Muslim Money Talk
Introducing the Muslim Money Talk Podcast, a place for all things Muslim and Money related.
Every week we'll be sitting down with Founders, leaders and industry experts from across multiple disciplines to discuss lessons learned, mistakes made and most importantly 'How they did it?'.
Brought to you by Kestrl: The Muslim Money App, software to help Muslims grow their wealth without compromise. Find out more here: https://kestrl.io/
Muslim Money Talk
CEO Who Launched The UK’s 1st Islamic Bank: Interest vs. Profit, Expensive Mortgages & More
In this episode of Muslim Money Talk, Areeb Siddiqui speaks with Sultan Choudhury OBE about the challenges and evolution of Islamic banking in the UK and beyond.
They discuss misconceptions around Islamic finance, pricing challenges, the need for stakeholder alignment, and how scale and innovation can push the industry forward.
This podcast is hosted by Areeb Siddiqui, the founder and CEO of Kestrl, the app that helps people to grow their wealth without compromise
Find out more about our app here: https://kestrl.io/
And how we help banks here: https://business.kestrl.io/
Show Notes:
00:00 - Opening trailer
02:08 - Intro and becoming a shareholder in Kestrl
05:39 - Early advice to Kestrl
06:23 - Early education and sales experience
11:00 - Studying economics and discovering Islamic Finance
15:21 - Early career and thoughts of Deloitte
19:20 - Remembering parents and their influences in entrepreneurship
22:26 - Working at Charles Schwab and learning Californian Tech Culture
26:08 - Building Islamic Bank of Britain
28:38 - Challenges in scaling Islamic finance in the UK
32:55 - Early Products & Launching Islamic Mortgages
35:40 - Adopting the cloud and new tech
38:14 - Why do Islamic Banks have bad User Experiences?
41:29 - Why are Islamic Mortgages more expensive?
49:08 - Why don’t Islamic Banks want more deposits?
51:10 - Why do returns track the BoE interest rate?
55:36 - So is this interest by another name?
56:53 - Dealing with conflicting Fatwas
59:15 - Dealing with poor UX first
1:01:47 - Why Are Islamic Banks Run By Non-Muslims?
1:05:55 - Do We Need A New Islamic Bank?
We all kind of felt like if you were to go for an Islamic bank, it was a downgrade compared to conventional services. What do you think caused that so?
Speaker 2:I think it's correct. People might say to me why do you benchmark to interest rates? Right, but on the other side they'll say why are you more expensive than the conventional?
Speaker 1:So they want it both ways, right? Why do returns seem to track the Bank of England base rate?
Speaker 2:First of all, tracking is not the same as being an interest rate. The only way to properly fix this is to have a completely segregated system. Maybe the burden of that price has to be shared while we build the industry. Yeah, it's going to take time. Islamic banks in the UK look at their history. Most of them will have had the majority of the time been run by non-Muslims, and so, for me, muslim or non-Muslim isn't the issue. What I want to see is that those people running the banks are believers in their own products.
Speaker 1:In today's episode. It is my genuine pleasure to welcome one of the OGs of UK Islamic banking, sultan Chaudhry OBE. Sultan was one of the founding members and the CEO of Al Rayyan Bank, formerly known as Islamic Bank of Britain. He has since gone on to be involved in numerous Islamic finance projects, including Offer Finance, wokfinity and National Zakat Foundation, all of which he is the chairman of, and he's even involved in companies as far away as Islamic Bank of Australia. Today, we'll be discussing the history and the future of Islamic banking in the Western world and beyond, where he thinks it may have gone wrong and how practitioners should be coming together to change the space forever.
Speaker 1:As always, I'm your host, arif Siddiqui, and this is Muslim Money Talk. Before we begin, we actually noticed only about 10% of you are subscribed to the podcast, so if you like what you're listening to and you want to hear more from us and see more things Muslim and money related, then please consider subscribing and, of course, leaving this episode a like and share it with your friends. Leave us a comment or a review, because it really really does help us out and help more people to find us. Thank you Now back to the show, sultan. Assalamu alaykum and welcome to the show.
Speaker 2:Walaykum as-salam, great to be here in the comfy couch.
Speaker 1:Yeah, we've used the studio a couple of times before Haris Rafan we had Yunus from Nesta here as well, but yeah, it's a bit cozier than our usual studio, so hopefully the viewers appreciate it Before we get into it completely and I know you've done a few of these podcasts before, but do you remember how we first met? I do, I do it's interesting.
