Exclusive interview with Qardus founder Hassan Daher

Qardus founder Hassan Daher tells Marc Shoffman how his Shariah-compliant peer-to-peer lending platform is filling a gap in the market

Shariah-compliant peer-to-peer lender Qardus launched during the pandemic in 2020 but two years later the platform is still going strong. Its founder Hassan Daher explains why the timing turned out to be a good thing and how Shariah-compliant finance appeals to all types of investors, not solely Muslims.

Marc Shoffman (MS): What is your career background?

Hassan Daher (HD): Prior to establishing Qardus, my background was in providing corporate finance and mergers and acquisitions solutions to small- and medium-sized enterprises at Deloitte.

From working in the Middle East, I came across Shariah-compliant business finance. Essentially, Muslims cannot pay or receive interest, what we do is create alternative structures to offer small businesses, individuals and anyone looking for financing.

MS: Why did you decide to set up a P2P lending platform?

HD: Upon my return to the UK, I went into incubator accelerator programmes in London and found that no one was providing Shariah-compliant business finance. We set up Qardus to solve that problem and offer business owners, and Muslim business owners especially, growth finance that is in line with religious requirements not to pay interest.

This is a problem on both sides of the marketplace. Investors need opportunities that are Shariah-compliant and need to receive profit as they cannot earn interest.

Read more: Islamic finance moves towards open banking

What we do is technically classified as investing rather than lending. We have a trade-based mechanism that transfers liquidity from the investor to the business owner. The business owner ends up paying the principal and the profit over the term of the facility.

However, our investors are not only Muslim – we have a diversified pool. They tend to invest as they like the business opportunities we are providing on the platform. Investors receive profit rates, which are around 11 per cent per year.

MS: Who are your typical borrowers?

HD: The platform launched in July 2020 during the first lockdown so we needed to reassess our credit and eligibility criteria. It primarily financed recession-proof sectors such as healthcare and pharmacies, but as the economy opened up we started financing more cyclical businesses.

We now have a diversified group of companies as borrowers. We were lucky to launch in the pandemic rather than beforehand, otherwise we would have been financing those who were struggling.

MS: Is there an ESG angle to investing with Qardus?

HD: The screening criteria we apply is identical to ESG investing. We don’t finance businesses that aren’t environmentally friendly or those that are involved in alcohol, weapons or pornography.

MS: How do you assess borrowers?

HD: We assess borrowers first on business activity. If we don’t have clear picture we will learn what they do to see if it is Shariah-compliant and in an ethical sector we want to invest in.

The next stage is to see two years of financial accounts and six months of bank statements to check if the business is creditworthy. Once that is done we prepare an investment memorandum that we pass on to our compliance team, they review it and we then list it on the platform as a funding opportunity.

Read more: Shariah-compliant platforms carve out P2P niche

We are currently focused on the UK but are looking to expand further down the line. There is a sizeable Muslim population in Europe, and obviously the Middle East and South Asia are no brainers.

MS: How is the platform growing?

HD: It has been growing in terms of average investment as well as total number of investors. We are not only bringing in more investors, but different types are coming through. We have sophisticated, high-net-worth and retail investors.

MS: Were there any regulatory challenges?

HD: When we were getting a Shariah-compliant structure in place we were focused on Financial Conduct Authority (FCA) regulations at the same time as we wanted to make sure we were in line with the rules as opposed to building something first and then checking afterwards. We constantly review FCA papers and make sure we understand how requirements may change.

MS: Tell us about your equity round.

HD: We have an equity round in process and are optimistic about getting it over the line. It is a seed round so we are looking to raise more than £2m to expand our presence in the UK, carry on building our technology, growing our team and becoming a dominant player when it comes to Shariah finance.

MS: Are you worried about rising inflation and interest rates?

HD: We are not immune to what goes on in the economy just because we are a Shariah-compliant platform. Our rates and investor expectations will change. It also impacts the creditworthiness of businesses that we are willing to bring on.

Read more: Qardus unveils £215,000 crowdfunding campaign

MS: What is your outlook for the sector?

HD: It depends on the P2P and crowdfunding models as well as track records. Some players in this space care about track records so investors can trust them, others are just interested in arrangement fees and will dump anything on their platforms.

It depends to what extent platforms can build trust with investors especially as interest rates and the cost of money goes up.