Ibda’a meaning innovation and tabani meaning adopt or embrace are two keywords defining the successes in Islamic finance. This is a time when the world economy had, in the recent past started showing signs of recovery but relapsed into a cost of living crisis with the onset of the Russia-Ukraine war. Even in these bleak times Islamic finance has shown a surge. The Islamic Finance Development Indicator (IFDI) determined a 17% growth in 2021 with assets at $4 trillions, which are projected to grow to $5.9 trillions by 2026; a trend which presently, seems distant but for now at the advent of 2023, we can see that 2022 has been a good year.
The question here is what makes Islamic business and finance so much more stable than conventional finance. To find answers we study the success cases in relevance to Islamic finance. Two such cases make the story of Dr. Shaher Abbas, Founder & CEO, Islamic Finance Initiation Network (IFIN) & Co-Founder & ED, Islamic Finance Advisory and Assurance Services (IFAAS) and Mohammad Farrukh Raza, Founder & CEO Islamic Finance Advisory and Assurance Services (IFAAS); a story which, in this context truly illuminates the leadership, vision, mission, struggles, passions, and ultimate success found on this journey. Dr. Shaher Abbas introduced, state-of-the-art FinTech revolutionising Islamic finance industry by way of instant Shari’a-compliant financing as part of IFIN. Mr. Farrukh Raza, driven by his passion and mission but weary of the ills of the global financial system, offers panacea by providing bespoke and impact-driven Islamic finance advisory solutions. IFIN and IFAAS packaged together are bringing about a slow revolution in Islamic financial thought, ideas, solutions and services.
Dr Shaher Abbas is an AAOIFI Certified Shari’a Advisor and Auditor (CSAA), a CISI accredited trainer for IFQ (Islamic Finance Qualification) and holds a PhD in Islamic Financial Engineering from Durham University (UK) and a Master’s degree in Islamic Economics, Banking and Finance from Loughborough University in the UK. He has 18 years of experience delivering Shari’a compliant products across the various disciplines of Islamic finance industry in GCC, Europe and Africa. He also has extensive experience in Shari’a audits and conducting market research and feasibility studies. His technical expertise has been internationally acclaimed within the Islamic financial industry and well respected amongst the leading Shari’a scholars of the industry.
Mohammad Farrkuh Raza, a man with a vision holds an MBA in strategic management and brings in exceptionally rich experience of the diverse sectors of Islamic finance industry. His unique background, as a multi-cultural and multi-lingual persona places him at the center of various collaborations internationally, in relevance to Islamic or Riba-free finance. He, also lectures on Islamic Finance in many reputed universities worldwide and speaks several languages with excellent command on English, French and Urdu. Islamic finance has risen in the last two decades to take up a sizeable portion of the global finance market. This industry is growing by extending it’s outreach among the unbanked populations in Asia, Middle East, Africa and globally. This trend has been fostered, supported by such innovations as IFIN, an Islamic FinTech and the continued advocacy of interest-free products and policy, regulatory and standardization frameworks such as the IFAAS Group. IFIN has introduced instant Islamic financing and now after it’s introduction in GCC countries, it is spreading it’s wings in Europe. It has started working on digitalizing SME financing which is expected to bring down SME financing duration from months to a few days. IFAAS on the other hand has been advocating and protecting Islamic finance products by working with governments, other regulatory frameworks and financial institutions in a number of countries around the world. Dr. Shaher Abbas & Mohammad Farrukh Raza together have given opened new dimensions and venues for Islamic Finance.
MOHAMMAD FARRUKH RAZA– IFAAS GROUP
LET US START THIS INTERVIEW WITH A BIT ABOUT THE COMPANY. CAN YOU RELATE, FOR THE BENEFIT OF OUR READERS, TO WHAT INITIATIVES AND PROJECTS IFAAS GROUP IS INVOLVED IN?
Bismillah. My Islamic finance journey started in 2004. This is when the first Islamic bank, the Islamic Bank of Britain (IBB) was being set up. I saw a job advert
for the marketing manager role and applied for it. The reason for applying was twofold – my desire to have some corporate exposure and experience at the end of my MBA course, but also searching for the answers to the questions that I have had for many years.
Coming from a business family background and while growing up in Paris, France where my now late father owned a small business, I witnessed the growth opportunities he had to let go simply because of lack of Halal finance. I remembered the dinner table conversations I had with my father, wondering about the possible solutions to grow one’s business and harness the growth opportunities while adhering to the prohibition of Riba Our own knowledge about Shari’a was very basic like masses, and in the 1980’s, there were not many people around in France with the ability to help with such queries. And there was no Google either.
So, my idea of going to IBB job was to explore Islamic finance, try to find and learn the solutions for small business owners. I shared my aims with the interviewer telling him that I’ll leave in 6 months to implement my learning in my family business and unlock its potential. I met Shaher, the first time on the day we both started together our jobs at the bank, in the same department.
The first six months were a roller-coaster, with colossal amount of learning, facing unprecedented challenges, making lifetime friends and the feeling of doing something great. I kept extending my 6 months and before I knew, it was almost 3 years in the bank. However, at that point, we felt it was time to embark for exploring new horizons – and hence the idea of IFAAS came.
