How to Start a Murabaha Investment Platform
Murabaha is a “debt-like” financial instrument in the Islamic world, but since debt is forbidden by the Shariah law, platforms work with non-interest-bearing types of loans. A murabaha loan is an acceptable form of credit which is used to operate in the P2P lending field.
What you will learn in this post:
How does a non-interest-bearing loan work?
A murabaha non-interest bearing note doesn’t have any documented interest rate and is usually backed by an underlying asset, sukuk share, used as collateral.
A non-interest bearing note is sold to an investor at a discount, and when the time comes to pay back the loan, the borrower will repay the full price or the face value of the debt note.
Why you need to launch a murabaha investment platform
If you want to operate in the Islamic Market and finance projects through P2P lending, you need to comply with the Shariah laws as well as the securities and lending rules established by the local regulator.
Working with a murabaha sukuk instrument is one of the 14 ways to run your P2P lending platform in the Middle East.
One of the major destinations for launching a murabaha sukuk crowdfunding platform is UAE. In Emirates, Dubai aimed to become the major center for issuing sukuk, but because the Central Bank of UAE introduced new rules the issuance of sukuk slowed down, according to the Reuters article.
However, sukuk is actually issued across 30+ countries around the world, so there’s definitely room for a platform.
The global interest in the Islamic Finance market
The Islamic Finance market has grown from $150 billion to $1.6 trillion over 20+ years and has become a noticeable part of the international economy, according to the Islamic Finance in Europe report.
With the growth of the Islamic Finance market grows the startups’ and investors’ interest in the new asset classes and financial structures.The muslim communities in different countries would be the first-line adopters and early users in your murabaha investment platform but in addition to them, locals would enjoy tapping into the new market too.
According to the same report, the Western Countries have also shown interest in the Islamic Finance products.
One of the observations, which may not actually relate to the topic that much, is that Amazon AWS has also tapped into the MENA region and now provides cloud-based solutions there as well. This however can make a bit more sense in a way that if big cloud providers are joining the market, it will be easier for local online platforms to launch too.
There’s a known issue with the local cloud providers because they lack the capacity, speed and bandwidth to support online investment platforms. Moreover, Islamic countries often have very conservative rules on where the data is hosted and stored, and it should always be operated on the local servers.
Competitors to watch out for
Basically, any Islamic Finance platform that operates in the P2P lending segment, because they are likely to be using one of the sukuk investing structures.
Qardus is one of the first UK-based platforms for Murabaha crowdfunding that provides shariah-compliant Islamic finance services for small businesses, regardless if it’s Muslim-owned or not. The platform is on a mission to help micro-enterprises become more ethical and socially aware of their services.
Forus is a P2P lending platform in Saudi Arabia which also works with sukuk investing. We helped Forus to launch an MVP which they used to apply to the Saudi sandbox and register their crowdfunding business.
Ethis is considered one of the most popular Murabaha crowdfunding platforms that is also compliant with Shariah requirements and provides services in Indonesia, Malaysia and Dubai.
Murabaha sukuk investing software
To start your online sukuk investment business, you need to have a scalable ecosystem which has proven market value and can be used to work in the real case scenarios:
- Set up a prototype to apply to the regulatory sandbox and get licensed to run your business
- Showcase your product to the board of directors and get a seed capital to build a platform
- Integrate software in your existing offline business and make it digital which will help you advance your business operations and grow beyond your current limits
These and other needs can be addressed using the LenderKit crowdfunding software. LenderKit is known for working with multiple clients in the MENA region from UAE, Saudi Arabia, and other countries. We can help you build an online murabaha investing platform using our ready-made solution as a foundation or even from scratch.
We always compare ourselves with the industry-leading crowdfunding platforms to ensure the best product-market fit as well as provide new solutions to the existing problems. In this video, we’ve looked at Crowdcube, one of the leading UK equity crowdfunding platforms, and whether you can use LenderKit to build a similar platform.
Even though Crowdcube is not a Murabaha investing platform, this video still provides a good insight in what LenderKit is about.
If you’d like to learn more about the services we can offer or schedule a demo with our Fintech Strategist who will answer your questions, fill in the form on our website and we’ll get back to you soon.