Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide institutional investors with cutting-edge tools to invest globally in digital loans. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest-growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
You are open-minded, self-driven and an expert in your field. You are a Data Scientist eager to work in the Fintech industry and want to join our team and contribute to the growth of the company. You work independently and like to take on responsibility and your own projects.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering and machine learning.
You will be a full member of our Software Development team from day one.
You will be in charge of your own projects.
You determine the effectiveness and certainty of new data sources and data gathering approach.
You analyze large structured and unstructured data sets and derive insights from them.
You develop custom data models and algorithms to apply to data sets.
You will manage components of our analytics infrastructure from data source to visualization.
Your Profile
You have a Bachelor’s or Master’s degree preferably in the field of Computer Science, Applied math, or Information technology ideally with a focus on Data Science.
You already have some practical work experience in a relevant field, ideally 3-5 years
Good knowledge, as well as previous working experiences, are a plus.
By joining an international team from many different countries excellent English language skills are essential.
Ideally, you are adept at using large data sets to find opportunities for product and process development.
You identify as a self-starter with an entrepreneurial spirit, a curious, creative mind, and a profound understanding of (or deep interest in) data science quantitative analytics, and/or capital markets.
You are dedicated and familiarize yourself quickly and comprehensively with new topics while also being able to prioritize and achieve objectives.
To work effectively in our team, you should be familiar with Python, Pandas, NumPy, and ideally NoSQL Databases. Essentials in Machine Learning libraries include scikit-learn, and h2O as part of your daily business
You have a very good knowledge of MS Office applications.
Other: On-site work; remote work occasionally allowed
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement in the entire trajectory of the firm.
A steep learning curve.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide institutional investors with cutting-edge tools to invest globally in digital loans. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
We are looking for a savvy Data Science Intern / Working Student to join our analytics team. You are open minded, self-driven and an expert in your field. You are eager to work in the Fintech industry and want to join our team and contribute to the growth of the company. You work independently and like to take on responsibility and your own projects.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering and machine learning.
You will be a full member of our Product Development team from day one.
You will be in charge of your own projects.
You determine the effectiveness and certainty of new data sources and data gathering approach.
You analyze large structured and unstructured data sets and derive insights from them.
You develop custom data models and algorithms to apply to data sets.
You will manage components of our analytics infrastructure from data source to visualization.
Your Profile
You are currently enrolled in a Bachelor’s or Master’s program preferably in the field of Computer Science, Applied math or Information technology ideally with a focus on Data Science.
You already have some practical work experience in a relevant field
Excellent English language skills are essential.
You identify as a self-starter with an entrepreneurial spirit, a curious, creative mind, and a profound understanding of (or deep interest in) capital markets, data science and/or quantitative analytics.
You are dedicated and familiarize yourself quickly and comprehensively with new topics while also being able to prioritize and achieve objectives.
To work effectively in our team, you should be familiar with Python and ideally NoSQL Databases. Essentials in Machine Learning and Big Data Applications such as h2O, Apache Spark or similar, are your daily business.
You have a very good knowledge of MS-Office applications.
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement in the entire trajectory of the firm.
A steep learning curve.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
Creditshelf & Exaloan: How digital SME lending adds value to an investor's asset mix
Frankfurt am Main, Germany, November 25, 2021 ‒ creditshelf Aktiengesellschaft, the leading financier for digital SME loans in Germany, and the data scientists at Exaloan AG confirm the added value of digital SME loans for the portfolios of institutional investors in a joint study.
Based on ECB data and the loan book of the creditshelf Loan Fund, the joint study elaborates the potential of the new asset class in the portfolio mix. Digital SME loans, such as those arranged by creditshelf’s lending platform, show a low correlation with other asset classes like equity, real estate, corporate or government bonds, and private equity. They are therefore ideally suited for further diversification of existing portfolios.
Dr. Tim Thabe, founding partner and CEO of creditshelf, explains: “We always knew that we are offering an attractive asset class for investors. Our new study with Exaloan officially confirms this. Especially companies of the German Mittelstand rarely have access to the capital markets and are therefore difficult to invest in by institutional investors. Through our platform, we offer a simple, digital and customizable way to invest directly into the German Mittelstand.”
In a volatility comparison, digital SME loans are significantly below other asset classes, even in comparison to a similar fixed income segment like corporate bonds. At the same time, they have much greater potential in terms of net returns. With the creditshelf Loan Fund portfolio, for example, the track record showed that investor returns amounted to up to 6% per year.
