UK Islamic crowdfunding platform Yielders is seeking approval by the Financial Conduct Authority (FCA) to execute fund management services, which would allow the country’s first regulated Islamic fintech start-up to expand its product range and tap the institutional market.
“We are looking to apply for a variation of permission to our FCA authorization to become a fund manager. If that goes through, it will open up a lot more avenues for us,” Abdul Haseeb Basit, the chairperson of Yielders, told IFN Fintech. “Rather than being a platform where individual properties are crowdfunded, we can have a diversified portfolio of assets.”
Expecting to secure relevant approvals by early next year, the start-up, which is predominantly serving the retail market, is hoping to leverage an asset management license to attract institutional investors, including Waqf institutions. IFN Fintech understands that discussions are underway between Yielders and several Waqf organizations exploring options for Islamic endowment funds to be channeled into UK real estate through the platform.
This comes on the back of a successful Seed A fundraising round comprising of a crowdfunding tranche via Seedrs and a private placement exercise which attracted high net worth individuals from the UK and the Middle East. Allocating GBP500,005 (US$634,239) to crowdfunding, the tranche was fully subscribed in a week, and was oversubscribed at 132%. The total Seed A amount raised is confidential, but it is learned that it is in the multimillion sterling pound range.
Deemed as a success, the fundraising round – which took course over a few months – however was not without its challenges, despite the increasing fundraising opportunities available in the tech scene.
“We feel like we were caught in the middle – from three sides rather,” explained Abdul. “Firstly, from a real estate perspective, real estate as an asset class is not really something tech investors pay attention to; on the conventional side, Islamic finance is still very much misunderstood, so education is needed; and on the Shariah compliant side, while there are funds in the Middle East looking at Shariah compliant real estate platforms, unfortunately, because we currently don’t have a base in the GCC, we did not fit their mandate.”
And while sovereign capital in the Middle East are focused on real estate, however, Yielders round size was too small of a ticket for these sovereign wealth funds.
Nonetheless, the private placement route has worked in its favor.
Expansion on the horizon
Proceeds from the funding round will be utilized to expand its product range as well as geographical footprint, particularly in Europe and the Middle East. Yielders last year secured licenses to operate in Holland, Luxembourg and Norway, however it has yet to activate any of the licenses due to uncertainties over Brexit.
“Given our license here in the UK, we have European passporting available to us,” Abdul shared. “Depending on what happens with Brexit, that may or may not continue in some form.”
Apart from these markets, the start-up has its eyes on other European jurisdictions including France, Germany and Turkey, where it has received significant interest from. The GCC – Bahrain, Saudi Arabia and the UAE – is also a big focus considering that the platform has attracted significant investments from GCC investors.
Collaboration, collaboration, collaboration
While bringing to market its first fund is a major priority over the next 12 months, concurrently Yielders is also drawing up a few potential collaborations with other Islamic fintech companies. Abdul confirmed that the start-up is in discussions with several Shariah compliant start-ups to explore mutually beneficial synergistic opportunities.
It isn’t only start-ups on Yielders’ radar as the company is also targeting traditional financial institutions, particularly banks.
“With open banking here in the UK, that potentially opens us up to millions of consumers and that is an option we are exploring,” confirmed Abdul. With APIs and the right partner banks, Yielders is looking to expand its distribution channel leveraging on the network of banks.