Two years after receiving a financial technology experiment permit (FinTech ExPermit) from the Saudi Capital Market Authority (CMA) in 2020, Mudaraba Financial Company (MFC) has officially launched its Sukuk crowdfunding platform, which issues Sukuk on behalf of MSMEs as an alternative financing tool utilizing capital market instruments.
The platform is a proprietary algorithm-driven funding platform based on the issuance of Sukuk, and a digital Islamic funding and investing marketplace. MFC facilitates MSMEs to obtain the required funding for their projects, by arranging the process of issuing Sukuk to investors registered on the platform.
“We replicated traditional bank lending and massively optimized our turnaround time using technology, keeping an intact due diligence activity within the underwriting process,” said Jazza Al Sari, MFC’s founding board member.
The company had, in January 2022, secured its Shariah compliant certification with Shariyah Review Bureau. “We wanted to optimize the issuance, trading and management of this instrument (Sukuk) for the Islamic capital market. Our platform automates the Sukuk process, streamlines the intermediaries using technology and minimize the substantial operational costs and third-party charges in Islamic capital markets,” MFC CEO Mosaed Al Enezy had said.
MFC is one of six FinTech ExPermit companies listed on the CMA website licensed to establish a platform for offering and investing in debt instruments. Other companies in the list include Sukuk Capital Company, Dinar Investments, Rakeez Capital Company, Competitiveness Financial Company and Tarmeez.
In Saudi Arabia, the Kingdom’s Vision 2030 has focused the spotlight on the local entrepreneurial and innovation ecosystem, enabling SMEs through several initiatives that prominently feature Islamic finance, including Sukuk and crowdfunding.
In this regard, the Saudi Central Bank launched the draft law titled ‘Draft to Update the Rules for Conducting Crowdfunding Activity in Debt’ in October 2021, which is part of its efforts in developing the financing sector in the Kingdom while supporting and enabling fintech businesses, which resulted in the emergence of more fintech companies.
The CMA also supports the fintech industry by providing a simplified regulatory framework to attract innovative business models and emerging technologies as it seeks to build entities that contribute to a deeper and more diverse financial market in line with the objectives and pillars of the Financial Sector Development Program of the Kingdom’s Vision 2030.
It is worth noting that the CMA launched the Fintech Lab in December 2017, which enables fintech developers to experiment their innovative capital market products and services within specific controls, parameters and time frames under the CMA’s supervision. Subsequently, the CMA opened the first batch of applications for the FinTech ExPermit in February 2018.