FIFTEEN YEARS DOWN THE LINE, ALHAMDULILLAH, WE HAVE COMPLETED CONSULTANCY WORK IN 51 DIFFERENT JURISDICTIONS. OUR GEOGRAPHICAL SPAN COVERS FROM NORTH AMERICA TO THE FAR EAST, INCLUDING EUROPE, SUB-SAHARAN AFRICA, MENA AND CIS REGIONS, AND ASIA.
My active involvement in the nascent Islamic banking industry in the UK was noticed also by the French banking industry stakeholders, who being intrigued by developments in the UK, were also exploring the concept of Islamic banking. Being among the few people who spoke French and also had any notable knowledge of Islamic banking, I was invited to be a member of the PARIS Europlace commission for Islamic finance. And that gave me an opportunity to contribute to some tax reforms in the country.
It was an achievement beyond my imagination though Islamic finance did not do well in France due to political and economic reasons. However, because of this international exposure, and several Islamic finance initiatives in the UK launched after the initial success of IBB, there was high demand for experienced professionals. That is what led us to jumping overboard in quest of learning more and contributing more to the international growth of Islamic finance.
In July of 2007, we established IFAAS (Islamic Finance Advisory & Assurance Services) as a professional consultancy that is entirely dedicated to Islamic finance.
Fifteen years down the line, Alhamdulillah, we have completed consultancy work in 51 different jurisdictions. Our geographical span covers from North America to the Far East, including Europe, sub-Saharan Africa, MENA and CIS regions, and Asia. We consider this to be a unique opportunity and a great blessing.
Our initial few years were very difficult and full of challenges. We continued to believe in ourselves as team and the mission that we were carrying. Now looking back, we are so grateful that Alhamdolillah it was all worth it. Allah has blessed us with success in making a positive impact on the lives of millions of people including individuals, businesses and the governments, switching from ‘Haram’ to ‘Halal’.
We can breakdown our activity in to two and a half components. Two main components include institutional and government advisory. We provide advice to financial institutions, which include Islamic banks, Islamic windows, insurers (takaful and retakaful providers), asset managers, microfinance, etc. This is mainly to help with their product development, operational implementation and optimisation, capacity building, Shari’a governance, audit and compliance etc.
The second component and a major part of our business is actually government advisory and this places us in a unique position as knowingly there is no other consultancy that has worked with as many different jurisdictions and on so many government policy advisory projects. I think there are around 35 governments across 4 continents for which we have worked as of today. This type of advisory is aimed at helping the governments and the stakeholders with developing strategic road maps and master plans for Islamic financial industry, their legislative, governance, tax, regulatory, and supervisory frameworks and building their capacity and market infrastructure for Islamic finance. The majority of our projects of government advisory are funded by multilateral organizations like Asian Development Bank, Islamic Development Bank, World Bank, International Finance Corporation, previously known as DfID UK and many other organisations.
The half component is related to the advocacy of Islamic finance and this is to create general public awareness to help people understand the spirit of Islamic finance. Help them overcome the concerns they have in relevance to terrorism financing or money laundering or something which will pave the way for Islamisation of their country. This is an area which we would like to develop and make it a full component. This activity is resource hungry and we are doing it mainly as pro bono so we have a challenge in ramping up resources without any cost to the beneficiaries.
FINTECH OFFERS AMPLE OPPORTUNITIES FOR INNOVATION IN ISLAMIC BANKING AND FINANCE. AS IFAAS HAS HELPED VARIOUS JURISDICTIONS TO KICK START THE PROCESS OF ISLAMIC BANKING AND FINANCE, HOW, IN YOUR OPINION, FINTECH WILL HELP THESE MARKETS TO GROW WITH RESPECT TO ISLAMIC BANKING AND FINANCE?
I think the answer to this question is one word – scalability. FinTech has provided an unprecedented opportunity to Islamic finance, where we can realise an exponential growth through Fintech’s scalability. The need for higher capital to be invested in branches and the brick and mortar infrastructure is no more. The UK is a great case study where Islamic banks, particularly former IBB and now Al Rayan Bank has closed their branches and moved on to digital and online banking.
This shows you how the distribution channels today are completely different from a few years ago. Fintech, and the advent of open banking regulations, has tremendously changed the banking sector whether it is conventional or Islamic banking. This is where the opportunity comes for Islamic banking institutions that they can gain access to the masses through Fintech and through initiatives like open banking. This was not imaginable before. Now it is actually much quicker, much cheaper and much easier to grow Islamic banking and finance for such institutions. For example, we have Islamic crowd funding platforms that have opened opportunity for small investors, who can just invest a small amount of money in a start-up, own a share in real estate in a Shari’a-compliant way or even participate in philanthropic projects through that.
There is a lot of social financing also happening by way of crowdfunding. IFIN is an example of Fintech helping Islamic finance grow. Initially it was very difficult to make the banks understand what we are doing but as we are moving forward we are finding it much easier. Banks now understand that by simply joining IFIN, they can have instant connectivity to retailers and access to the entire population of the jurisdiction, without any capital investment, and without any operational cost. Customer relationship has actually become much easier thanks to IFIN’s instant onboarding process that facilitates customer acquisition through its e-KYC app.
