Standard Bank and Merchant Capital have teamed up to launch a Shari’ah funding solution that aims to both address the significant SME funding gap in South Africa while offering a new source of working capital for entrepreneurs in the retail sector who want to consume Shari’ah compliant products and services.
A first of its kind in Southern Africa, the Merchant Capital Advance certified as Shari’ah compliant by Standard Bank Shari’ah Banking, allows SMEs with a point-of-sale (POS) device and R30,000 in monthly card sales, to access funding in under 48 hours of application, with a flexible repayment mechanism based on monthly turnover.
Ryan Cohen, the co-founder and chief relationship officer at Merchant Capital, says Muslim-owned businesses were a material contributor to the South African economy, contributing an estimated 10% of South Africa’s GDP. He believes the potential market for the new product is significant.
“If you look at the marketplace today, there’s an extremely limited universe of Shari’ah-compliant products, particularly in the field of working capital solutions. This new product directly addresses the challenges and lack of options facing business owners when it comes to traditional funding channels,” says Cohen.
He adds that the product is underpinned by a robust technology platform and innovative credit that has not yet been seen before in the area of Shari’ah. “Prior to the launch of the product, there has been limited ideation of Shari’ah fintech lending products in sub-Saharan Africa,” he said.
Mohammed Ameen Hassen, the head of Shari’ah Banking at Standard Bank, says Shari’ah-compliant working capital solutions were traditionally filled with administrative friction for the customer, and could only accommodate certain components of a business’s working capital requirement.
“This product has the potential to transform the lives of entrepreneurs seeking Shari’ah compliant funding solutions in South Africa. Until now, Shari’ah working capital solutions were either non-existent or an administrative nightmare, which meant many businesses would simply go without funding, limiting their growth in the process. This new product is all about simplicity and ease, and will make a real difference to SMEs,” Hassen says.
Standard Bank and Merchant Capital have an already established deep-rooted working relationship. “As a bank, we are taking a long-term view on our relationship with Merchant Capital. The latest product launch deepens our relationship, and provides the breeding ground for future innovations,” he adds.
He says the new product will act as a catalyst for growth in businesses based in South Africa that have been demanding innovative Shari’ah compliant solutions. “It is our aim at Standard Bank to provide entrepreneurs with the tools to grow their businesses with the hope that they will become drivers of the economy and continent as a whole.”
The product went live on 1 February 2020.