While Islamic finance has long been a focus in Southeast Asian countries with significant Muslim populations, such as Indonesia and Malaysia, financial institutions operating in accordance with Sharia law are increasingly establishing a presence around the world – including the UK. Here’s what you need to know about establishing and marketing a Sharia-compliant fintech.
Sharia compliant: what you need to know
Derived from the Islamic holy text (Qur’an) and prophetic traditions (Sunnah), Islamic finance revolves around upholding justice and equality in all activities and transactions, something that’s enforced through three fundamental prohibitions:
1. Riba or usury
All forms of interest that provide a predetermined, fixed rate of return to the lender, as this might encourage wealth inequality, increase indebtedness and lead to exploitation.
2. Qimar or gambling
Earning wealth at the expense of others by one participant gaining and the other losing in a zero-sum game.
3. Gharar or uncertainty
Transactions that possess elements of ambiguity, uncertainty and hazard, for example, a sale where the price or nature of the goods is unclear. This is the main reason why various financial instruments, such as derivatives like futures and options, are not acceptable.
In addition, banks that offer loans to businesses operating in certain non-permitted industries, such as gambling or alcohol production, are not viewed as Sharia-compliant. In a bid to avoid these prohibitions, institutions that adhere to the tenets of Islamic finance tend to utilise various equity-based and asset-backed arrangements with the aim of promoting risk-sharing and real transactions
The global landscape
Thought Islamic finance was a niche sector? Think again. Last year, IFN Islamic Fintech revealed there are now at least 142 fintech firms globally providing Shariah-compliant products and services, including challenger bank MyAhmed and gold trading platform Minted, both of which were founded in the UK, crypto trading platform Huulk in Dubai and US-based wealth management platform Wahed Invest. And it’s a rapidly growing area – a 2021 report estimates that the transaction volume of the global Islamic fintech market will reach $128bn by 2025, a 161% increase from 2020’s figure.
Credibility is crucial
As a result, confidence is high – 56% of founders who took part in a recent survey expect to raise an equity funding round of at least $5m. Just last month, for example, it was reported that Islamic Finance Guru (IFG), a UK-based Islamic finance platform, raised £3m in investment.
Amid all this promise, both established and start-up Islamic fintechs are set to tap into a huge growth area as young Muslims seek out products that integrate their faith with all aspects of their daily life and offer the convenience and accessibility of a digital platform.
In fact, it’s the ethical dimension of Islamic finance that’s propmpting a number of Sharia-compliant fintechs to look beyond Muslim audiences in a bid to appeal to customers who are disillusioned and distrustrful of traditional financial services.
Socially responsible investing is an attractive offer for many, prompting some Sharia-compliant fintechs – such as Wealthsimple and Stash App – to position their social and environmental stance front-and-centre. As Areeb Siddiqui, founder and CEO of Sharia-compliant ethical banking alternative Kestrl recently commented: “We found that, with younger Muslims, it was less about ticking an arbitrary no interest box, and more about their investments doing good in the world.” With a view to attracting socially responsible investors of all backgrounds, Siddiqui recently stated that around 25% of Kestrl’s user base is non-Muslim.
Spread the word about your Sharia-compliant fintech
Now’s the time to tune into the demand. A study of 1,000 British Muslims found that 90% of respondents wanted some kind of Islamic finance solution, but fewer than 25% were actually using Islamic banking, so it’s never been more important to raise awareness of your Sharia-compliant offer. When it comes to positioning your fintech as Sharia-compliant and coming up with an effective marketing strategy, it’s worth keeping the following five points in mind:
1. Reassurance and regulation
One of your key marketing messages should be that every financial activity and transaction adheres to the principles of the Qur’an. Wayhome makes this clear on the landing page for its Islamic mortgage alternative, stating it’s been certified Sharia-compliant by Amanah Advisors. Getting your product assessed and certified builds consumer confidence, just as seeking approval from national financial authorities reassures customers that you’re adhering to regulations. MyAhmed, a Sharia-compliant e-money platform, was accepted onto the Financial Conduct Authority’s (FCA) regulatory sandbox earlier this year, while to be officially registered in Indonesia, the Indonesian Financial Services Authority (OJK) and the Indonesian Ulema Council require every Sharia-compliant fintech company to have its own Shariah Supervisory Board.
2. Put your customer in your creative
When coming up with branding materials, make sure your target audience sees themselves reflected in your adverts. At Growth Gorilla, we populated Wayhome’s website and marketing collateral with images of Muslim couples who’ve just bought a house. Again, this gives prospective customers confidence that you are talking to them specifically and that you’re experts in the space.
3. Talk about your ethics
As mentioned previously, a Sharia-compliant fintech can also be marketed as a value-driven fintech – therefore appealing to all people who want ethically sound investment options. Similarly, you might not have considered whether your fintech is right for an Islamic audience, but it’s easy to obtain that advice and include mention of your Sharia-compliant status within any marketing activity. While it’s a growing sector, there are only a limited number of Sharia-compliant banks in the UK – such as Al-Rayan – so it’s great if you can demonstrate that you are one step ahead of the competition and actively appealing to an Islamic audience.
4. Get your targeting right
When it comes to Google Ads and Bing Ads, for example, there are a lot of specific Islamic keywords or Sharia keywords you can reference – like (Islamic banking) and (Shariah-compliant mortgages). While topics such as Islam, the Qur’an and Muslim TV channels and publications are interest targets on Facebook. Specific businesses – such as Al-Rayan – are also listed so, if you are a financial firm, you can target the bank’s followers.
5. Go after lookalike audiences
Over time, you can reach additional audiences through Google retargeting ads and the Facebook pixel by building an image of the people you want to target and then going after a similar audience – or what’s called a ‘lookalike audience’. For example, use Facebook to find people who look like the people who’ve already visited your website. The pixel will generally identify additional Muslim people who are in the same wealth bracket and age bracket, and who have similar interests.
Want to know more?
To find out how we can help you get your Sharia-compliant fintech in front of the right audience and spread your marketing message effectively and efficiently, request a free strategy call today.