This is a golden opportunity on a plate for any bank incurring zero cost and getting access to retailers and also consumers. IFIN makes the process much cheaper, making the banks more competitive, profitable and sustainable. This is an opportunity which has been created only through technology. Islamic financial industry and its stakeholders really need to focus on technology because they can experience exponential growth, reach to wider community, become more profitable, scalable and appealing to Muslim as well as the non-Muslim consumer. If they are competitive and provide a good service and excellent customer experience then these are the three things which everybody is looking for. This is FinTech’s impact on Islamic financial industry.
WE UNDERSTAND THAT IFIN AND IFAAS CANNOT BE SEEN AS COMPLETELY INDEPENDENT OF EACH OTHER, EVEN IF THE LEGAL STRUCTURE ENSURES THE CHINESE WALL BETWEEN THE TWO COMPANIES. WHAT STRENGTHS DOES IFIN DRAW FROM IFAAS AND VICE VERSA?
Both are connected and complimentary to each other. I can share with you a recent example. I was in Istanbul, my new hometown where we had a meeting with a Turkish Islamic bank. They were interested and keen on signing up with IFIN, but they had an issue. They said, being a relatively new bank, they do not have a credit decision engine of their own. So they are processing all their credit approvals manually.
We informed them of IFIN having an embedded decision-making system that just needs parametrising and population of data. So IFIN’s credit decision engine will use the bank’s own credit policy and the credit scoring methodology and the automated system will process the credit application without any human intervention.
It turned out that the bank neither has a scoring methodology nor an elaborate credit policy until now. So we offered them a combined solution where IFIN will provide them the technology and IFAAS prepare an elaborate credit policy and will design a credit scoring methodology for the bank according to its needs and preferences. This is a real example that has happened recently where IFIN and IFAAS worked hand in hand for the same client. Alhamdolillah we have this capability and the packaged services are very attractive for the clients. Similarly, when we are providing advisory to a bank or a government, technology is there to help us achieve scalability. We have IFIN to offer but we also recommend other Islamic Fintech providers. We are promoting every Islamic FinTech that is reliable and helping some to expand and establish into the markets where we operate and have good relationships with the regulators and market players.
CAN YOU SHARE WITH OUR READERS SOME OF THE OTHER MODELS YOU HAVE CREATED AND THE PROJECTS THAT YOU ARE CURRENTLY WORKING ON?
We have just finished a big project at IFAAS with one of the multi-lateral organisations and that was working with all the STAN countries with the exception of Turkmenistan. In this project we worked with the governments of Pakistan, Tajikistan, Kyrgyzstan, Kazakhstan, and Afghanistan (the project stopped due to regime change). We are also working in Uzbekistan, so we were working simultaneously in six of these STAN countries, in addition to the govt. of Philipines.
In the last two years, we have developed for them a wide range of regulatory frameworks and supervisory tools for the regulators, and deposit insurance schemes for their Islamic bank deposits. We have given some of the central banks, the Islamic liquidity tools to help them with liquidity management. We also provided a lot of capacity building to the stakeholders including the central bank, the ministry of finance, the banking and insurance regulators, etc. We also gave them the national Shari’a governance frameworks with our recommendations for the adoption of AAOIFI1 and IFSB2 standards, where possible and to which extent. All these things have been done with across multiple countries.
In Pakistan, we prepared a framework for the Ministry of Finance for issuing Asset Light Sukuk, aiming to help the government of Pakistan in raising at least 10% of the sovereign funds through Shari’a compliant instruments.
We have also prepared a framework for Islamic FinTech for the SECP (Securities and Exchange Commission of Pakistan), to help achieve scalability in capital markets and non-banking financial sector. We have brought our FinTech knowledge and the policy advisory experience into one framework aimed at helping improve the access to market for the small investor and enhance the penetration of investment products in the country with scalability. This roadmap that is currently under review by the SECP, once adopted, will be really handy if the government decides finally to implement the ruling of the Federal Shari’a Court about converting the entire financial system into Islamic.
In the Philippines, the Central Bank and other government agencies have been working very hard over the last few years to adopt Islamic banking and finance. IFAAS has worked with them closely with technical assistance, helping them to roll out Islamic financial services in the country. We are also providing Shari’a audit services to some global banks and major asset managers, product development, operational advisory and Shari’a compliance services to many local and international banks and financial institutions around the world and helping new Islamic financial initiatives in rolling out their services.
At IFIN, so far we have launched the instant consumer financing platform and now we are working on our SME financing platform. We are trying to develop a digital ecosystem and rollout to different countries InshaAllah in 2023 and beyond. We aim to bring all the stakeholders of SME financing onto one digital platform with the objective of improving access to finance for SMEs by reducing the turnaround time for credit approval and disbursement from months to literally minutes.
Our target is disbursement of funds from a new application within 10 minutes. What we are trying to do here is to apply the knowledge that has cumulated in IFAAS over the years and multiplying it with the technological knowledge that we have gained working on IFIN over the last few years and the things we are learning from our peers within the Islamic finance industry. We believe the SME digital platform will be a leap for the banks and financial institutions, enabling them to penetrate new and lucrative segments, and offer new products. It will be a new growth opportunity for them and the SMEs.
