An Islamic digital banking start-up is in the process of securing licenses in Switzerland and the UK while preparing for its pre-initial coin offering (ICO).
A casual conversation between friends several years ago about the impact of banking on society particularly after the financial crisis of 2008 is now gradually culminating into a digital bank combining both Islamic finance principles and blockchain technology, known as Hada DBank.
“During the conversation, somebody joked that we should build our own bank in response to the crisis; and what started out as a joke then became a serious discussion,” Hada DBank co-founder and chief marketing officer Linda Azmi told IFN Fintech.
The group of friends, Malaysian trio Linda, Mohd Al-Shazanous (CEO) and Juan Mahussin (chief technology officer), then learned about blockchain technology in 2015 and decided to fuse Islamic banking (which promotes risk-sharing) and blockchain (which enhances transparency) together to create what they see as an ideal sustainable banking solution promoting financial inclusion.
With minimal seed capital from a private investor only enough to support the team toward its pre-ICO, the team conducted market research, engaged advisors and stakeholders as well as begun discussions with the Swiss Financial Market Supervisory Authority and Financial Conduct Authority of the UK to be recognized as a legitimate digital banking service provider.
“We chose these markets because it is not as difficult to secure a license there as they have fintech regulations,” Shazanous explained.
The decision for these Malaysians to headquarter their operations in Switzerland is not only motivated by the regulatory efficiency and support for fintech in Europe, but also underscored by the openness of Europeans in embracing digital banking technology. Needless to say, the region will be a core market for the bank, which will also focus on ASEAN due to the co-founders’ familiarity with the region.
Aiming to raise US$5 million from its pre-ICO, Hada DBank did initially launch the offering in November but halted all sales and activities less than four weeks later when the firm was approached by several investors and venture capitalists on potential collaboration and partnership opportunities; it secured a CA$100,000 (US$77,650) partnership with Canada-based DE Asset Management.
Proceeds from the sale of Hada Coins, to be backed by gold and silver, will be channelled toward research and development, capital expenditure and operation expenditure. Over the next five years, the start-up plans to hire at least 50 computer programmers, coders and IT personnel and establish fintech labs including one in Switzerland and another in MENA as well as develop its product suite.
The team hopes to raise another US$20-50 million from its ICO at a later date.
Starting with an e-wallet, savings account and simple financing products, the team plans to begin offering Takaful solutions and term-financing in 2019, with an initial focus on the retail market before moving on to the wholesale segment. According to Juan, the start-up is also working on a personal financial management bot (Huda) and an artificial intelligence-based personal financial advisor (Hadi).
The team is also in the process of finalizing an internal Shariah advisory board comprising of scholars from MENA, Malaysia and Indonesia.
The trio would be the first to admit that the journey has been tough, especially in the face of rising cryptocurrency concerns, digital banking doubts and misplaced Islamophobia, however, they are encouraged by the fact that their proposition is gaining traction as awareness grows.
The start-up expects to grow its retail deposits to US$100 million in the first five years from when it launches next year and to reach 2 million customers by 2022.