Startups to play key role in Islamic economy Report

Mubasher: Startups are expected to boost their investments in the Islamic economy sector, particularly in countries such as the UAE, Saudi Arabia, Malaysia, and Indonesia.

Estimated at $2.1 trillion, the sector consists of Halal food, travel, cosmetics, modest fashion and Islamic finance, with 1.8 billion Muslims worldwide, according to a 2018/2019 report by the State of the Global Islamic Economy.

Islamic economy-focused startups have been supported by many initiatives, accelerators, and awards such as the Islamic Economy Award in Dubai, the Ethical Finance Initiative Award in Abu Dhabi, and the Halal Innovation Digital accelerator programme among others, Magnitt reported.

Goodforce Labs, an incubator for ethical and Islamic startups, has been helping startups and small- and medium-sized enterprises (SMEs) in the UAE to generate annual revenues of $50 million and measurable social impact through the Halal and Islamic industries with the aim to revive the Islamic market.

Rafi-uddin Shikoh, director of Goodforce Labs and managing director of DinarStandard, said: “We are a special kind of business incubator as we are not a common business space and we do not offer short-term business acceleration programmes.”

“Instead, we build long-term relationships with only eight to 10 startups that we believe will turn into success stories,” Shikoh added.

He noted that startups working in the Islamic economy business must be ethical, have a social impact and operate within the United Nations Sustainable Development Goals (SDGs).

“Islamic finance, by definition, is, in fact, ethical finance because it must be fair and take into account the impact on the environment, economy and society,” he said.

Goodforce Labs currently focuses on three Islamic startups. These companies are iWealth, Rabiaz for modest fashion, and the Good Food Institute.

In the same vein, the UAE’s Beehive, founded in September 2015, is the first Shariah-compliant peer-to-peer lending platform.

“We are proud to offer Islamic investors the opportunity to invest in some of the most innovative ethical SMEs in the UAE,” Beehive’s founder and CEO Craig Moore said.

“Working with leading Islamic legal advisors and experts of Islamic financing industry, we have been able to develop a structure that allows us to process investments in a Shariah-compliant manner,” Moore continued.

He also pointed out that Islamic crowdfunding through the improvement of credit distribution to the SME sector would result in greater financial integration.

He remarked that the SMEs would benefit the society and the overall economic development and improve employment when they get the support they need and access to affordable financing.

The Global Islamic Finance said in a report that the Islamic Finance industry worth $2.4 trillion, and accordingly Moore believes a startup would worth almost $1 billion if they target large markets, including Indonesia, Pakistan, and Europe.

According to Shikoh, Goodforce Labs aims to offer startups a product that is relevant to all markets in order to expand and grow in the global markets.

“In the last five years, about 450 startups have launched in the Islamic ethical economy to join more than 2,500 companies in that field,” Shikoh said.

He noted that some of these startups are successful, such as the Muslim Pro application and Modanisa, but most of them face obstacles in the second round financing and have limited global impact.

Shikoh claimed that global companies such as Nestle and Carrefour have become some of the main largest brands in the Islamic economy as they offer products targeted at the Muslim segment.

“Entrepreneurs have a role and a place in the Islamic finance market, just like any other market where they can create valuable solutions to improve customer experience or reduce product costs,” Moore highlighted.

“Let us not forget that the Islamic finance market lacks some of the innovations available worldwide in traditional finance markets. That is a great opportunity for entrepreneurs,” he said.