Islamic venture capital ≠ Conventional venture capital + Fatwa
There is no need to try to catch up with the Joneses, meaning to try to bring Islamic venture capital to the standards and the size of the conventional industry. Our financial system is based on the principles of Islam — so, it is and it must be different.
Islam is based on many crucial concepts — among them are Inclusivity and Charity. Muslim communities are inclusive of all backgrounds and abilities, they foster mutual participation, interaction and relationships. Paying Zakat and Sadaqah signifies being ready to extend a helping hand to those in the need.
In the conventional world investing in venture capital funds and most wealth management products is a lot of the well-offs. To join in, one must usually have no less than US$1M in liquid assets. It does not have to be the same way in a community that is built on the foundations given to us by the Holy Quran. According to the Economic Times, the total wealth held by Muslims exceeds US$11.3T. So, to fully participate in the global financial systems, Muslims need to be able to pull their resources together — via platforms, crowdfunding sites and collective investment vehicles. The world will adapt.
SC Ventures (the venture arm of Standard Chartered) and NEXT176 want to bring affordable AI-led and Shariah compliant wealth management solutions to users in the Middle East in Africa via an inclusive financial wellness platform. The key principle here is democratization. It is a novel and brilliant way to tap into US$2.4T of investable African wealth.
Ethis, the brainchild of Umar Munshi, has channeled millions of US$ to at least 15 startups from his network of over 300 limited partners. Ethis’ VC firm HASAN is looking to invest at least US$3M in start-ups of the Islamic economy. HASAN has a target fund of US$10M to invest in start-ups in sectors ranging from technology to lifestyle with funding of $60K to $250K each. Qardus in the UK may soon provide equity investments as well.
Earlier-stage (before MVP) startups are covered by the UAE-based digiwaqf and Falcon Network, the latter is an angel investment network that invests in Islamic and ethical startups. Unfortunately, it seems that the last rounds of fundraising and investment by Falcon had been concluded in 2020.
Our Ummah in not unified. So, on the surface we need several national Islamic VC crowdfunding platforms that would product higher returns to the wide investment community, and help build new Islamic economy. There are many Muslims among leading conventional and Islamic firms that could contribute their time and skills to the platforms’ project selection and oversight.
“The journey of a thousand miles begins with a single step” (Lao Tsu, a loose translation)
An interesting topic for the next month column — “will VC-funded AI drive the costs of Shariah compliance down?”