“We used bank lending data from the ECB to get a clearer picture of long-term return estimates for digital SME loans. When analyzing the data, we found that SME loans could be a great asset to include in an investor’s portfolio because they offer higher returns with a shorter duration than traditional fixed income securities like corporate bonds. By taking a close look at the creditshelf Loan Fund, we were able to validate our estimates with actual data. The study shows that institutional investors can benefit significantly from adding digital SME loans to their portfolio to enhance returns in a meaningful and stable way. Having the right tools to construct a diversified loan portfolio and control default risk is key, which is what our analytics engine is built for,” explains Luca Frignani, CEO and founding partner of Exaloan.
About Exaloan
Exaloan is the leading technology provider for institutional investments in digital loans. Its mission is to close the global funding gap for individuals, entrepreneurs and SMEs by connecting institutional capital with digital lending platforms. By operating a global B2B marketplace, the company opens up digital lending as a new asset class.. As an independent agent and validator, Exaloan provides a fully digital investment infrastructure with a standardized risk assessment of each single loan through its Loansweeper™ platform. At the core of its business, Exaloan uses big data and predictive analytics to generate an independent real time credit analysis as well as dedicated insights and reporting for institutional investors, banks, and lending platform partners. Insights cover topics such as sustainability reporting, advanced portfolio analytics, and market research.
Behind Exaloan stands an experienced team with extensive know-how in the areas of quantitative portfolio management, capital markets, machine learning, and software development.
About creditshelf
creditshelf is the leading financier for digital SME loans in Germany. Founded in 2014 and headquartered in Frankfurt am Main, the company arranges bank-independent, flexible financing solutions via a constantly growing network. creditshelf combines complementary needs: While SME entrepreneurs can easily access attractive financing alternatives, institutional investors can invest directly in German SMEs and partners can support their clients as innovative providers of new credit solutions. The core of creditshelf’s business model is a unique, data-driven risk analysis and unbureaucratic, fast and digital processes. Thereby, creditshelf covers the entire value chain: its platform is used to select suitable credit projects, analyze the creditworthiness of potential borrowers, and provide credit scoring as well as risk-adequate pricing. For these services creditshelf receives fees from both borrowers and investors.
creditshelf has been listed in the Prime Standard Segment of the Frankfurt Stock Exchange since 2018. The experts in the creditshelf team offer many years of experience in SME financing and are trusted partners and visionaries for the entrepreneurship of tomorrow.
To get access to the study please click the button down below or contact us directly at research@exaloan.com.
Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide a global marketplace that connects institutional investors with digital lending platforms. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
We are looking for a motivated and creative Full Stack Developer to join our team as soon as possible. You are an open-minded, fast learner who likes to work independently.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering, and machine learning.
You are part of the full software development process for various products and are responsible for managing your projects from conception to deployment.
You are responsible for database management.
You will continuously maintain and upgrade existing software solutions following deployment.
You are responsible for creating and maintaining your cloud applications, which use either a server less architecture, or are running on dedicated instances.
You are responsible for maintaining front-end and back-end data.
Your Profile
You have experience as a Full Stack Developer or a similar position.
You have a Bachelor’s or Master’s degree in the field of Computer Science or similar area.
You are an expert in front end technologies.
You should have experience working with AWS Lambda, ReactJS, D3, NodeJS, Multi-Model Databases
You have an excellent knowledge of development languages (preferably JavaScript or Python)
You have experience in working with and developing APIs
Excellent writing and communication skills.
Excellent English, additional language is a plus.
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement in the entire trajectory of the firm.
The possibility to grow and scale your role along the growth of Exaloan.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide institutional investors with cutting-edge tools to invest globally in digital loans. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
We are looking for a motivated and creative Product Designer to join our team as soon as possible. You are an open-minded, fast-learner person who likes to work independently.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering and machine learning.
You are responsible for designing and developing our product.
You are responsible for improving the existing product.
You will be employing design concepts into functional prototypes.
You are responsible for communicating our products’ interfaces.
You are responsible for handling user testing and evaluation.
You are able to design and maintain our website.
Your Profile
Work experience as a Product Designer or similar role.
A bachelor’s or master’s degree in Product Design, Manufacturing Design Engineering or relevant field.
Experience with design programs (Photoshop, Figma etc)
You are creative, flexible and a fast learner.
Excellent English, additional language is a plus.
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement in the entire trajectory of the firm.
