Explainer: How to create impact beyond profitability across the halal industry

We speak with Umar Munshi, managing partner at Hasan.VC, a venture capital fund, on the purpose of impactful investing, the value frontier technologies can help unlock and the role of the future of the alternative finance ecosystem.

How do you measure the social impact of HASAN.VC’s investments beyond profitability, to align with the ethical values embedded in the halal ecosystem? 

We have several data points and barometers, which at present, are relatively qualitative, and are spread across the different types and stages of startups we support.  We are very focused on grooming the startup founder community, as well as pay close attention to emerging markets. 

We measure impact across two diverse yet cardinal principles – first, the religiosity of our investments, and their impact on the lives of Muslims, elevating the community in practice and progress. 

With Shariah compliance as a starting point and initial baseline, we focus on tech startups that hold the potential of impacting Muslim consumers. We prioritise enterprises that are halal-centric and impact-driven as well as look into apps such halal travel and tourism services that beckon people of all faiths. 

From a broader lens, we measure impact of technologies and startups that have a purposeful impact on the wider community, help improve employment, create value and efficiency, and enhance literacy and education.  

What opportunities do you see in the $2 trillion halal market, and how is HASAN.VC positioned to capitalize on untapped segments? 

There are several gaps and pain points to fill among practicing Muslim communities, where early-stage startups can strive and offer pragmatic solutions to real-world challenges. In an AI-assisted and -dominated world, I expect an explosion of new startups that will spring up, looking to fill the lacunae and ease the interface between technologies and communities. 

Businesses that are established with a higher purpose of dispensing value and helping curate products and cultures around the core principle of altruism and community, yield tangible benefits. New-age and new-form businesses rooted in halal values that can help alleviate real-world problems remain on Hasan VC’s radar. 

What role do you envision for blockchain and decentralized finance (DeFi) in expanding the halal economy’s digital infrastructure?

Blockchain and decentralized finance (DeFI) can and ideally should, form the backbone of the halal economy infrastructure, which includes, among other elements, payment remittance and market organization components. 

Beyond infrastructure, these frontier technologies can play a critical role in product innovation and delivery. 

The payment process consists of several intermediaries, which render the entire value chain costly. High execution costs coupled with friction among stakeholders, and a dearth of transparency and interoperability has prompted  fintech companies and global think tanks to encourage disruption to the conventional model. 

In the halal economy space, this is especially important because the large majority of natural markets - that constitute outsized Muslim populations - face payment challenges and thus offer huge opportunity for technologies such as blockchain and DeFi to enable seamless domestic and cross-border P2P payment transactions. 

Blockchain and DeFi can also simplify and foster fundraising, undergirding companies and projects to raise capital effectively. Decentralized autonomous organizations can help set the rules of engagement and transparency, streamlining and automating the supply chain.

DeFi can also help tokenize real-world assets as well as physical and virtual assets, offering a new conduit for revenue.

What is the future of the alternative finance market?

The way people will invest, and alternative finance markets will function in the future will be very different from what they are today. 

There is a plethora of opportunities in the alternative ecosystem, such as the tokenisation of real-world assets, democratising access, enabling wealth creation and allowing people to own a fraction of the assets otherwise unavailable.

This configuration can be done in a Shariah-compliant manner, within the bounds of an ethical framework, operating on moral structures and intent. 

Governance systems such as DAOs and smart contracts are helping build trust, forging ways in which consumers can transact in a frictionless, low-cost manner engaging a friendly user interface. 

AI can work as a huge catalyst, processing colossal amounts of data to derive sound investment and pricing decisions as well as curate bespoke investment portfolios based on an individual’s risk profile and income levels. 

I expect a raft of investment options ready to be democratized, enabling alternative finance markets to become a linchpin of tomorrow’s financial landscape.