The third product that we are planning for IFIN is a digital ecosystem for agricultural financing. Agri- financing is a major need in many OIC countries where agriculture is very strong. This need remains unmet due to a large gap in funds and access to market. We are currently conceptualising this solution while the development work is in progress for the SME solution.
ARE YOU SATISFIED WITH THE FLEET OF FINANCIAL PRODUCTS OFFERED BY ISLAMIC FINANCIAL INSTITUTIONS THROUGHOUT THE WORLD?
I have always been a diehard supporter of Islamic finance, however over time, I have become critical of the current state of Islamic finance industry. It may be me turning fifty or it may be due to my experience and exposure, I am not satisfied with the way Islamic finance is operating in the market and the products that are currently on the offer. The analogy, I use is that Islamic finance is like a Ferrari and you know that Ferrari is a jewel of the automobile industry. If I have a Ferrari that drives at 20 miles per hour, shall I feel proud of it or shall I be worried about why my Ferrari is not driving at 200 miles an hour, the speed that it has been made for.
The questions I need to ask myself are, is there a fault in my Ferrari; something wrong with my driving skills; am I on the right track or is it simply adverse weather conditions that are preventing me from achieving my potential of doing 200 miles an hour. I need to find why I am short of 180 miles in my speed and address the issues so that I can truly enjoy my Ferrari. In my view, the current form of Islamic finance industry is the Ferrari that is driving at 20 miles an hour.
IN WHAT AREA OF YOUR BUSINESS ARE YOU FOCUSING YOUR SUSTAINABILITY EFFORTS?
I do not know what exactly is meant by sustainability here. What I really care for is the sustainability of the knowledge and capacity within the institutions including IFIN and IFAAS and the institutions which we are working with whether they are financial institution or government entities or other organisations.
How do we make them sustainable not in terms of small things but in big things like e.g. succession planning. How do we make sure that these institutions are not dependent on individuals? I made it very clear to the team that IFAAS shall not need me or Shaher. I do not want to be sitting around forever, or being quoted endlessly as the founder of IFAAS. I want IFAAS to be completely independent of Shaher Abbas and Farrukh Raza. You should yourselves be able to sustain the business and also the mission.
The mission that we started with, the vision that we had, should be sustained overtime. Alhamdolillah, I am very glad to say that this year IFAAS was accorded the title of Best Professional Firm of the Year by Islam channel in the UK and this initiative was 100 % effort of the team without any involvement from Shaher or from my side. It was very satisfactory for me to see this happening as it is a sign that Alhamdolillah they are now capable of sailing on their own and Shaher and I are no longer indispensable to the business. For me this is sustainability.
I WANT IFAAS TO BE COMPLETELY INDEPENDENT OF SHAHER ABBAS AND FARRUKH RAZA. YOU SHOULD YOURSELVES BE ABLE TO SUSTAIN THE BUSINESS AND ALSO THE MISSION. THE MISSION THAT WE STARTED WITH, THE VISION THAT WE HAD, THAT SHOULD BE SUSTAINED OVERTIME.
We are trying to do the same thing in IFIN. We are just going LIVE in Türkiye where I am leading the operation in its early phase. However, I have given an ultimatum to IFIN Türkiye team that by mid 2023, I will be moving on to the next country where we will be expanding InshaAllah and the team needs to be able to navigate on its own without too much involvement from my side. The team should be able to run the business on its own without needing to look at me or Shaher. For me, this is sustainability but also empowerment and trust.
ISLAMIC FINANCE IS GOING THROUGH A TRANSITION PERIOD WITH INTEREST OF WESTERN FINANCIAL BANKS AND INSTITUTIONS DECLINING AND THE INDUSTRY NOT HAVING A UNIQUE ECONOMIC VALUE PROPOSITION FOR CUSTOMERS OF SHARI’A COMPLIANT FINANCIAL SERVICES, WHAT VIEW DO YOU TAKE ON THE FUTURE OF ISLAMIC BANKING AND FINANCE?
The reason is very simple. Some people are genuinely intrigued with the philosophy of Islamic finance but they get disappointed with the similarity of products and practices. Others see Islamic finance as a business opportunity, but that business opportunity declines very fast due to lack of viability. Conventional institutions cannot make as much money from Islamic finance as they do otherwise, hence their interest fades due to lower returns on their investments.
I feel the industry is falling short of making the difference that it boasts. We claim that Islamic finance industry is about transparency, responsibility, ethics and much more. What people see is completely different because the products very much resemble the conventional products. You make an Islamic deposit and you call it mudarba with a promise to share the profit.
This is great, a new concept, but there is a small print saying that the customer’s share of the deposit is capped, so it will not exceed 5%. You actually killed the spirit of the product. These type of practices are causing harm to the cause of Islamic banking and preventing its growth. And these are the things that have led to my criticism of the industry.
Islamic bankers tell me if they pay the 50% share of the profit, then we will be paying out a lot. I say what is the problem with this – it is the customer’s right. [The bankers’ response is, if we did not have the small print] then we would have a lot of influx of deposits, putting us in excess liquidity situation as we may not be able to deploy that money in the financial markets due to lack of government securities.
I respect Islamic bankers, they are doing a good job however I believe they can do a great job if they think differently. They need to get out of their comfort zone aka financial markets and start investing in the real economy.