The possibility to grow and scale your role along the growth of Exaloan.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
Digital Finance: Driving Financial Inclusion in Africa | Part 2
In one of our last blogposts, we begin discussing the impact of the global digital lending industry on financial inclusion, based on the example of Africa. In this blog post, we will go more into detail exploring the different variations and business models that fall under the umbrella of Digital Lending.
The Digital Lending Landscape | Sub-Saharan Africa
The visualization below shows three main lending models: Bank Originated Digital Lending, Balance Sheet Lending and Peer-to-Peer lending. We will explain these models based on their implementation in Africa and discuss how these models are linked to the development stage of the financial system and its African participants.
Source: based on FSI Insights on policy implementation No 27; Regulating fintech financing: digital banks and fintech platforms
Bank Originated Digital Lending entails banks partnering up with mobile service providers or startups to deliver their loans through digital channels. These offerings were the first to come to market, piggybacking off newly emerged mobile money systems and making use of established deposit-taking institutions. The first such lending scheme to emerge in Kenya was M-Shwari, a collaboration between the Commercial Bank of Kenya (CBK) and Safaricom, the provider of the M-Pesa mobile wallet. Bank-based digital lending is among the best-regulated form of digital lending in Africa since banks fall under the jurisdiction of local regulators.
Other players in the Sub-Saharan Digital Lending Ecosystem are Balance Sheet Lenders. They lend out proprietary funds acquired via capital or debt markets. This sector has grown significantly with notable players such as Branch and Tala, two Silicon Valley affiliated companies operating in Emerging Markets across the globe. Unlike banks these lenders do not take deposits and fall out of most of the traditional regulatory framework. These types of lenders have also been bogged down by controversy connected to the often extremely high interest rates that are not always communicated transparently to the borrowers (the Africa Report, 2021), prompting moves towards more regulatory scrutiny.
According to the 2nd Global Alternative Finance Market Benchmarking Report (2021), the global market share of Balance sheet consumer and business Lending in 2020 reached 36% of the estimated alternative finance loan volume, which amounted to more than 40 billion dollars.
Lastly the field of Peer-to-Peer Lending grew to become the dominant alternative lending model in Sub-Saharan Africa, reaching a total volume of 769 million in 2021, up by 50% from the previous year. A good example is Nigeria based Kiakia, which offers consumers both loans and investments. This field is however also quite dominant in the agricultural sphere, with offerings such as thriveagric or farmcrowdy allowing investors to finance the seeding stage which will be paid back with the harvest. In Sub-Saharan Africa P2P lending has become the dominant model in the alternative finance market.
The advantages of P2P lending are far-reaching: it does not only create more financing opportunities but also gives retail investors a good alternative to established asset classes, which are underdeveloped especially in the African context. It also enables to invest directly into the local economy. Most importantly perhaps, digital lending has proven to reach borrower segments that are excluded by traditional banks.
Market Share of Alternative lending products in Sub-Saharan Africa 2020 Source: The 2nd Global Alternative Finance Market Benchmarking Report (2021)
The advantages of P2P lending are far-reaching: it does not only create more financing opportunities but also gives retail investors a good alternative to established asset classes, which are underdeveloped especially in the African context. It also enables to invest directly into the local economy. Most importantly perhaps, digital lending has proven to reach borrower segments that are excluded by traditional banks.
Banking Status of Borrowers from Digital Lending Platforms across Regions (2020)
Source: The 2nd Global Alternative Finance Market Benchmarking Report (2021)
Currently relatively unconstrained by regulatory hurdles both balance sheet and peer-to-peer lending have shown double and even triple digit growth over the last few years. There are however still significant hurdles impeding market progress, most importantly a lack of transparency and comparability of the loan originators and the loans themselves. An investor willing to invest a large amount in the sector will invariably run into the problem that it is very difficult to assess the creditworthiness of companies and debtors from the outside. Furthermore, the availability of capital across lenders, but in particular in P2P lending, remains very limited. Nigerian lenders for example are currently only able to fund around 10% of eligible loans due to a lack of available funding. In 2020, the reported institutionalization rate on lending platforms stands at merely 30%. Although this is an increase compared to only 21% in 2019, bringing in cheaper money will likely be essential for sustainable growth.
Funding Source in Digital Lending in Sub-Saharan Africa 2020
Source: The 2nd Global Alternative Finance Market Benchmarking Report (2021)
In conclusion, new business models in digital lending hold great promise, especially in Africa, to improve financial inclusion. There are however still significant hurdles that need to be overcome before its full potential can be fulfilled.
