“Unsuccessful startups are all alike, every successful startup is successful in its own way” — Leo Tolstoy (a free translation). Last month I had a unique opportunity to witness first-hand the operations of Uzbekistan’s most successful Islamic fintech — Alif Moliya. Having done consulting for Islamic fintechs around the world, I always qualify their unique features, to understand how they travel from survival and obscurity to prosperity. As for any other business, the performance of an Islamic fintech company is a function of market, product, team and funding. In this article, DR VLADIMIR MALENKO undertakes to analyze these factors in a vane desire that this information may be of use to other Islamic finance entrepreneurs.
First, there was a bank — Alif Bank in Tajikistan, which was set up by Abdullo Kurbanov, Zuhursho Rahmatulloev and Firdavs Mirzoev who all moved from the UK and the US to their native Tajikistan to change the way banking operates. With Seed financing from another Monaco-based Tajik businessman Khofiz Shakhidi Alif was able to obtain a commercial banking license, and in just one year became the most trusted bank in the country. Now the leader in POS financing, B2C online financing, Alif also runs the region’s most popular mobile wallet alif.mobi. The tech leader already, the bank also runs Alif Academy — an online educational venture that offers free programming classes to ambitious Tajiks.
Feeling limited by the size of the Tajikistan economy, Alif founders looked north to its larger neighbour — Uzbekistan, where it is now represented by Alif Tech (a fintech), and Alif Moliya (a consumer finance company).
Alif Moliya came to Uzbekistan at the right time. A predominantly Muslim country of 35 million people lacks Islamic financial services worth speaking of. The member of Organization of Islamic Cooperation since 1996, Uzbekistan had paid only lip service to the development of Islamic economy. With a large pent up demand for Islamic finance we may witness the emergence of a new economic tiger that shows the advantages of operating in accordance with Islamic principles.
The field of consumer finance is always competitive in the countries with low-to-medium discretionary incomes, where some 50–70% of smartphones and household electronic goods are sold in installments. Alif Moliya dominates the Islamic finance market with its Murabahah and Musawamah products. Ethical financing coupled with user-friendly online experience have placed the company in a unique situation where it has to artificially restrain its sales in order not to run out of capital.
The unique features of Alif Moliya products include:
· A strong adherence to Shariah principles;
· An absolute transparency of Shariah compliant product pricing;
· A complete absence of any fines and late changes — although allowed in Islamic finance, the company shareholders are adamantly against introducing them;
· Effective tech-intensive pre-qualification, KYC and customer acquisition of clients.
The market performance of Alif Moliya in Uzbekistan once again proves the very important doctrine that people are indeed rational, and when faced with a choice between a simply convenient and a convenient ethical product, most would select the latter one.
Qualified and enthusiastic teams are paramount to startups’ success — they sometimes have to work in unstructured environments, with large workloads, and often with unspecified lines of authority and responsibility.
Alif is fortunate to have “The Team”, rather than a team:
· All key shareholders and top managers have studied in the UK and the US, and thus are free from the remnants of the old Soviet mentality;
· The official language of their Tashkent office staffed with Uzbeks, Tajiks and Russians is English — spoken fluently and willingly;
· The team’s ethical standards reflect the shareholders’ values which in turn lead to the lack of absenteeism, flexible but productive working hours, and minimal staff turnover. And there are several hundred job application keep arriving to the company monthly.
While doing the interviews, I encountered a young compliance officer that voluntarily reviews all of her approved financing cases and matches them against the non-performing loans within this group. All just to learn from her mistakes. The important part is that her bosses are not even aware (!) of her initiatives.
Funding can make or break any business. Islamic startups often suffer from the lack of money due to the relative underdevelopment of Islamic capital markets. Having put Alif Bank firmly on the regional fintech and banking map, the shareholders have welcomed Monaco-based businessman Khofiz Shakhidi, whose investment has brough the group to a new level of excellence, and allowed it to develop and expand regionally. Mr. Shakhidi is now the Chairman of the Board of Alif Capital Holdings Ltd.
But, the Islamic finance innovation does not stop at the service level, it can also apply to the funding. Alif Moliya is about to become a pioneer issuer of the totally new and exciting market for high-yield Shariah compliant notes. Given the lack of good Islamic investment products I expect these notes to do well.