Sustainability trends in Islamic venture capital

The year 2023 is likely to make history as the year of Convergence of Sustainability and Islamic tech. We saw many Muslim-majority countries as such Saudi Arabia, the UAE and Malaysia and multiple Islam-friendly countries, such as Singapore and the UK adopting various sustainability initiatives that focus on climate change, resource constraints, population growth, poverty and inequality and ageing population. All within the Shariah compliant framework. These initiatives will solve the cardinal problem of Islamic tech — the dearth of capital — as billions of dollars, ringgit, and dirham from state budgets will start flowing in. The private sources will soon follow. Just a few months ago RHB Islamic International Asset Management, the Islamic management arm of RHB Banking Group, in collaboration with Janus Henderson Investors has launched Malaysia’s first Shariah compliant sustainable technology fund.

Shariah compliant sustainability tech has two immediate needs — the Money and the Initiative from the Top. The money is, of course, the grease that smooths the project flow from an idea to its successful and profitable implementation. The initiative from the Top is required due to the situation urgency — we simply do not have the time to allow climate change measures to evolve evolutionally. Our survival as species is at stake.

The UAE as usually taking a lead. Several of its top companies from various industries have signed newly signed the signed the UAE Climate Responsible Companies Pledge. Among them are Abu Dhabi Islamic Bank (ADIB); Arabian Gulf Steel Industries (AGSI); FIVE Holdings; AMEA Power; Commercial Bank of Dubai (CBD).

As the countries and companies strive to become net zero, removing one’s carbon trail becomes paramount. Next month will witness the launch of the world’s first Shariah compliant carbon offset investment product — XTCC — Exchange Traded Carbon Credit tool by Ethical Ventures. This Islamic tech products allows Shariah compliant investors to earn on carbon offsets, hedge against their price appreciation and/or reduce their carbon trails on as-wanted basis.

And some very current news:

This week I witnessed an emergence of a new (to the Islamic venture capital world) format of collective “forum pitching” — several Islamic startups presented their cases in front of several Islamic and conventional venture capital firms, who collectively grilled the applicant. This session took place on the grounds of the Islamic Fintech Leaders Summit in Kuala Lumpur and was attended by MDEC, Ficus Capital, Artem Ventures, NEXEA Angels and Plug and Play APAC. A sort of a mutual competition between different funders and different targets.

Also, a new wind in financing Islamic startups — the provision of non-dilutive capital. Capifly of Jordan just raised funds from Oasis500, BLDR Ventures, Joa Capital, Ahli Fintech and angel investors to provide Islamic entrepreneurs with Murabaha-based funding based on recurring revenue. In addition, Capifly has become one of the few trans-jurisdictional Islamic funding starups. Starting in Jordan, it swiftly moved to Saudi Arabia, and now is extending its journey to Malaysia.

I have never seen my industry being so dynamical. Our “golden years” are just around the corner.