Islamic Finance

INTERVIEW-‘We are underserved, for generations we have been underserved’: UK Islamic fintech rising

Photo: Emmy Abdul Alim, editor of Salaam Gateway, interviewing Abdul Haseeb Basit, co-founder of Elipses, chairperson of Shariah-compliant fintech Yielders, and member of the UK Islamic Fintech Panel, during the Global Islamic Economy Summit (GIES) 2018 in Dubai, UAE on Oct 31, 2018. 

What is the character of Islamic start-ups in the UK and what does the recently-formed UK Islamic Fintech Panel do?

Interview with Abdul Haseeb Basit, co-founder of Elipses, chairperson of Shariah-compliant fintech Yielders, and member of the UK Islamic Fintech Panel. If you can't access audio, the full transcript of the interview is provided below. 

Emmy Abdul Alim (EAA): Thank you for listening to Salaam Gateway. You’re listening to our interviews with Islamic economy people from the Global Islamic Economy Summit that was on October 30 and 31 in Dubai.

Hello, Abdul Haseeb Basit.

Abdul Haseeb Basit (AHB): Hello, Emmy, salaam alaikum, how are you?

EAA: Wa-alaikum assalaam wa rahmatullahi, I am very good, thank you. Thank you for speaking with Salaam Gateway and thank you for coming to this year’s Global Islamic Economy Summit.

AHB: It’s great to be back. It’s a fantastic event this year.

EAA: How have you been finding it this year, as compared to the last one in 2016?

AHB: I think this year the focus has very starkly changed to more ethical, sustainable finance, supplementing or complementing Islamic finance, which wasn’t a theme that I really observed coming through the previous time I was here. So that has been very apparent in every interaction I’ve had, whether it’s watching sessions, networking or talking to people.

EAA: Is that something that fits in a lot better with what you do back in the UK?

AHB: Yes, that is… So, the last time I was here, I was representing an organisation called Innovate Finance, which was the first membership association for fintech anywhere in the world, based in the UK. I’ve since left that organisation and am now the co-founder and principal of a firm called Elipses, which is a digital structured finance firm, and I am also now the chairman of Yielders, one of the first Islamic fintechs that launched in the UK, and it is still the only one fully authorised by the FCA in the UK.

And so, my focus through Elipses has changed really to more ethical, sustainable finance, looking at how digital is really permeating that space and how digital can really be an enabler in that space. So the firms I work with always have either a sustainable, ethical Islamic finance underpinning, but they are technology-based firms.

EAA: In the global Islamic economy, from where we see it in Dubai, we have key Islamic markets, such as the UAE, Saudi Arabia, Indonesia, Malaysia… And then in the UK, where it is a Muslim-minority country, we do consider it an influencer market, because it is a very strong… It is a small Muslim community but it is also strong and very vocal. And I wonder in terms of the fintech start-up space, or basically, just Islamic start-up space, what is the character of that in the UK, in comparison with a place like Dubai?

AHB: I think the character of that space in the UK is really focussed around ‘We are underserved and, for generations, we have been underserved.’

The UK has got a very distinct history in how Muslims came to be a part of the population in various waves of migration, through various industries, through various initiatives that the government had.

So we have a very diverse group of Muslims from all over the world at all levels of education, professional status and duration in the UK. Some Muslim populations are third generation in the UK now, some are recent migrants.

So really, there is no typical Muslim consumer in the UK. But what is homogenous through all of that is that we are underserved from a financial perspective.

We have five registered Islamic banks in the UK, only one of those is a retail bank. So it doesn’t really lend itself very well to competition.

When we look at the broader set of financial products that you might need as an average consumer, a lot of those are not available.

So the option that you’re left with as a Muslim consumer is you either stay excluded or you go the conventional route, which most of us have to do – and that is not something we really want to do.

What’s happening now is that through entrepreneurship and the growth of things like fintech and tech generally in the UK, the new generation in these Muslim communities is looking at the way they’re served and looking at really trying to solve those problems.

I really come from the old guard, from conventional finance, having had a decade-long career in conventional finance. But there’s a new breed of entrepreneur that is really looking at tackling specific problems that exist for the Muslim community.

And in the UK that really seems to take hold, because we have, as you said, an adjustable market of 2 million Muslims, which is equivalent to the size of the US. It is fairly large, in that sense. And they are generally quite tech-savvy, they are fairly affluent, they have disposable income, and they want those services.

So it actually makes a really good test bed to try out a business or launch a business in the UK. And then also we have all the peripheral services you need as an entrepreneur. We have a great tech specialism, we have a developed financial services sector, we have all of the ancillary services that you’ll need. Because we have those things, it’s actually a very easy place to do business.

