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Analysis: Fintechs dominate 'Top 30 digital Islamic economy startups' list

Salaam Gateway, in partnership with DinarStandard, has released its first-ever list of Top 30 Digital Islamic Economy Startups. 

The list features 30 digital-first, consumer-facing startups that are serving - wholly or partly - an Islamic values-based lifestyle market across sectors covering fintech, media, travel, and fashion. 

It aims to highlight the growing prominence of digital startups serving the Islamic/halal lifestyle market and serve as a benchmarking tool for its continued development.

Sector growth

From a sector standpoint, Islamic fintech emerged as a clear winner with 20 firms, including two unicorns. Muslim-friendly media was a distant second with five companies, followed by three enterprises from the modest fashion space. 

Fintech is on a tear in the wake of its exponential post-Covid growth, and continues to find favour, especially in emerging markets. Increased e-commerce adoption has led to an emergence of Buy Now Pay Later firms, while players across the Islamic insurtech and wealth management space are increasing in number and prominence. 

Meanwhile, Muslim-friendly platforms, including matrimonial ones, are becoming fairly popular across the media ecosystem. Modest fashion, one of the top three sectors in the list, is in the ascendant on the back of its online growth and global appeal. 

Saudi leads the pack

Saudi Arabia, the largest Middle Eastern economy, leads the list with five companies. The UK and the UAE ran it close, with four enterprises each. Indonesia, Malaysia, Turkiye and the US each host three startups.

Saudi Arabia is pursuing its diversification agenda to develop an economy beyond oil and has emerged as a global hub for digital Islamic economy players, on the back of top-tier support, an outsized market, funding and regulatory ease.

Meanwhile, the UK has become a preferred location for halal economy startups, led by a strong Islamic finance ecosystem, robust digital infrastructure and an appealing entrepreneurial vibe. 

The UAE is also gaining prominence due to its worldwide appeal and supportive infrastructure, while a substantial domestic market and proximity to the broader European region has enabled Turkiye’s popularity as a sought-after destination for startups. 

“The Top 30 Digital Islamic Economy Startups list highlights a vibrant mix of startups globally. In the evolution of the modern Islamic/halal lifestyle digital global ecosystem, these are the first major cohorts that are maturing with proven business models and societal impact,” Rafi-uddin Shikoh, managing partner of DinarStandard said. 

“Given these early successes and significant gap in servicing the large addressable market, this space is poised to see the number of players multiply and expand,” he added. 

The Top 30 Digital Islamic Economy Startups was compiled on five criteria, including the companies’ Islamic positioning, aggregated funding, employee strength, traffic ranking and media mentions. 

To view the entire list, click here

Islamic Finance
Long-standing challenges beset Australia’s modest Islamic finance sector

On surface level, Australia offers several opportunities for the growth of its Islamic finance sector. 

The country has a young Muslim population which continues to propel the demand for Shariah-compliant products. It has developed a well-regulated and thriving financial sector, too, and can potentially capitalize on its Islamic finance space to prompt foreign direct investment (FDI) inflows as well as beckon prominent Islamic financial institutions to set up shop. 

Yet, despite key positive indicators, long-standing challenges continue to hinder the industry’s progress and development. An unfavourable regulatory environment, funding inadequacy, and lack of trust among consumers are to name a few.

Serving an underserved yet promising community

Muslims accounted for 3.2% - equating to 813,400 - of Australia’s approximately 25.5 million people in 2021, according to latest census data. Whilst the numbers may be modest, they indicate promising prospects for Shariah-compliant products. 

Talal Yassine, managing director at Salaam (previously Crescent Wealth), a Sydney-based Shariah-compliant investment manager said that a recent survey of 709 customers revealed 96% were interested in a home finance product that adheres to Islamic finance principles. 

“91% ranked Shariah compliance as the most important feature for a home finance product,” he told Salaam Gateway.  

