Driven by strong client demand, RootAnt, a Singapore-based technology enabler of the Banking-as-a-Service (BaaS) technology, will be introducing Shariah fintech solutions for the Halal supply chain finance segment as the firm attempts to capture a slice of the burgeoning Islamic finance market.
In its seven years of business, RootAnt has largely focused on the conventional finance space but its interest was piqued early this year when clients brought to its attention about the opportunities in the Halal financing space.
Lincoln Yin, the founder and CEO of RootAnt, shares with IFN Fintech that the commercial potential for Halal supply chain finance is immense particularly as the firm’s research has shown that the Islamic finance industry, in general, is lagging behind its conventional peers when it comes to Halal supply chain data and integration. The data are largely fragmented and not digitized.
To address these flaws, Yin expounds that there is a need to digitize the financing process to benefit the whole value chain from an ecosystem approach, integrate and leverage Halal data sources to prevent fraud and risk and engineer specific new products or single-purpose instruments.
Headquartered in Singapore and present in China and Japan, RootAnt’s Islamic finance focus will primarily be concentrated on the Southeast Asian region, particularly Islamic finance giant Malaysia and Halal market heavyweight Thailand.
“Transparency, traceability and validation of [the] Halal supply chain are the key factors in Islamic finance,” RootAnt explained in its white paper. “With integration of digital enterprise solutions, supply chain management and supply chain data — the digitization of supply chain and digitalization of banking — the financiers are transforming to provide easier, faster financial services and better financing management.”
With the firm’s move into the Shariah finance space, it was a natural progression to also target the green and ethical sector. It is also looking at SME financing. The idea is to develop a multi-tier financing platform that will cater to the specificities of these segments.
RootAnt recently secured US$1.46 million in seed funding which will be channeled toward the development of this new platform. The investment round, led by Linear Capital and co-investor KZM Group, will also be used for its expansion in the city state, Southeast Asia and Japan as well as research and development.
RootAnt’s multi-tier financing platform concept
The platform could be led by a single financier or consortium of financiers (syndicated lending), an anchor corporate or group of anchor corporates, or a third-party platform operator. Integrated with supply chain management systems, enterprises digital systems/platforms and supply chain data sources, the embedded supply chain finance platform provides efficiency, visibility and flexibility throughout the entire supply chain.
Through open banking and digital technology, it integrates with existing banking infrastructure thus overcoming obstacles with legacy banking systems faced by banks.
The end-to-end digital supply chain finance platform is integrated with core banking systems and enterprise systems, providing reverse factoring service with digital payment obligation (DPO) and DPO receipts issued by the anchor corporate (payer) to its upstream multi-tier suppliers, and providing the entire value-chain of suppliers with the options of: 1) finance based on the DPO receipts, 2) split and transfer the DPO receipts, and 3) hold the DPO receipts until due payment.
Figure 1: Multi-tier financing platform model