There hasn’t been enough use of retail Islamic Finance, but FinTech can allow for this to happen, according to Yielders co-founder and CIO Zeeshan Uppal in a research interview with FinTech Global.
The UK has served as a kind of hub for Islamic Finance outside of the Middle East and countries like Malaysia and Indonesia. However, there is still a lot of room for the retail side of the market to develop further, as to date, the institutional side has received most of the attention and support. This is where Islamic FinTech can help evolve this retail side of the market, but it itself also needs to get extra support.
Yielders co-founder and CIO Zeeshan Uppal said, “We’re already starting to see a lot of investment and government run products to invest specifically in increasing the economy. It’s just dependent on how that money will be used and whether it’s going to be used effectively to create long lasting businesses that will change the face of how retail Islamic finance is looked at and consumed. It’s the biggest problem, there hasn’t been enough of a use of it to drive it forward. What FinTech does is allow for that to happen in a concise and consumable manner.”
Yielders is an online crowdfunding platform and was the first UK-based FinTech company to become Shariah compliant. The platform offers consumers a way to invest into the property market in a low risk environment. This is achieved by all assets and rental licences being acquired by Yielders before the project is offered to consumers.
In order to meet Shariah compliance, Yielders offers no debt or interest on investments, and consumers receive full voting and financial rights to determine key decisions made during the holding period. Yielders also implements annual Shariah Audits to ensure the company stays compliant. The company CEO and fellow co-founder Irfan Khan is on the recently established UK Islamic FinTech panel, an independent group of leaders in the space aiming to support the growth of the UK’s Islamic FinTech sector and cement its position as a hub.
There are two key benefits that FinTech can bring to the market, according to Uppal. The first is providing an opportunity for millennial investors that are looking for more ethical investing. A big draw of the app is users can support something real and tangible they can understand, rather than being lost in the traditional and complex financial models. One quarter of the platform’s user-base are non-Muslims that just liked the model and can see they are getting good rental returns for an ownership share.
He said, “It’s a fantastic opportunity for those with disposable income lying around or saving in an interest bank saving account which is producing 0.5% per annum, where we’re a 5% net return at a minimum.”
The other benefit is that FinTech is able to cater for the retail side of the market, which has been somewhat underserved. The institutional side of the market has been supported through the country’s links with countries like Saudi Arabia that have helped push the retrick around Islamic Finance. However, the same level of push hasn’t funnelled down to the retail end.
“What we realised is the retail level is the products available for people at the basic human level were missing and so there is a huge opportunity for that. The Muslim market in the country is estimated to be around £2bn, that’s money that’s not in the market being circulated or spent, it’s purely in savings. It’s a relatively untapped market that needs to be explored and I think our product is absolutely perfect for that.”
Another reason this gap has formed is because there is a lack of education to the market and the benefits it offers. He added, “At the retail level there is a failure by Islamic finance institutions and adoption of that from retail customers.” There is a big opportunity which does need to be supported by more competition, as this will offer consumers more choice, but it needs to be done correctly.
The company has come across a lot of people who understand the product instantly and pick it up instantly, but there are still some that have difficulty understanding the solution.
“It’s not just financial inclusion but financial literacy is an extremely important part of what we do. That’s why we’ve ensured everything on the platform is simple in terms of language and understanding, to ease the use of what we’re doing. It’s as simple as logging onto your amazon account and executing a transaction, we’ve made investment into real estate as easy to use as that.”
Copyright © 2018 FinTech Global