This is what will really differentiate Islamic finance from conventional. Indeed, it will require new skillsets, new strategies, new risk management frameworks and much more but that is where the true value and a lot of money lies. It may also require adjustments to the prudential frameworks and liquidity rules but I am sure the industry stakeholders can work together to take it forward in its true spirit and make the real difference to the economies and the financial wellbeing of the populations. Questionable; nor My view as to what the industry needs to do is to stop mimicking conventional finance and be more transparent. We can learn a lot from crowd funding and cryptocurrency.
They both came to the market just a few years ago with products that were completely new and inexistent before. Within a matter of few years, they convinced the regulators that they are different and need new regulations for effective operation.
Today, most of the countries have at least some basic regulation for them, whereas Islamic finance has been around for more than 40 years and as yet we have not managed to get accepted that it is different from
conventional and needs a separate set of regulations. Instead we have been trying to fit a square block into a round hole. It is not working and we are trying to make our square block rounder so that it fits in the round hole. It will either never fit or it will lose its unique feature of square shape on the way and both are not good.
We have to say loud and clear that Islamic finance is different, it cannot be governed like conventional finance. An Islamic deposit is adifferent – it is neither a deposit nor an investment by conventional definitions. It is something in between, which needs a regulation for its own. This is where a lot of work is required and this is where the opportunity lies.
HOW HAS THE E-COMMERCE MARKET CHANGED DUE TO COVID-19 AND WHERE DO YOU SEE IT GOING, ESPECIALLY FOR CONSUMERS OF ISLAMIC FINANCE?
This is a big shift that was already on its way when CoVID came and things got accelerated over the last two three years with increased need for integration of online platforms. Islamic finance institutions need to be really quick in order to harness this opportunity and if they continue doing the things the way they have done for the last 2-3 decades, [the time] since they have been around-then they will be outpaced by the market. Things are happening very fast in the conventional space and Muslim consumer is looking for Halal options. People need not suffer or make compromises. The market players need to stand up to these expectations.
WE WOULD NOW LIKE TO COME TOWARDS SOME PERSONAL QUESTIONS. WHAT IS YOUR KEY TO BEING PRODUCTIVE THAT YOU CAN SHARE WITH US?
My key to being productive is having this passion for what we do. People tell me that I am passionate about Islamic finance. This passion is something which keeps me going and makes me productive. Since turning 50 I have started thinking differently. On one hand I am trying to make the businesses that I am involved in, more sustainable, strengthening them to continue and flourish on their own, expand to incorporate fresh ideas.
On the other hand, I am diverging more towards my involvement in other things. The last few years I have been engaged profoundly with AAOIFI and other industry bodies on pro bono basis. I feel it being my responsibility to share this knowledge, disseminate the cumulative experience which we have had, benefiting the industry from the exposure and the journey that Allah has best paved.
This is to foster the standardization within the industry increasing advocacy and so on. Also helping the younger generation in making their career choices, to instill the same passion in them, to kindle the spark- taking forward whatever my generation has done. The younger generation needs to become the new torch bearers taking this industry to higher levels and longer distances InshaAllah. This is something that helps me wake up every morning fresh and enthused for a new day and hope.
WHAT IS THE MOST VALUABLE LESSON YOU’VE LEARNED THROUGH THE COURSE OF YOUR CAREER?
Nothing comes easy! Everything that is valuable – requires time, effort, passion, patience and purpose. So whatever we do in our life, we need to have a passion for it; we have to have faith in Allah and in ourselves and the people around us. With time and efforts we start seeing the results.
WHAT ARE YOUR FAVOURITE THINGS TO DO OUTSIDE OF WORK?
Travelling, I would say. I have been to more than 100 countries and worked in more than 50 countries to date. I have done some odd travelling including the camel caravan in the Sahara, Africa with my kids and travelling with my wife to the closest land mass to the North Pole, to name a few I am trying to have a farm, now, where I can do some farming, raise some animals, in Turkiye, not here.
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Dr. Shaher Abbas Founder & CEO, IFIN; Co-Founder & ED,
IFAAS Group
LET US START THIS INTERVIEW WITH A BIT ABOUT THE COMPANY. CAN YOU RELATE, FOR THE BENEFIT OF OUR READERS, HOW THE IDEA OF IFIN CAME ABOUT?
Going back to the original starting point or trigger point of why we have IFIN. I was in UK in 2008, when my wife and I went to a furniture store. The salesperson asked at the point of purchase if we would like to have finance. To which I replied that we are Muslims and we do not pay interest. He said you do not have to worry about it because it is interest-free instalments for 3 years. This was an interesting offer which I wanted to try. So the guy just pulled up a laptop and asked for my name and address and in a few seconds said congratulations you are approved and that was a complete shock for me. At that time, I was working for the first Islamic Bank in the UK (now Al-Rayan Bank UK), positioned there as a product manager.
At that time, a finance deal would take at least one week to be completed with multiple paperwork, multiple signatures and multiple visits for the customer to the branch. I morally felt that this is what we should do in Islamic finance, because without it, we are never going to survive as an industry. This triggered us to prepare a feasibility study with business plan and we presented the idea to the bank’s board. The proposal did not go through due to the high cost of setup, which a small bank could not afford. After leaving the bank and setting up IFAAS our consultancy business, I continued trying to develop the idea on my own.