For all the optimism surrounding the potential of the Islamic finance space, its current state remains small, with Australia’s Islamic financial assets estimated to be worth $2 billion.

Muzzammil Dhedhy, co-founder of Hejaz Group, a Melbourne-based financial institution identifies three key areas to spur sector growth. 

“There is significant potential to expand Shariah-compliant banking products, like savings accounts, personal loans, business banking, and trade finance,” he explained.

The second area is investment products.  “Developing more Islamic investment products can attract both local and international investors seeking ethical investment opportunities.” 

The third is takaful, REITs [real estate investment trusts], and sukuk. 

A handful of financial institutions do offer Shariah-compliant products and services across Australia, including Hejaz; finance and investments provider MCCA; and Melbourne-headquartered Amanah Islamic Finance. Conventional banks also offer some Islamic finance products, such as National Australia Bank (NAB), which extends Shariah-based construction financing.

“We’re playing in the larger commercial property space and are seeing a lot of opportunities in construction residential developments, land sub-divisions, etc. Because of the [country’s] young population, we are getting [interest from] a lot of Islamic schools that are looking to fund new campuses to help accelerate growth,” said Imran Lum, Islamic finance head at NAB. 

“It also makes sense for them to get financing that aligns with their school ethos.”

Nevertheless, there are no Islamic banks in Australia, a scenario unlikely to change for a while. 

In March, Islamic Bank Australia (IBA) requested the Australian Prudential Regulation Authority (APRA), the country’s financial services regulator, to revoke its licence to operate as a restricted authorised deposit-taking institution.

The lender, which sought to become the country’s first Islamic bank, had received its licence in July 2022. 

IBA, renamed to Islamic Money Australia, said it did not have enough capital to operate as a regulated bank and therefore decided to return its licence before any potential legal breach.

Dean Gillespie, CEO of Islamic Money Australia told Salaam Gateway, that once they raise sufficient capital - currently in progress - they would re-apply for a licence. 

“Our plans haven't changed,” he added. “We [have] approached Islamic investors and private equity houses in Australia and the Middle East.” 

However, he conceded that it has been a challenge to raise financing in regions such as the Gulf, as a lot of investors are not familiar with Australia as an investment proposition. 

“Nonetheless, we are hoping to complete our fundraising within the next three to four months,” he said.

Regulatory, trust issues chip away at sector growth

Although Australia’s banking sector is developed and well regulated, practitioners complain existing laws are not favourable for facilitating Islamic finance transactions.

“While there have been improvements, the regulatory framework is still not fully conducive to the unique needs of Islamic finance, creating hurdles for market entry and growth,” said Dhedhy.

Gillespie added that major challenges such as taxation exist. “We have written to relevant lawmakers and called for these regulations to be amended to accommodate Shariah-compliant [policies],” he explained. “It will take some time to change and adopt.” 

In addition to unfavourable regulations, stakeholders also point to the lack of trust stemming from poor performance and high fees associated with Islamic finance products. 

For example, three of Crescent Wealth’s investment products failed APRA’s performance tests last year as returns underperformed benchmarks. 

“The annual performance test to assess relevant super products is based on benchmarks set by the government, and do not take into account faith-based or ethical investment criteria, like criteria associated with Shariah-compliance principles underpinning the fund's underlying investments,” noted Yassine.

Reclaiming consumer trust is expected to be a cumbersome process. “As an industry we need to focus on having the right governance structures in place,” explained Lum. 

Depleting trust coupled with a lack of awareness regarding Islamic finance products means Shariah-compliant service providers have their work cut out.

“Despite being the first Islamic bank in the country, we will have to work to gain trust as well as be competitive on a price basis,” said Gillespie. "There is a lot of distrust among incumbent conventional banks in Australia.”

Boosting foreign inflows, trade ties

Hejaz’s Dhedhy suggested that by offering Shariah-compliant financing options, Australia can attract investment from Muslim-majority countries as well as investors seeking ethical investment opportunities. 