EAA: In terms of the start-up scene and in terms of Islamic fintech start-ups, is there any… sort of consciousness, even, that ‘we’re a fragmented Muslim community, maybe we would do better if we got together and did something’?

AHB: Yes, absolutely, there is. I am part of something called the UK Islamic Fintech Panel, which launched and brought together a number of people in the Islamic finance and fintech space that are looking to solve some of these problems.

What we first found was that there is actually quite a healthy set of Islamic fintechs already in the UK.

They are at various stages, but the challenges they face are very common challenges, in terms of scaling, finding funding, finding access to talent, getting regulated if they’re in a regulated space, accessing the Muslim consumer if they need to be branded as Shariah-compliant and, from that panel, really, has developed a number of initiatives that are looking to bring those communities together.

So, for a start, we don’t actually have some of the infrastructure that you have here in the Middle East – so, we don’t have Islamic economy centres or government institutions. It’s really up to the community to develop those.

So, I’m part of an initiative that is looking to set up a network and hopefully, finally, a co-working space where Muslim or halal economy businesses can come together and have a home. And that, we really hope, is a starting point for building that community cohesion and the services that they’re going to need.

EAA: Will this be a new co-working space? Or are you just looking for a place where everyone can come together, that’s already on the market?

Well, we are open to both. Ideally, I think if we could have our own space, it would lend itself a bit better to developing it with that community in mind and being community-led. If we have to start off in another space and grow from there, then we’re open to that as well.

AHB: Will this only be in London?

We are looking to start in London, of course, because that is predominantly where these businesses are based, but we’ve had interest from Edinburgh, we’ve had interest in other parts of the UK, especially where there are university towns, where universities are teaching Islamic finance and other Islamic-based subjects.

EAA: Like Oxford and Durham?

AHB: Yeah… So, Manchester, Oxford, Leicester, places like that, where there’s a Muslim population but also a group of students that are coming into the workforce with that academic background.

EAA: I know that the panel is relatively new but could you say a little bit more about what else you’ll be doing, or if you have a vision and a plan?

AHB: Yeah, we started with the aim to bring together the community and let the community decide what are the things that we need to do.

We have distilled this down to a few things: projects like the community and accelerator is one thing, but we are also heavily focused on advocacy around Islamic finance. So, where there are government initiatives to provide more access to finance for start-ups, small enterprises, which don’t tend to focus on Islamic finance or they don’t have an Islamic finance aspect.

We feel it’s our job to go in and educate the government and really almost soft-lobby the government to think about how they might want to do things like SME lending in a Shariah-compliant way, student loans in a Shariah-compliant way and things that the community can benefit from.

EAA: How is the panel structured? I am assuming this is done on a voluntary basis?

AHB: It’s all done on a voluntary basis. We have a chair who selected the first 25 participants for this year. We meet once a quarter, we’ve also met ad hoc around various Islamic finance events, had bespoke round tables with other visiting delegations from other Islamic countries to look at how we might collaborate, and we’re really building from there.

Next year, the focus will, I presume, shift a little bit from what it has been in year one, but we the group will decide what it needs to be and what it needs to achieve next year.

EAA: What are you hearing from the community that really needs to be done immediately, in the short-term?

AHB: I think there are two main things: access to funding is a challenge for start-ups anyway, and if you’re overtly branded as an Islamic start-up or a Shariah-compliant fintech, the investment community can almost see you as slightly too niche.

So again, it sort of exacerbates the problem where getting your ignition funding can be troublesome. And the second common thing we hear is about educating the Muslim consumer about the benefits of what you’re trying to do.

Unfortunately, we’ve had iterations of Islamic finance in the UK before, and some of it has been done well, and some of it has not been done well, and the consumers have been burned before. And they are wary of it, quite rightly, and they challenge the basis on which you purport to be Shariah-compliant. So it is a more savvy consumer that doesn’t really take it at face value, and so, there’s an education job that needs to be done to demonstrate that you are Shariah-compliant to that group and, to the group that is not engaged, demonstrate why it is beneficial to them as well.


UK's Yielders completes pre-series A funding round, achieves regulatory approval in multiple EU/EEA jurisdictions

EAA: So with Brexit looming, how is this going to affect Yielders’ future?

We do have the passporting in three European countries… It really depends on the mode of Brexit that we go through, how long we will be able to utilise that. In the best case, we have two years post Brexit where that still applies, where we can apply for full authorisation in those countries… Worst case, we may not be able to operate and have to go for authorisation straight away. But it is all very unclear at the moment and we hope that it will be resolved in the next few months, in the run-up to March.

EAA: Okay, well, we’ll check back with you when that happens.

AHB: Thank you very much.

EAA: Thank you, Abdul Haseeb.

AHB: Pleasure. Thank you.

(Interview by Emmy Abdul Alim

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