However, at that time [proposing] to any bank to connect to their core banking system was a big NO, unless your system was developed by the like of Oracle or Microsoft. It was in 2013 when I met with Mohammed Khateeb who was then the CEO and chairman of Path Solutions which is a software company now owned by Azentio. I presented the idea to Muhammad Khateeb with 5 pages presentation and told him, that, we want to build second generation of Islamic banking software and he immediately saw the opportunity and quite liked it. So we setup IFIN in Bahrain as joint venture between IFAAS and Path Solutions. Now going back a little about IFAAS. IFAAS is a consultancy business setup to achieve two objectives, first to help in building the industry and the second to protect the industry by helping financial institutions, by building the proper governance and implement the right products. We try to make sure that there is always a solution for problems which people say that there is no solution to.
SO FAR IFAAS HAS WORKED IN OVER 50 DIFFERENT COUNTRIES, IN PROJECTS COVERING MULTI-DISCIPLINE ISLAMIC FINANCE INDUSTRY AT INSTITUTION LEVEL AND GOVERNMENT LEVEL
Shari’a-based product, so the industry can grow in the right direction. So far IFAAS has worked in over 50 different countries, in projects covering multi-discipline of the Islamic finance industry at institution level and government level. Despite all the successes we made through IFAAS, we still feel that there is more work to do, especially on the financial institution level. We want to impact the lives of the people directly by providing them with a solution that helps them avoid Riba. Therefore, we created IFIN to solve 80-90% of the industry’s existing problems. IFIN is a new concept that will take the industry to the second level by helping banks to reach out to larger communities, digitalise their processes, reducing their costs and unleashing their real potential. No matter how much we believe in Islamic finance if you do not have good price and good customer service then only few will use it. Thus, if a bank does not have good price or good customer service then why would any customer bother? IFIN solves these two problems and helps Islamic financial institutions not only in competing better with conventional banks but for the first time in the Islamic finance industry, IFIN will put the Islamic banks ahead of the conventional banks.
WHAT WOULD YOU DESCRIBE AS THE CORE FEATURES OF IFIN – THE FIRST OF ITS KIND, REAL ECONOMY, AUTOMATED ISLAMIC FINANCING PLATFORM?
IFIN is a digital platform connecting all types of retailers and SMEs to all types of financial institutions including Islamic banks, Islamic windows, microfinance companies and crowdfunding. Literally, any type of business that is willing to do Islamic finance will be able to actually help them to offer on IFIN platform. On the other side all types of retailers such as car dealers, white goods, brown goods, furniture, electronic shops, health care providers like dentists, education like private schools, private universities, travel agents, events managements such as weddings; all will be on the same platform. So the sellers of any good or service which is halal, can be financed, we will be able to connect whether in physical stores or online stores. You can imagine Amazon, Noon, IKEA or you can imagine Emirates airline. [It simplifies purchase] While you are going to checkout, you have to do transaction using either of debit or credit cards and then you have IFIN. The customer chooses IFIN if he wants to finance it and [IFIN] will make sure that the person gets the best offer from the banks or finance companies available on IFIN platform. If you are at Nissan or Toyota showroom you go select your car and you get the best finance offer completing the approval process and sign the contract and complete the entire process within few minutes. This is what you are doing in Saudi Arab now. This has never ever been done before. The customer walks into the car dealer and in 10 minutes drives out, with his new financed car. Hence, what IFIN does is link back Islamic finance with real economy.
In addition, IFIN will reduce reliance on tawarruq, as customers can directly finance the actual goods and services, they need, rather than buying metal or something else to get cash. This is how we are positioning Islamic finance ahead of the conventional. IFIN as a platform did not exist in the Islamic banking industry nor in conventional banking industry whether it is the US, the UK, or Europe. In Europe you have one bank or finance company financing 20-50 or 100 retailers. They have instant financing in Europe but not exactly the way IFIN does this is as a platform – it is the future of the industry. You can think about it as an aggregator – we aggregate all type of retailers. You can think about it as a finance platform where the banks can connect to us (plug and play) to become digital instantly. Thus, you can also think of us as a digital transformation tool for those institutions looking to transfer their services to become fully digital.
HOW IS IFIN DIFFERENT FROM OTHER MORE TRADITIONAL FORMS OF E-COMMERCE?
IS THIS STEP TOWARDS DIGITAL EVOLUTION AND DEVELOPMENT OF THE ISLAMIC FINANCE INDUSTRY TO MAKE IT MORE COMPETITIVE TO THE CONVENTIONAL FINANCIAL SYSTEM?
Some banks have the money to build their digital system, either they bring in someone from outside to build or they have their own resources. It is really our aim at the end of the day to help all institutions, banks, finance companies and microfinance companies to build their own digital system as we do not want to put these guys in a disadvantageous position. They can plug in to our system and use it and the main charge is on transaction basis. If the financial institution makes money, we make money. If a bank receives a 100 applications and the banks approve only 20 then we will charge for only the approved 20. We will not charge on the remaining 80.
