Shariah-compliant financing

Indonesian Islamic crowdfunding fintech has very global ambitions

Shariah-compliant fintech companies are popping up in Indonesia at a healthy clip. Given the relative underperformance of their traditional bricks and mortar siblings, many startups are confident they can capture huge market share. ALAMI is just one good example.

With an app release imminent, Jakarta-based Shariah-compliant crowdfunding platform ALAMI is preparing for international expansion.

“We want to be a one-stop solution for Islamic finance,” ALAMI co-founder and chief executive Dima Djani told FinanceAsia in an interview.

The startup has facilitated more than 150 financing deals averaging $75,000 each since registering with Shariah-finance authority Otoritas Jasa Keuangan (OJK) in May 2019 - and ALAMI is just getting started.

ALAMI’s mobile application equivalent will launch this quarter and allow people in other countries to contribute funds to Indonesian SMEs on the site. The app will facilitate international expansion and could act as a springboard into neighbouring countries with large Muslim populations. 

The startup is in the midst of its A round of funding. A seed round led by Golden Gate Venture, with participation from RHL Ventures and tryb Group, concluded last year. Currently unprofitable, ALAMI’s chief executive expects the startup to break even in 2021.

Indonesia’s 227 million Islam-adherents account for 13% of the global Muslim population according to World Bank data. “There is a lot of potential in this market given the size of the Muslim population,” Djani said. 

“Malaysia would be a good place to go because of their advanced Islamic finance industry,” Djani explained. “Another potential market is the Philippines.”

Under Islamic finance, interest is forbidden. Instead, “funders [on ALAMI] will see a return in the form of a commission,” Djani said. “The equivalent interest rate would be around 15 to 16% per annum.”

Users who contribute funds are compensated once the sum has been repaid by the borrower. “On average, funders see the principle plus the margin at the end of three months,” he added. 

As an invoice financier, the startup screens businesses before they can apply for loans through the platform. “A business must have an invoice from a reputable company and needs to be operational for at least one year,” Djani explained. 


ALAMI's business model is Shariah-compliant - it views money as a token of exchange instead of a commodity and all transactions must be asset-backed.

ALAMI does not bar non-Muslims from using its service and as ESG-focused investing increases, the startup’s commitment to strict moral guidelines could prove a strong draw for people of all religions.

Djani plans to refine the platform’s credit scoring system to reward enterprises that emphasise social justice and sustainability.

“We would like to compensate businesses that are more environmentally responsible with lower pricing or special discounts,” he explained.

Islamic fintech is coming into vogue in Indonesia, where Deloitte reported nine startups registered with the national Shariah-compliance board as of August 2019.

Deal size sets ALAMI apart from competitors in the Islamic fintech space like p2p lender Ammana and crowdfunding site Syarfi. “They are focused on microfinance and grassroots projects,” Djani explained. “We write bigger cheques.”

Within the Islamic finance space, these startups are racing to convert users in a country where only 38.4% of adults have bank accounts according to a 2019 financial inclusion survey.

Done right, ALAMI and its competitors can bring Indonesia’s unbanked Muslims into the fold with loans and other financial services. They will be facing pressure from larger banking entities with Sharia-compliant units of their own, but Djani isn’t concerned.

“We overlap with these larger banks in the way we’re also dispersing SME loans,” he acknowledged. “But we can also collaborate with them. I want the banks to become our partners.”

But partnerships with local fintech upstarts may not be a priority for the institutions. Alibaba’s data analytics unit announced its collaboration with Indonesia’s oldest Shariah-finance bank, Bank Muamalat, in June 2019. 


It comes as no surprise that companies around the world are vying for a chunk of the Islamic finance market.

Worldwide, spending by Muslim consumers on halal lifestyle, pharmaceutical and food goods will hit $3.2 trillion by 2024, according to consultancy firm DinarStandard’s 2019 State of the Global Islamic Economy report

Islam is the world’s fastest-growing religious group, the Pew Research Center noted in 2017, and yet its financial equivalent remains inefficient and outdated.

“There’s a lot of scepticism around Islamic finance because it hasn’t really been performing for the last 30 years,” said Djani.

Indonesian authorities are aware. Looking to jumpstart the industry, Indonesian president Joko Widodo founded the Komite Nasional Keuangan Syariah (KNKS) in 2016 and the government’s LinkAja mobile payment network was updated last year to include a Sharia-compliant feature.

Financial assets held by Indonesia’s Sharia banks and business units reached an all-time high of $37 billion in December 2019 according to OJK data. However, unless coupled with innovation in the private sector. Islamic finance remains dominated by large international banking institutions.

“All the Shariah banks are subsidiaries or business units of much larger conventional banks so they have fewer resources compared with the parent bank,” the ALAMI co-founder explained.

A lack of resources and competition has allowed the industry to stagnate. “Customers nowadays expect an instant solution and Sharia banks have been slow to innovate,” Djani said.

ALAMI intends to meet these expectations. In addition to the mobile app, the startup plans to introduce a range of other financial services as part of its fintech aggregator platform which has lain dormant since 2018.

Two years on, Djani is ready to try again.

¬ Haymarket Media Limited. All rights reserved.
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