Australia is seeking to strengthen economic ties with Muslim-majority countries like the GCC and Southeast Asian states to fuel trade and develop its investment landscape. 

Source: Australian Department of Foreign Affairs and Trade website

The UAE is Australia’s largest trade and investment partner in the Middle East. Bilateral trade (goods and services) stood at $9.3 billion in 2022, while the UAE’s investment in Australia totalled $12.6 billion the same year. The two countries started negotiations for a bilateral free trade agreement last December. 

Qatari and Australian chambers also signed a memorandum of understanding in May to improve trade and investment opportunities. Bilateral trade of goods and services reached approximately $2.4 billion in 2022-23.

Furthermore, economic relations between Australia and Malaysia have strengthened in recent years, with bilateral trade equalling $18.57 billion in 2023. 

“[Additionally], Islamic finance can facilitate trade with countries in the Middle East and Southeast Asia, where Islamic finance is more established. This can lead to stronger economic ties, increased bilateral trade, and a more diversified investment portfolio for Australia,” Dhedhy added. 

What’s in store ahead?

On balance, there are several domains across the country’s Islamic finance sector that offer immense potential for growth. 

Australia could mirror initiatives of other countries to develop a robust regulatory framework, a strong funding pipeline and educational campaigns that help increase awareness of Islamic finance and Shariah-compliant policies. 

Such initiatives coupled with rising demand from young Muslims will continue to ensure that opportunities across the sector stay abound. 

*Edited on July 22, 2024, with changes to paragraphs 11 and 12. 

Islamic Lifestyle
UAE’s Eagle Hills adds Indonesia to global portfolio with $3bn deal

Abu Dhabi developer Eagle Hills Properties is looking to add Indonesia to its global portfolio. 

Mohammed Alabbar, the developer’s chairman and founder, and Erick Thohir, Indonesia’s minister of state-owned enterprises signed a memorandum of understanding this week.

The agreement includes plan to invest up to $3 billion to develop Indonesia’s tourism infrastructure assets, including property, airports and tourism destinations.  

The agreement will be effective for one year only, with the possibility to extend, the company said in a statement. No timeline was outlined for the investment.

Development of new tourism spots, and enhancing state-owned hotels and airport infrastructure, including the Soekarno-Hatta International Airport, are part of the deal. 

"Indonesia has significant potential due to its resources and tourism destinations,” Mohammed Alabbar said. 

“[We believe] Indonesia can be competitive and increase its proportion of the tourism sector’s contribution to the GDP [gross domestic product] – Eagle Hills would like to support this endeavour."

Eagle Hills, which operates in more than 11 countries across three continents, has a global projects portfolio valued at around $30billion. In May, the developer said it would invest $3.25 billion to redevelop a beachfront property in Latvia. It also plans to invest $4 billion to develop real estate in Bahrain. 

“This partnership aligns perfectly with our national strategy to diversify our economy and establish Indonesia as a premier global tourism destination,” minister Erick Thohir said. 

“We are confident that this collaboration will not only boost our infrastructure but also create significant employment opportunities and drive sustainable economic growth across our beautiful archipelago."
 

Islamic Lifestyle
Islamic lifestyle roundup: Thailand to boost appeal to Muslim tourists

Here's a roundup of key developments across the Islamic lifestyle ecosystem during the month of July

 

Editor's note: Thailand is looking to boost its Muslim tourist numbers, which has led its government to task all tourism agencies to promote the country as a viable Muslim-friendly destination. 

 

Philippines is also looking to develop a halal ecosystem to bolster tourism with Muslim countries. 

 

Trade Developments


Philippines

Philippines looks to ‘halal ecosystem’ to boost tourism, trade

The Philippines is developing a "halal ecosystem" to boost tourism and trade with Arab and Muslim countries, according to the National Commission on Muslim Filipinos (NCMF).

 

With around 10 million Muslims in its nearly 120 million population, the country aims to expand its domestic halal industry.