We want to be the ‘Go To’ industry. We have this aim not because of it’s regional basis, but because it’s fast, it’s better, and it is cheaper. This is where we want to be and this is our obligation as Muslims to make our solution. People should come to us not because it is halal and pay more and wait and face more difficulties – no. We want non-muslims and Muslims both, to apply and obtain finance and be happy with a smile after that. This is the correct concept of service. So we came in the middle to make sure, the customer is able to choose the best bank, the best offer, the fastest one and the easiest one for them. So yeah it is a digital platform which will make things easy for the customer.
HOW CAN THE RETAIL MURABAHA AS DEVELOPED, AIDED AND ASSISTED BY IFIN REVOLUTIONALISE ISLAMIC RETAIL FINANCING?
Currently, customers have to go to the retailer, identify the goods that they want and take the quotation, apply for finance and wait for a couple of days and finally take the cheque from the bank and go back to the retailer to pay for the goods. It’s a complicated process. Now what does that mean- let us take car dealers as an example: 50% of people who take a quotation from the showroom- they never come back, because the minute a customer leaves the showroom he can change his mind for any reason.
The car dealer is losing business because he cannot close the deal. We think IFIN can help car dealers [or retailers] increase their sales instantly by 50%.
In addition, IFIN allows all types of products not only murabaha. The bank can choose to offer ijara, istisnaa, Salam, Service ijara, mudarba or musharaka. Hence, the diversity that IFIN will bring to the market will enrich the entire Islamic finance industry with multi-instant financing products available in the market.
PLEASE SHARE WITH OUR READERS THE SUCCESS STORY OF IFIN. IS IT A SPIN OFF FROM IFAAS OR AN INDEPENDENT COMPANY?
IFIN is an independent company and majorly owned by IFAAS. It has been a very difficult journey and we are yet to say it is fully successful. To put things in context, it is a story of a struggle. As an example we setup the company in 2014 and we presented to the First Bank in Oman in the same year and all top management they liked the solution, however, they signed the contract in December 2017. It took three years just working with them to sign the contract and then we took another two years to get regulatory approval and then CoVID hit and everything was shutdown. In June 2021, we finally went LIVE in Oman. A member of bank management saw me on the day we launched and he said you know Shaher, I have never ever thought that this day will come -I have heard about IFIN project for 7 years. It started on top of the projects’ list and with time, as more projects came in, it started going down the list. Anybody else would have walked out of this project but you did not and you are LIVE now. So [the lesson is] if you want to pursue something then you have to keep pushing, specially, if you believe in the idea and it’s outcome then you keep pushing forward.
WHAT CHALLENGES DID YOU FACE WHILE LAUNCHING INNOVATIVE FINANCIAL SOLUTIONS FOR ISLAMIC FINANCIAL INSTITUTIONS? WHAT ARE, IF ANY, SOME OF THE DISADVANTAGES OF IFIN FOR RETAILERS AND CONSUMERS?
You can name all kinds of challenges in the world and you will find these [in the story of our journey]. We planned what we wanted to do, we built a platform. However, when we presented to our first bank [client] we found that their needs are completely different. Even on the most critical [part] which is the credit decision engine. They had a different system of scoring and [in comparison] what we had built was completely different from their expectation. So we had to rebuild a number of components of the system to allow them to operate in the way they want. In addition to the technology part, you will face another challenge with the mentality of the people; change is against the normal thinking of a person. How do you convince a credit officer of the bank to offer finance to a person who has never seen never set foot in the branch. He is never going to show his ID. Giving a credit decision instantly is something they have never done before. So convincing them to give up control, convincing them to let a machine take decision on their behalf, is still the biggest challenge that we have.
[Other] Challenges with people, challenges with regulations, challenges with the law, challenges with the infrastructure, challenges with our own company, the startup, challenge with the shareholder because they are looking for returns, challenge with the retailers [who] are challenging us to prove the instantaneous nature of our transactions. So challenges are on all different fronts but this is what you have to do if you have a mission. You have to overcome all these challenges. We take [these challenges] one by one – we analyse them and [then] we find the solutions around them.
IN WHAT AREA OF YOUR BUSINESS ARE YOU FOCUSING YOUR SUSTAINABILITY EFFORTS?
Sustainability is built-in within IFIN operational model and business model as we help the financial institutions in ensuring sustainability in different areas. If you do not have a low-cost and long-term strategy for certain sector then you cannot sustain it. Banks usually focus in profitable areas and this might exclude poor areas because [poor areas] cannot sustain [bank branch]. [In poor areas] the customers are just a liability for the bank because small number is going to put deposit and small number is going to be part of the profitable segment. We are changing that, we are allowing banks to be able to offer services to customers in all areas. We can do this because IFIN digitalises the entire financing process and make it cheaper to the bank who will only pay a small cost. If we think about SMEs – you will be able to reach to SMEs in areas where the bank does not have any branches. By funding the SMEs we help them to grow and to employ people from that area. Thus, we will be able to help the sustainability of the community itself. The result is that banks use IFIN as a tool for them to boost financial inclusion efforts and achieve their sustainability targets.
HOW HAS THE E-COMMERCE MARKET CHANGED DUE TO COVID-19 AND WHERE DO YOU SEE IT GOING, ESPECIALLY FOR CONSUMERS OF ISLAMIC FINANCE?
