UK firm pioneers new borrowing method for small businesses
UK-based Liberis has pioneered a flexible new approach to borrowing by linking repayments to cash flow, providing a better way for small businesses to borrow. The firm is now looking to expand into the Shariah space – offering Islamic business owners the same advantage.
The UK has a £50 billion SME funding gap, which the Business Cash Advance from Liberis is attempting to fill through a simple finance solution based on customer card payments. The firm’s technology allows SMEs to access between £2,500-300,000 at a fixed cost of finance, without the burden of fixed repayments.
Instead, repayments are linked to cash flow, as an agreed percentage of every customer card transaction. “Since 2007, we have helped over 5,000 small businesses in the UK and provided over £160 million in funding,” said Frederico Tavares de Carvalho, a business development analyst at Liberis. “It is a far more flexible alternative to a traditional bank loan or other forms of finance, as all repayments are tailored to work in line with your cash flow, and there is just one single cost that is agreed upfront.”
Following its success, the firm is now looking to expand into the Islamic market – potentially through a commodity Murabahah approach.
“There are several features that make our product very suitable to Islamic finance: we have one fixed cost, agreed up front, and our repayment mechanism flexes with our customers’ cash flow,” explained de Carvalho. “We also place a great emphasis on treating customers fairly and focusing on opportunities where we can help customers grow rather than saddle them with debt.”
The firm ran a trial website to test demand, which generated far more interest than expected, and has subsequently moved on to a minimum viable product stage. “We have worked hard to develop solutions that can be deployed quickly,” said de Carvalho. “We are looking to launch in the market in the next couple of weeks, and once the trial is complete we will use what we have learned to make improvements and deliver the product to a much wider audience, enabling all UK SMEs to get access to Shariah compliant financing.”
Backed by UK government-supported British Business Bank, the Shariah Business Finance solution from Liberis is one of the first Islamic SME short-term finance products in the UK, and breaks new ground in the arena of interest-free applications for UK firms.
British Muslims entering Islamic property funds
London is well-known for its attraction as a safe haven location for wealth investors from Asia and the Middle East, and funds continue to pour in from international Islamic investors. however, there is a growing trend for british Muslims to join them in their search for accessible Shariah compliant real estate products.
According to property investment firm London Central Portfolio (LCP), which offers Shariah compliant residential funds in central London’s buoyant Private Rented Sector, domestic demand is on the up.
The company saw 38% of Shariah investment coming from British Muslims last year, a notable increase.
The growth was driven by investor numbers rather than investment volume, suggesting an even wider penetration.
The average individual investment into LCP’s funds from the MENA region was 57% higher than the total average, and 4.5 times higher than the amount invested by British Muslims.
“For these UK Shariah compliant shareholders, often subscribing through tax-efficient savings schemes such as Islamic SIPPs and ISAs, investment was 65% lower than average,” said LCP.
Significant opportunity for Islamic insurance in UK market
Islamic insurance and reinsurance have been one of the last financial services sectors to take off in the UK, and growth has been small and slow. In 2016, the Islamic Insurance Association of London (IIAL) undertook a global survey of the Islamic insurance industry and its potential buyers in order to discover what the market needs to do to become relevant to the Islamic clients of today.
The results highlighted a clear opportunity for Islamic insurance in the UK, with seven out of 10 respondents saying they would prefer to buy Islamic insurance products. The survey established a clear demand for commercial, specialty and reinsurance products, as well as a desire for healthcare cover - at a time when the government is struggling to tackle the issue of funding medical and long-term care for a growing, aging and ever more affluent population. “The industry has to do more to communicate the availability of the capacity and its ability to match the price of conventional covers.
However, price and availability were cited as key barriers. “There is a strong view that the Islamic capacity is not available,” said IIAL, speaking to UKIF. Over half of those questioned said that they were not offered an Islamic option by their brokers.
The results suggest that although the demand is out there, the industry is currently failing to communicate the availability of products or to match the price of its conventional competitors. “In the current economic climate, price remains a significant attraction but it can be countered by the fact that there is a willingness to buy Islamic cover if it is available and the cost is not prohibitive,” said IIAL.
Complexity and terms and conditions were also cited as barriers, pointing to the need for work on the simplification and clarity of wordings for Islamic policies, and an issue that the IIAL is already addressing.
“What is clear from the research is that the market needs to cooperate across all disciplines to drive the supply of Islamic capacity and a wider product range if we are to meet the needs of the Islamic business community,” said IIAL. The group is currently working with Lloyd’s of London and the Lloyd’s Market Association to develop a standards document for Shariah compliant insurance to be adopted by the London market.