Qardus is part of the wave of new Islamic finance options that have come out or soon will be out – which is great news for Muslims! Launched mid 2020 it provides a platform for shariah compliant investments in companies.
Founded by Hassan Daher who has a PhD in Islamic Finance and a sleuth of experience in the corporate world, Qardus fills the gap in the crowdfunding market for Muslims. To gain a greater insight into what Hassan thinks of Islamic finance and his journey up to this stage, there is an excellent podcast interview with him here.
In this review we will cover:
What is Qardus?
How is Qardus Sharia Compliant?
How to Use Qardus; and
What Can Qardus Help Me Do?
What is Qardus?
Derived from the Arabic word for loan ‘Qard’ – Qardus facilitates the bridge between companies that want to grow their businesses in accordance with Islamic principles and investors who want to grow their wealth with the same belief.
Qardus currently provides small and medium sized enterprises (SME) that are looking to expand with short term investments. These business have often reached an impasse in their growth as growing via the traditional way would mean engaging with banks and non Islamic products. Moreover, SMEs are also often overlooked by the current UK Islamic finance options which further hinders their growth.
The size of funding they seek to raise are relatively small – averaging between £50-100k. This is an important point that Hassan decided to make when he set out to launch Qardus. He felt these small businesses were looking for Shariah compliant investments and without them these businesses wouldn’t survive.
Qardus’s business model is such that it also shares the idea of financial inclusion. We have already looked into how the modern consumer is different; the modern investor wants to not only generate a return with their investment but also contribute to society. Qardus helps investors contribute to the wider society by focusing on companies that help the local community.
Whilst this review primarily focusses on the side of the investor – applications by businesses to apply for funding are highly encouraged and details can be found here.
How is Qardus Sharia Complaint?
Qardus is the first Sharia compliant business financing marketplace in the UK and is very open about the way it adheres to these principles.
Company screening:
All companies that apply for funding are reviewed by Qardus to make sure they partake in industries which are inline with Islamic finance principles. These are then credit checked via their management and financials for further rigorous analysis.
Funding structure:
Normal SME financing relies on money being lent out by the investor with the expectation of a return based off interest. Qardus however conforms to a Musharakah structure for investors and a commodity Murabahah structure for the companies that require investment. The essence here is for risk sharing rather than risk transfer.
For the investor, this structure allows them to share in the profits and losses of an enterprise. While for the company requiring financing, the Murabahah structure allows them to access funding on the condition of paying an agreed profit margin. Further details of the structure can be found on Qardus’s FAQ section here
Oversight:
Hassan’s knowledge gained from his PhD in Islamic Finance allowed him to take into account the different schools of thought within Islam. He also works closely with the internationally renowned Sharia compliant advisory firm Amanah Advisory. As an additional check, all offered products meet the conditions of The Accounting and Audition Organization for Islamic Financial Institutions (AAOIFI) – the same body which oversees Wahed Investments.
There are also semi annual audits by their Sharia advisor on the structures, processes and transactions undertaken by Qardus.
How to Use Qardus?
The registration process consists of a few simple online steps with the minimum investment being £100. Currently Qardus is only open to UK residents who also have a valid UK bank account.
The home page lists all current investment opportunities with the amounts they are looking to raise. The projected return and time period of investment are also shown.
Before completing the sign up process you will be asked a few multiple choice questions. This is to make sure you understand what you are investing and the risks, answers to all are available on the website. This is a great way for everyone to thoroughly research the website as well as the offering.
After receiving the investment prospectus in your email, you will have set up your personal dashboard. Here you can see a range of options from your invested amount to your returns, as well your invested company’s details.
Following on from the Sharia screening process, Qardus seeks to invest in stable recession proof businesses which also have high net worth owners. This allows for better risk mitigation of the investments when it comes to economic downturns.
There are plans to offer investment opportunities in more mature companies as Qardus develops.
What Can Qardus Help Me Do?
As an investment into small high growth companies, returns can be very high. The caveat to this should be that this is a high-risk high-reward investment. Whilst the chances of you losing your money is low (due to the background checks Qardus performs), your capital is still at risk, so do bear this in mind.
What makes Qardus exciting is that it has allowed opportunities to manage finances in a way not previously offered via a Sharia platform.
1. The nature of the investments are short term, ranging from 6-24 months. This means you can invest your money for the short term in a potentially high yielding manner; expected returns are 8-12% per annum. The lack of Sharia compliant short term investments is stark and so we are glad for this offering. Your initial capital can be recouped after the period of funding ends.
2. You can receive a passive source of income every month with your monthly dividend repayments.
3. The identification of recession proof businesses allows for a diverse portfolio. This allows your investments to still generate income during economic downturns – we’re looking at you 2020!
4. A large premise behind Qardus is ethical investing. Qardus wants to promote financial inclusion and involve the investor as well. By investing in these companies you are enabling local businesses to thrive via Sharia complaint routes.
5. Until Dec 31st 2020 Qardus is offering a Cashboost on your investment. This is where they will increase your investment by up to 3% depending on your invested amount.
Summary
Qardus is a very new addition to the Islamic fintech world so a full review on experiences and impacts is unfair. What Qardus does offer is a Sharia complaint crowdfunding platform which allows Muslims to enter this area of investing.
This will allow Muslims to invest in exciting businesses and the potential of high returns. In time Qardus will offer more opportunities and we look forward to revisiting them soon.