Oh it has changed a lot on our side. Before CoVID it was very difficult to convince banks that IFIN can help them by connecting to retailers and accepting business from retailers. Suddenly, everything stopped and [those] who continued to work and sell are the guys who had e-commerce. These [were the] guys who were delivering food, goods, or merchandise. Irrespective of where the bank is on the digital journey, most banks did shut down completely. After CoVID it was a completely different story – banks themselves changed. [The banks] could not stop again and they could not shut down again. [The banks now thought that] they needed their customers to buy and to grow, so that they [could now envision] this new channel. And we were ready for them and this is why we think there is a change in the mentality of the top management. So then, it was about where we should go with this digitalisation and what type of digitalisation should happen. Before everybody was thinking about it talking about it and after CoVID a lot of guys were smart enough to think of something new to bring in. So we were preparing and rebuilding for this change. Yes CoVID did change banks – it showed them the potential for huge growth and opened everybody’s eyes to [the advantages] of e-commerce. A secret- if you count 10 banks in the GCC [Gulf Cooperation Council] and [you will] find that 6 or 7 of those are building their own e-commerce now or talking about it. Since when it is the [function of] banks to build e-commerce? [It is that] they want to do it themselves and we are telling [them] now don’t build it – we already have it.
I LIKE TO BE PRACTICAL, I LEAVE MY STAFF, MY SENIOR STAFF WITH FULL CONTROL OF WHAT THEY WANT TO DO. I DO NOT LIKE TO INTERFERE WITH THEIR BUSINESS WITH THE WAY THEY DO THINGS OR TAKE DECISIONS.
WE WOULD NOW LIKE TO COME TOWARDS SOME PERSONAL QUESTIONS. WHAT IS YOUR KEY TO BEING PRODUCTIVE THAT YOU CAN SHARE WITH US?
I think this is the most difficult question and the most sensitive one because you do not know how to assess your own productivity. I can tell if my staff is productive or not but for me to [assess myself] is very challenging [but] it is a challenge [faced] on a daily basis. I have to repeat for myself to reprioritize, [to decide] which issue to focus on, what to focus on and what to do when you have multiple takes, multiple operations in different countries and multiple staff in each country. [At a time] when you are growing so fast this is one of the biggest challenges that you face as CEO of a startup company. We are LIVE in Oman and Turkey and setting up in Saudi Arab, UAE and Malaysia. We are also trying to build connection with Egypt, Indonesia and Pakistan. We are doing this because we are trying to help as much as possible. I like to be practical, I leave my staff, my senior staff with full control of what they want to do. I do not like to interfere with their business with the way they do things or take decisions. I hire top consultants and top senior staff because they can actually do their job [without] the need for me to tell them their job. Each one understands the strategy and have his/ her own targets and they have to go around and do the needful. If I have to do everything myself then it’s a problem for everybody and for the company. So as a CEO being productive means you actually hand over the right task to the right person to deliver it for you. The smartest thing a CEO will do is to choose the three-four people who will work under [him] immediately. If you are a successful CEO then you choose the right people and if you fail to choose the right people then you are a failed CEO, [simply] because you cannot do everything yourself. The CEO who does everything himself is already failing or failed CEO. As CEO the best thing you can do is to choose the right people around you. They will make you successful, if they are productive then you are productive and vice versa.
WHAT IS THE MOST VALUABLE LESSON YOU’VE LEARNED THROUGH THE COURSE OF YOUR CAREER?
I think perseverance is the key to success of a startup. [A person] can be smart, can be educated, can have money but if the main person in the startup does not have perseverance then that startup is not going anywhere. One time, I saw a picture or something on one of the social media – a picture of a man with an axe digging a hole in a mountain, looking for treasure. [At the end when there] was only one more hit to go before hitting the treasure, the man had enough and was already planing to quit. Similarly, when you do not know at which point the project is going to be successful, you always have to think that you have just one [more] step and so you can continue to push harder, work harder, while continuing to believe in your abilities. Overall the main driver is that we do this for the benefit of the entire ummah because we want the ummah to be built correctly. We believe in the Islamic solutions, we believe in the Islamic finance industry and we want this model to be the most successful model. We need to facilitate it to grow. We know it’s potential and we are helping Islamic financial institutions to unleash their real potential.
WHAT ARE YOUR FAVOURITE THINGS TO DO OUTSIDE OF WORK?
Time with the kids, is always the [best] thing. I also like to go swimming and fishing.
AT END THE OF THE INTERVIEW, PLEASE SHARE WITH OUR READERS WHAT IS THE GROWTH STRATEGY OF IFIN IN THE NEXT FIVE YEARS? IN OTHER WORDS, WHERE SHOULD WE EXPECT TO SEE IFIN IN 2028?
We have a very aggressive growth strategy -we want to be in over 20 countries within the next five years, which is very challenging, very difficult and very ambitious. I hope [we will be able to successfully] drive the company to reach up to its potential. The objective is to reach out to the biggest chunk of the Muslims’ community and offer them easy, fast and reliable Islamic finance solutions. We want IFIN to be the main solutions in the Islamic finance industry. InshaAllah we want to be in all OIC countries and then inshaAllah for all Muslims and Non-Muslims in Europe and the US.