At Exaloan we believe in the transformational power of technology to close the global financing gap. By providing a marketplace to connect Lending Platforms with Institutional Investors we aim to accelerate the transformation of the global financial lending markets toward more equitable and fair lending across the world – Including Africa.
If you want to find out more about our ecosystem, please reach out to us.
Digital Finance: Driving Financial Inclusion in Africa
How digital Lending reaches previously underserved populations
Getting an overview over the fintech digital lending landscape can seem daunting and confusing, so we would like to use this blogpost to give an overview over the industry and how it has progressed in recent years based on its development in Africa.
Traditional lending by banks comes with high barriers for entry that has historically excluded large parts of the population. This is especially true in Africa, where for the longest time most people did not even have a bank account to deposit and transfer money. As the graph below shows, most countries in sub-Saharan countries had financial inclusion rates of less than 50% in 2011.
2011: Account ownership at a financial institution or with a mobile-money-service provider (% of population ages 15+)
Source: Demirguc-Kunt et al., 2018, Global Financial Inclusion Database, World Bank, last accessed: 6/17/2021, own visualization
\Note: the following countries have been excluded from the original visualization: Angola, Comoros, Djibouti, Burundi, and Sudan
Without formal employment or address and a credit history, traditional financial institutions are unwilling and unable to provide individuals or their informal businesses with credit. In developing economies, the first alternative lending models in the shape of microfinance institutions emerged in the 1970s. These institutions typically had a local focus and aimed to establish community-based lending behavior, that although it minimized default rates, was both high in costs and maintenance, and hardly scalable. As a result, thereof, large parts of the wider population in many countries remaining unbanked and without access to credit.
This only began to change with the emergence of mobile phone technologies in the 2010s. In the space of a few years the financial inclusion rate more than doubled in sub-Saharan Africa (Mastercard, 2020). With the introduction of M-Pesa in Kenya people suddenly had access to mobile wallets, first to send and receive money, but soon also to borrow. This development was not only limited to Africa: globally 1.2 billion adults have obtained an account since 2011, including 515 million since 2014. Between 2014 and 2017, the share of adults who have an account with a financial institution or through a mobile money service rose globally from 62% to 69%. In developing economies, the share rose from 54% to 63%. As the graph below shows, a large part of this growth was driven by mobile accounts, which grew disproportionately from 2014 to 2017 in many African countries.
Annualized growth of account ownership by type (% population age 15+)
Source: Demirguc-Kunt et al., 2018, Global Financial Inclusion Database, World Bank, last accessed: 6/17/2021, own visualization
Note: the following countries have been excluded from the original visualization: Angola, Comoros, Djibouti, Burundi, and Sudan
New companies sprang up to capitalize on this growing trend, using data collected by users’ mobile phones to calculate default probabilities. Consumers previously excluded from accessing capital had the ability to quickly borrow money in emergencies or to fund and grow their businesses. The visualization below breaks down the regional allocation of mobile money accounts as a percentage of all accounts in 2017. One of the main drivers in Sub-Saharan Africa has been Kenya, which is also the first country to propose specific legislation to regulate Digital Lending companies.
2017: Account ownership at a financial institution or with a mobile-money-service provider (% of population ages 15+)
Source: Demirguc-Kunt et al., 2018, Global Financial Inclusion Database, World Bank, last accessed: 6/17/2021, own visualization
Note: the following countries have been excluded from the original visualization: Angola, Comoros, Djibouti, Burundi, and Sudan
Digital Lending as described above includes a host of different types of companies and business models. However, all share one common hurdle. Digital lending processes ultimately require digital funding processes to bring that market to scale, and many platforms lack the appropriate funding sources to fulfil the demand for credit. This is where Exaloan comes in by standardizing and automating digital funding processes for institutional investors and digital lending partners. If you are interested to know more, send us an email at info@exaloan.com and request a meeting or a demo.
If you want to find out more about our ecosystem, please reach out to us.
Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide institutional investors with cutting-edge tools to invest globally in digital loans. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
You are open minded, self-driven and an expert in your field. You are eager to work in the Fintech industry and want to join our team and contribute to the growth of the company. You work independently and like to take on responsibility and your own projects.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering and machine learning.
You will be directing and overseeing all aspects of the Finance and Accounting matters of the company.
You will be responsible for building up the financial controlling base of the company as well as taking care of the taxation, fees etc.
You will be identifying and participating in the funding opportunities including reaching out to banks, Venture Capitals etc.
You will also be responsible for keeping an eye on the future financial health of the company, forecasting costs of different projects, the capital needed for the upcoming months etc.