 

The government targets raising 230 billion pesos ($4 billion) in investments and creating 120,000 jobs by 2028, tapping into the global halal market worth over $7 trillion. (Arab News)

 

Qatar

Qatari ministry launches calligraphy competition

Qatar has launched the inaugural Qatar International Arabic Calligraphy Competition, Al Raqim, enriching its cultural heritage.

 

Inaugurated by Ghanem bin Shaheen Al Ghanim, Minister of Awqaf and Islamic Affairs, at the Sheikh Abdulla bin Zaid Al Mahmoud Islamic Cultural Centre in Doha, the event aims to elevate Arabic calligraphy on the global stage. (The Halal Times)

 

Thailand

Thailand to boost appeal to Muslim tourists

Thailand aims to become the region's hub for halal tourism, according to government spokesman Chai Wacharonke.

 

Prime Minister Srettha Thavisin has instructed all tourism-related agencies to promote the country as a Muslim-friendly destination.

 

This announcement follows Thailand's fifth-place ranking among non-OIC countries on the Global Muslim Travel Index (GMTI) by Crescent Rating and Mastercard, which evaluates countries based on the conveniences they offer to Muslim travellers, including halal food options and access to places of worship. (Bangkok Post)

 

 

Regulatory


Azerbaijan

Azerbaijan to issue ‘halal hotel’ certificate

Azerbaijan will issue "halal hotel" certificates to tourist facilities following the adoption of a new state standard for halal tourism services, based on international experience, the State Tourism Agency announced. Interested hotels can undergo halal certification to present themselves as "halal hotels" to customers. (Azerbaycan24)

OIC Economies
OIC roundup: Qatar to enhance trade ties with Iraq, Uzbekistan

Here's a roundup of key developments across the OIC ecosystem during the month of July.

 

Editor's note: Cooperation is a wonderful concept in general, and moreso for businesses and economies. Perhaps why countries across the OIC are capitalizing on it for greater economic growth and prosperity. 

 

Qatar is looking to enhance economic ties with both Iraq and Uzbekistan. Oman and Algeria are also looking at ways to bolster trade and investment cooperation. 

 

 

 

Investment


Türkiye / Turkmenistan / Suriname

IsDB allocates $369m for development projects in Turkiye, Turkmenistan, and Suriname

The Islamic Development Bank's board approved $368.98 million for new development projects in Türkiye, Turkmenistan, and Suriname.

 

These initiatives aim to bolster sustainable development and socio-economic growth, focusing on transportation, health, education, and energy sectors. (Zawya)

 

Trade Developments


Oman / Algeria

Oman, Algeria discuss enhancing investment, trade cooperation

Oman's Minister of Trade, Qais bin Mohammed Al Yousef, and Algeria's Minister of Trade, Tayeb Zitouni, held a videoconference to explore ways to boost investment and trade cooperation.

 

They agreed to encourage companies to enhance partnerships and transfer technology, aiming for long-term collaboration. (Zawya)

 

Qatar / Iraq

Qatar, Iraq to enhance economic, trade ties

Qatar's Minister of Commerce, Sheikh Mohamed bin Hamad bin Qassim al-Thani, and Iraq's Minister of Commerce, Atheer Daoud Salman al-Ghurairi, co-chaired the seventh session of the Qatari-Iraqi Joint Committee for Economic and Trade Cooperation in Baghdad on July 7-8.

 

The session underscored mutual efforts to enhance bilateral cooperation, economic partnerships, and joint mechanisms.

 

Sheikh Mohamed praised the strong relations between Qatar and Iraq, highlighting their role in deepening economic, trade, and investment cooperation. (Gulf Times)

 

Qatar / Uzbekistan

Qatar, Uzbekistan discuss ways to enhance trade ties

Mohammed bin Ahmed bin Twar Al Kuwari, First Vice Chairman of the Qatar Chamber, held a video call with Rasulov Dilshod Ozodovich, Deputy Chairman of the Uzbekistan Chamber of Commerce and Industry.


