NEOBANKS OF THE WORLD: ISLAMIC FINANCE
Timeforchange? Islamic financing platform Manzil is persuading Canadian financial services providers to rethink some fundamental concepts, enabling the country’s Muslims to transact guilt-free. Founder Mohamad Sawwaf believes everyone can get involved, though It’s difficult to achieve strict compliance with shariah law in a system that’s based on Western concepts of money – from the dominance of interest-charging payment cards to interest-paying investments, all sorts of routine transactions carry with them a certain unease. That’s why Mohamad Sawwaf decided to launch a different type of financing platform in Canada – not just for the country’s Muslim population, but for anyone to use. Because, for Sawwaf, the future lies in accessible, fintech that’s also shariah-friendly. “The global Islamic finance market is at US$2.7trillion and growing at a double-digit CAGR [compound annual growth rate], so it’s the fastest growing industry worldwide”, explains Sawwaf, who holds a doctorate in Islamic finance from Henley Business School in the UK. For this fintech founder, the need for an inclusive, 100 per cent shariah-compliant, online financial service was blindingly obvious when he set about building Manzil in Canada in 2017. Namely, the 1.6 million Muslims there who are underbanked. Often, when people talk about underbanked demographics, they’re referring to the poorest members of society.
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It’s normally people with cash-in-hand jobs, or those who’ve newly arrived in a country. But that’s not Manzil’s main demographic. “In fact, Canadian Muslims have double the national average when it comes to household income,” Sawwaf reveals. “But when you look at their participation in housing, and in capital market solutions, they’re actually the lowest on that pole.” Finding a solution for all that uninvested cash could be a serious ‘kerching moment’ – if 1.6 million Canadians chose one platform that met all their financial and ethical needs, for example. “As we continue to grow and take market share away from the conventional banks, they’ll start to realise this is a true opportunity that they missed out on,” says Sawwaf. But, right now, he just feels frustrated at all the lost potential. “There’s all this wealth that’s just sitting, not participating in the economy. And this community is not growing, from a net worth perspective, because of a lack of product.” Manzil hopes to correct that by providing a range of financing solutions, including mortgages and investments, that address the debt-averse nature of many Muslim people while encouraging them to save – even while they are making payments. To that end, it recently teamed up with Canadian challenger KOHO, which is
partnered with Peoples Trust Bank, to provide customers with low-fee, Visabacked, pre-paid cards, linked to a KOHO online chequing account. The card rounds up change for saving and earns cashback from retailers. It allows practising Muslims to participate in paytech, guilt free. “VISA doesn’t earn its revenue through interest, rather through interchange fees,” explains Sawwaf. “It’s the banks that charge the interest and, yes, VISA enables that for them. However, our job is to provide solutions that are ethical and create habits for avoiding debt, and if VISA helps us do that then it is essentially enabling us to reverse the habits of having debt-issued credit.” Manzil doesn’t yet have a banking licence –“Our client servicing system is a modern treasury system that allows for payment reconciliation and automatic withdrawal of funds from the client account. I would say it’s better than the banks,” says Sawwaf. But it is licensed under the Mortgage Brokerage Act of Canada to originate, underwrite and administer funds in a totally online process. And it offers personal and business investment accounts with a shariah-compliant portfolio managed by robo-advisor CI Direct Investing (formerly known as WealthBar). “Everyone thinks it’s hard to find companies [to invest in]. But there are so
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