Your Profile
Ideally >5 years of experience in a similar position.
A bachelor’s degree in the field of Business Administration, Finance or adjacent areas is a must; a master’s degree would be an advantage.
Strong interpersonal and communication skills and being able to manage well at all levels of the organisation.
Strong creative and strategic thinking, problem solving and being able to analyse and make decisions in a limited amount of time.
High level of integrity and independency with a strong sense of urgency and results oriented.
Fluent English is mandatory; Fluent German is a plus.
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement and participation in the entire trajectory of the firm.
The possibility to grow and scale your role along the growth of Exaloan.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
Financial Service Technology Company in Frankfurt, Germany
Who Are We?
We are Exaloan, a financial services technology company. We provide institutional investors with cutting-edge tools to invest globally in digital loans. We operate at the intersection of asset management, software development, and advanced analytics with the ambition to drive innovation in one of the fastest growing FinTech sectors. And we are unstoppable to reach our goals.
Who Are We Looking For?
You are open minded, self-driven and an expert in your field. You are eager to work in the Fintech industry and want to join our team and contribute to the growth of the company. You work independently and like to take the lead on responsibility and your own projects.
Your Role
You will be working directly with the founding partners of industry experts with more than 100 years of combined experience across the fields that are at the heart of what we do: capital markets, portfolio management, banking law, software engineering and machine learning.
You will be responsible for cultivating and maintaining relationships with Institutional Investors.
Continuous talks and communication with Asset Management firms, Pension Funds will be part of your regular schedule.
You are actively present, build relationships, and sell our product to potential clients.
You expand and leverage our network adequately.
You communicate clearly, with purpose and emotion to build a genuine connection with prospects and clients.
Your Profile
Ideally > 5 years of experience in a similar sales position.
A bachelor’s degree in the field of Business Administration, Finance or adjacent areas is a must; a master’s degree would be an advantage.
Strong knowledge in financial markets, credit and/or insurance business is required.
Previous experience working as part of a team to develop the company’s customer base and provide a first-class experience to clients, preferably within the financial market.
Fluent English is mandatory; Fluent German is a plus.
What We Offer
Flexible working schedule.
Professional and experienced team.
International environment and network.
Central office in the heart of Frankfurt.
Direct involvement and participation in the entire trajectory of the firm.
The possibility to grow and scale your role along the growth of Exaloan.
We hire for talent; hence you will be able to develop your role according to your personal goals and position yourself where you can make the biggest impact and contribution.
If you think you are a good fit for our team, send your application now!
With global mobility down and no prospects for physical experiences in foreign lands insight, we are taking a virtual trip towards the Global Middle East! Towards Islamic credit markets, and towards yet another exciting opportunity in digital lending!
A Brief Introduction to Sharia-Finance:
Islamic finance refers to how businesses and individuals raise capital in accordance with Sharia-law, a set of rules that comply with the Quran, the Sacred Scripture of the Muslim community. Key concepts include the avoidance of riba (usury) and gharar (ambiguity or deception). Money is seen as a representation of value, not an asset in itself, leading to the saying’ money cannot make money.
Therefore, simply lending capital with interest (and therefore for profit) is considered riba – and prohibited under Islamic law.
The concept of risk-sharing must be considered when raising capital in accordance with Sharia law. The Sharia-compliant product uses a bank fee rather than an interest payment structure while keeping product features very similar. Lending activities must happen within a banking framework in which the financial institution shares in the profit and loss of the loan it underwrites. To comply with the risk-sharing approach of Sharia-compliant lending, the Islamic bank may pool investors’ money and assume a share of the profits and losses.
Why Sharia-compliant Digital Lending?
As the Islamic Finance Marketing Experiment 2020 found, consumer preferences for Sharia-compliant lending products over conventional products are relatively un-elastic when it comes to religious borrowers. In a randomized experiment in Jordan, the researchers found that Sharia-compliance increased the application rate for loans from 18% to 22%, which equates to a 10% decrease in interest rates.
These barriers add to the intrinsic dislike of conventional loans for religious borrowers. The findings suggest that religious considerations are partially responsible for the low utilization rate of household credit in developing countries with a large Muslim-population. High lending rates, an exclusive attitude, complicated procedures, and bureaucratic policies of traditional FIs are common obstacles reported by (M)SME when getting a loan. Muslim-majority countries have a 24% lower participation rate in active borrowing from banks (10.5% versus 7.9%) and a 29% lower rate of having a bank account (40.2% versus 28.6%).