They discussed key sectors for potential investment and the activation of agreements between the chambers of commerce in both countries.

 

 

The meeting attended by officials from both countries focused on enhancing bilateral trade and economic cooperation.

(The Peninsula)

 

UAE / Kuwait

UAE, Kuwait discuss economic cooperation

UAE Minister of State for Foreign Trade Dr. Thani Al-Zeyoudi met with Kuwaiti officials to discuss enhancing economic and trade cooperation between the two countries.

 

He held talks with the Kuwaiti Consul General in Dubai and Northern Emirates, Ambassador Ali Al-Thaidi, and the Chairman of the Kuwaiti Business Council in Dubai and Northern Emirates, Dr. Firas Al-Salem.

 

They explored ways to boost bilateral cooperation and exchanged views on investment opportunities across various sectors. (Zawya)

Islamic Finance
UK's Offa launches paperless buy-to-let finance service

UK-based Shariah-compliant fintech Offa has introduced a new buy-to-let (BTL) finance service to overhaul traditional property finance solutions. 

The service offered by the bridge finance fintech is available to anyone - British resident or expatriate, Muslim or non-Muslim – who is keen to purchase a property in England and Wales and is above the age of 21. The property must be valued at between £60,000 and £1 million.

Offa’s BTL product is built on Islamic finance principles of co-ownership-with-leasing. Customers can acquire the property in partnership with Offa and make regular monthly payments to increase their share, over time owning it. 

If a customer’s rental income does not meet the product's affordability criteria, Offa allows them to make the up the difference with their personal monthly income, the company said in a statement. 

“Our digital application process means clients can potentially get a fair decision within minutes, depending on credit rating and risk criteria,” Sagheer Malik, Offa’s chief commercial officer said. 

The Birmingham-headquartered fintech offers an ethical model designed in accordance with Islamic finance principles, which includes no interest and invests in sectors not involved in activities deemed harmful to society. 

In April, Offa announced a £100 million credit line for its bridge finance arm from a fund managed by UAE-based Gulf Islamic Investments Group. The credit line is the largest of its kind outside the Gulf. 
 

Islamic Lifestyle
Religious tourism: Why it may be prudent to reposition this space

The Muslim world is making headway in developing Islamic heritage tourism, but experts believe larger gains could be reaped from repositioning this space

From Asia to Africa, Muslim-majority countries are increasingly investing in developing and promoting Islamic heritage sites to increase their competitive edge and draw in more visitors. 

However, these destinations could capture a bigger chunk of the $613-billion global heritage tourism market if they position their religious tourism offerings differently.

Middle East countries such as Lebanon, Türkiye, and Egypt, as well as Asian nations like Indonesia, Bangladesh, and Uzbekistan, often use the term ‘religious tourism’ to attract visitors to their trove of Muslim heritage sites. 

This form of tourism is economically, socially, and culturally important for regions that have sacred Islamic sites and monuments. 

But the renewed focus on promoting Islamic heritage extends beyond Muslim-majority countries, according to Ufuk Seçgin, chief marketing officer at HalalBooking, an online booking platform for Muslim-friendly travel.

“We have seen, for example, an increase in Muslim travellers booking accommodation in Spain’s Andalusia region to discover the history of the Umayyad dynasty,” he said. 

Potential misinterpretations

Yet, the term ‘religious tourism’ can be misunderstood in the Muslim travel context, according to Fazal Bahardeen, founder and CEO of CrescentRating, a research organization focused on Muslim-friendly travel.

“Calling Islamic heritage ‘religious tourism’ can be problematic for some people. It might create issues with some parts of Muslim communities,” Bahardeen told Salaam Gateway.

“I feel it is better to describe Umrah and Hajj as religious travel and position the rest as Islamic culture or Muslim heritage travel.”

That positioning is not being done by many of the countries with Islamic heritage, he added.

