CASE STUDY-How Dubai-based Leap Technologies raised Shariah-compliant financing online
| LEAP TECHNOLOGIES FZC | |
| CEO | Moiz Rajkotwala |
| Headquarters | Dubai |
| Annual Revenue | 5.5 million dirhams ($1.5 million) |
| Number of employees | 26 |
| Amount raised | 500,000 dirhams ($136,000) |
| Funding method used | Beehive, a crowdfunding site which received Shariah certification in Aug 2015 |
COMPANY OVERVIEW
Established in 2010, Leap Technologies FZC is an importer and distributor of consumer electronic accessories. It has exclusive rights to sell products in the UAE with branding from partners that include Manchester City football club, Warner Bros. and the UK boy band One Direction. It also has deals with Warner Bros. in India and Turkey and with Disney in India. The products are sold on to e-commerce sites and retailers.
FUNDS RAISED AND METHOD OF FUNDRAISING
The company raised 500,000 dirhams ($136,000) in Shariah-compliant funding via the Beehive crowdfunding website in August 2015. Moiz Rajkotwala, CEO of Leap, says its bid was fully-funded within an hour of going live on the site.
It offered a profit rate of 10 to 18 percent per year to investors and by the end of the finance process, during which investors bid against each other to provide the funding, the profit rate settled at 11.3 percent. “I consider that a very good rate in the UAE for SME business loans,” says Rajkotwala.
Beehive carried out an in-depth background check on Leap before accepting it on the platform. This included a credit committee questioning the company on its cash flow, its risk exposures and other issues. “Their intense scrutiny acted like a financial health check for my business and my plans,” says Rajkotwala.
REASONS FOR OPTING FOR ONLINE SHARIAH-COMPLIANT FUNDRAISING
The initial aim was simply to raise funds. Rajkotwala was familiar with the concept of fundraising online, having backed a number of projects on the U.S.-based Kickstarter website. He says “the fact that it is Shariah-compliant was just icing on the cake. I believe that, in this region, a lot more investors will be willing to take part in this [funding] platform due to the fact that it is Shariah-compliant. The success of our bid shows that is the case.”
The funds raised will be used to invest in products and intellectual properties to further develop its offerings. The company expects to almost double its revenues in the UAE this year to 10 million dirhams compared to 5.5 million dirhams in 2014.
HALAL MARKET STRATEGY
Leap Technologies’ products are aimed at a broad mass-market audience, rather than a specifically Muslim audience. However, for Rajkotwala, there is an underlying element that is relevant to the halal sector. “I feel that the concept of halal is basically to do with the simple idea that your inputs should add value. A company or person should not make undue profit without having added some value to the process,” he says. In his opinion, he continues, “From this perspective our company is a halal company as we do create products and services with additional value-add, supporting our team, vendors, clients and partners alike.”
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KEY TAKEAWAYS |
| GCC- and MENA-based crowdfunding websites, which include Eureeca.com, Shekra Crowdfunding and Zoomal, offer a viable way for companies to raise Shariah-compliant funding at a reasonable cost. |
| Different platforms offer different funding options, including profit-sharing and equity-based funding. These are closely aligned with the principles of Islamic finance, as there is risk-sharing involved between the investor and the company. |
| The screening process involved in getting on to some websites can act as a useful health check on a company. |
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