Sharia-compliant digital lending products could not only lower access barriers to Islamic finance, but they could also contribute to mitigating the region’s financing gap, which sits at $335bn for South Asia and $186bn for the Middle East. Digitization could also propel Islamic finance’s growth in general, which is experiencing moderate to sluggish growth (1-2% in the next 2-3 years, S&P Moodys 2020).
Global investments in Islamic economy-relevant companies are already rising. In 2020, VC and other direct investments amounted to 11.8 billion dollars (Dinar Standard , 2019). Almost half of the investment volume, namely, USD 4.9bn, is invested in Islamic Fintech, highlighting the objective of putting technology-enabled finance to use to mitigate the historical slagging growth of Islamic Finance in MEASA.
Notably, the UK accounts for the most registered Islamic Fintech Firms with 27, followed by Malaysia, the UAE, and Indonesia (IFN Islamic Fintechs, 2021). A growing number of more than 120 Islamic fintech firms already offer Sharia-compliant financial products, many of them in the form of digital loans. Examples of Sharia-compliant digital lending platform include MicroLeaP (Malaysia), Dana Syriah (Indonesia), Nusa Kapital (Malaysia)…
Tradition meets Innovation: The Opportunity
According to Dubai International Financial Center (DIFC), Sharia-compliant assets currently represent 25% of banking assets in the Gulf Council Countries (GCC) and 14% of total banking assets in MEASA. Globally, Sharia-compliant AuM are expected to reach $3.8 trillion by 2023, almost doubling their 2020 volume of $2 trillion and growing at a CAGR of 10-12%.
The S&P Islamic Finance Outlook 2020 emphasized the need for inclusive standardization by relevant authorities and stakeholders to sped up Islamic finance advancement. It also hints at the role of Fintechs for supplying the necessary innovations with regards to products and technological infrastructure and for achieving a financial landscape that aligned with ESG objectives.
While market growth remains paced, it is gaining traction: Sharia-compliant digital lending operators in Indonesia have already doubled their Assets under Management between October 2019 and October 2020 (OJK, 2020). As recently as February 2021, the Bank Syariah Indonesia (BSI) was established after consolidating three state-owned banks. BSI has a net worth of $1.4 billion and works on the efficient integration of the three forming banks: Bank BRI Syariah, Bank Syariah Mandiri, and Bank BNI Syariah. The BSI shall allow platforms to better access credit scoring, e-KYC, and digital signature services. It will also integrate customer data from the forming three banks to help fintech companies partnering with BSI to offer services to its customers.
The digital lending market volume in the Middle East (MEA) has recently experienced impressive three-digit annual growth rates with complementing investments in several Arab lending platforms. Excluding Israel from the Middle East region, it is found that 95% of this digital lending volume stems from Debt-based instruments, roughly 5% from equity-based models, and 0.18% from non-investment models such as Waqf (donation)-based crowdlending (CCAF, 2019).
The biggest Sharia-compliant platform for SME lending in gulf countries is beehive, with approximately $170m in facilitated loans in 2020 (as of spring 2021). The platform recently partnered with government entities to roll-out a digital financing platform for micro and small Saudi Arabia enterprises. Across the UAE region, retail investors account for the dominant share of digital loan investments, with 90% against 10% institutional investors.
Another underlying driver is that since 2017, Islam is the fastest-growing religion in the world. It is already the second-largest religion after Christianity, and by 2025, approximately 30% of the global population will be Muslims. Sharia-compliant lending platforms are not only rolling-out products that their customers desire. They are entering an underserved growth market, while also captivating the general socially responsible investors and borrowers due to an emphasis on fair and equitable treatment of counterparties in the financing agreements.
We at Exaloan are excited to see where the market is headed! If you are interested in country-specific details, please contact research@exaloan.com.
Further Read / Interesting sources:
For an up-to-date picture of all things related to Islamic Fintech, see: https://ifnfintech.com/
Karlan, Dean S. and Osman, Adam and Shammout, Nour Musallam, Increasing Financial Inclusion in the Muslim World: Evidence from an Islamic Finance Marketing Experiment (April 2, 2020). World Bank Policy Research Working Paper No. 9200, Available at SSRN: https://ssrn.com/abstract=3567480
Global Mobility Reports: https://www.google.com/covid19/mobility/
If you want to find out more about our ecosystem, please reach out to us.
Source: The 2nd Global Alternative Finance Market Benchmarking Report (2021)
Source: The 2nd Global Alternative Finance Market Benchmarking Report (2021)