“They either neglect it or position it as some kind of religious tourism; neither is appropriate. Of course, when it comes to Iran, it’s a different ballgame as there is a religious travel aspect to parts of the country.”

Hafsa Gaher, founder of the Halal Travel Network, a platform dedicated to cultivating Muslim-friendly travel, shares a similar sentiment, suggesting that ‘religious tourism’ could be misinterpreted if it is used to describe travel to places across the world.

“I would extend the term beyond the pilgrimages of Umrah and Hajj. The Al-Aqsa Mosque in Palestine, Kairouan in Tunisia, and the Great Mosque of Djenné in Mali are just a few examples of places that could be visited to further someone’s connection to prayer and worship.”

While Umrah and Hajj pilgrimages are forefront in terms of significance, there is great benefit to making journeys to other significant places to deepen that connection, adds Gaher, who is also a co-founder of Archer & Gaher Adventures, an Africa-specialist tour operator.

Reconnecting with Muslim history

In all cases, Gaher believes that a distinction should always be made between religious tourism and Islamic heritage tourism, especially as the latter can be promoted to a wider audience.

“For me, ‘religious tourism’ refers to journeys made for religious purposes and often includes significant places with ties to Islam. Indeed, certain places such as Makkah or Madinah are reserved exclusively for Muslim travel as places of worship,” she explained.

“In contrast, Muslim heritage can be celebrated by everyone, creating connections to Muslims both past and present. So, it is the traveller’s intention that differentiates the term.”

And it is this link to Muslim communities that should be at the heart of efforts to promote Islamic heritage, Gaher added.  

“Liaising with local mosques and community leaders is a great way to create not only an authentic experience for travellers but also a sense of pride and history for those who live there.”

Similarly, Bahardeen suggests promoting Islamic heritage to Muslims as a way of reconnecting with their past and learning about the legacies left by prominent figures such as Imam Mohammed Al-Bukhari, one of the most eminent scholars of Hadith in Islamic history. 

He notes that Uzbekistan is one of the countries doing a notable job in promoting its Islamic heritage to the world - efforts which are particularly noticeable in the cities of Bukhara and Samarkand.

For instance, the mausoleum of Imam Al-Bukhari—along with many other revered sites in Islam—is listed among Uzbekistan’s top attractions by the country’s tourism committee and travel agencies.

“We need to reimagine how we are going to position Islamic heritage. This is necessary at this time, especially for younger Muslims who need to be reconnected to their glorious history,” said Bahardeen.

“We also need to educate different stakeholders on how to position this whole space – the terminology and storytelling. There is huge untapped potential.”

Purposeful adaptations

With language constantly evolving to reflect modern times, HalalBooking found it necessary to repurpose existing words to describe the attributes which are important to the platform’s guests. 

A similar approach can be taken with the term ‘religious tourism’, suggested Seçgin.

“Take, for example, the word ‘secluded’ - we use this to describe a leisure facility, such as a pool where it is not possible to see in from the outside, meaning that a woman can feel comfortable in removing her hijab. This is not the word’s original definition, but its new or adopted meaning is gradually becoming more current,” he explained.

Islamic Lifestyle
Thailand aims to become regional halal tourism hub

Thailand's government will continue to develop a strategy to turn the country into a regional hub for halal tourism, a government official has said.

Thailand is attractive to Muslim travellers because of its multicultural atmosphere and wide selection of Muslim-friendly amenities and halal dining options, Bangkok Post reported, citing government spokesman Chai Wacharonke. 

A part of the success was due to the government's roadmap on halal industry development for 2024-2028, Wacharonke said, which saw the establishment of the Thai Halal Industry Centre.

The industrial centre has been assigned the task of bolstering the country's halal products. 

These efforts are a part of a broader strategy to develop and promote various halal products and services, including fashion and tourism, as well as to develop a halal economic corridor across the southern border provinces.

The plan is expected to bolster GDP by 1.2% by 2028, while creating an estimated 100,000 jobs annually.


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