Speaker 2:So we've got a certainly your father and I have got a common friend who is James. Oh, yes, of course. Yeah, james Bankshaw. James Bankshaw is the ex-CFO of Gatehouse and he suggests we're all chartered accountants you're me, james so he suggested we meet at Moorgate, that chartered accountant house. Yes To just. He asked me to come and listen to an interesting project. So I turned up in the basement where this restaurant is. When I say basement, it's a little bit nicer than that, yes, I turned up in the basement where this restaurant is. When I say basement, it's a little bit nicer than that, yes. And there you were, with Deng, I think, james. I turned up with a colleague of mine and we kind of listened to your pitch. I remember giving you instant feedback. You did Instant feedback and it was that time in the industry where there was a lot of new startups.
Speaker 1:Loads of us.
Speaker 2:Particularly in the payment space. Yes, particularly in the payment space, and I gave the feedback. I think you took it away. You stayed in touch. I subsequently did become a small investor, a shareholder.
Speaker 2:But it was really interesting because so many people in the high net worth space approached me and said I've seen this pitch from Kestrel, I've seen this pitch from somebody else. I've seen this pitch from somebody else. What do you think? Can you advise me? And I said well, show me everybody's numbers, show me their goals, and I'll just give you my views on it. And I remember there was one, and I won't name it, but they're not around anymore.
Speaker 2:Yes, yeah yeah, which was saying you know, we're going to take millions of customers in the UK and we're going to have tens of millions of people in Indonesia.
Speaker 1:Yeah, and capture all of the payment space.
Speaker 2:And I said look careful about, uh, these ambitions great, you know. Vision, huge, long-term ambitions, great. But how are they going to get to the end of year one? How are they going to get to year two? And I'm glad to say that, uh, you know my advice was correct to that who is also a shareholder of you. Yeah, because you know, you know you ultimately judge people by the management and their ability to pivot when obstructions come, when obstacles arise, and get over it and come out with something that still works. I think Kestrel is a very good example of that.
Speaker 1:We've had to. Yeah, we were forced to. We were brought to the brink a few times, but we've pivoted away from that original digital banking idea. We went to personal finance, we found a cool niche in B2B and now we're looking at getting back into it, back into the digital banking space as well.
Speaker 2:It's a similar story at Offa as well. I think it started off as very much the Islamic version of a traditional bridging finance company and now it's very much the fintech and exploring a huge amount of new products.
Speaker 1:Yeah, and it was a pleasure to speak and visit your offices when we spoke with Sageer, I think, three or four episodes ago over in Solihull in Birmingham. So really cool venture and a lot. We'll get more into it in this episode.
Speaker 2:Sure of course.
Speaker 1:Cool. So do you remember any of the advice that you gave me? I do remember saying make sure it's uh seis or eis, yes, and I think you did that.
Speaker 2:Yeah, we did. I think we had a discussion on uh, what was called advanced advanced share subscriptions, or safe agreements as they're now called. Yeah, and there was a just a little bit about uh you know how converting the market research into uh growth in customer numbers, because that's the biggest value driver at that time for your business which is B2C.
Speaker 1:That was the big thing. You were very concerned about trust from the market and people's perspectives, and you also I'll always remember you said you need to develop quite a thick skin in this industry, which, again, I'm sure we'll come on to All right. So, casting your mind back, is this what you imagined you would be doing as a child? Did you have a concept of Islamic finance back then, growing up in Birmingham, or did you kind of fall into it?
Speaker 2:Yeah. So how far do you go back as a child? So let's go as far back as 16, shall we say. Like we formulated some ideas just before I was going to embark on my A-levels, ideas just before I was going to embark on my A-levels that gap between GCSE and A-levels and I thought I'd need to get a job. This is quite a big break, right? And in those days we were reading physical press. I picked up the local Birmingham newspaper, looked in the classified and there was a section where we're recruiting come up to North Birmingham, to West Birmingham, and we're recruiting come up to North Birmingham, to West Birmingham, handsworth, okay. And I got the bus. I wasn't sure what they did, I just thought they're recruiting.
Speaker 2:Got there, queue of people, gave you a clipboard and you had to fill out a form, basically your basic CV. And in one section on that form was and remember, this is before we had word processors on massive yeah, I've had a typewriter, you didn't, so you're handwriting your application forms. There was a section on this that said what are your ambitions? And I said I want to be a ceo, probably of my own business. I wasn't, I was, but I want to be a ceo. That was the primary thing. And I remember then going into the interview and I said you're the only guy out there that just says you want to be a CEO. So I'm going to, I'm going to give you the job Really.
Speaker 2:And the job was getting on a bus going into what we call the black country, so like areas like Oldbury and Smethwick, greater Birmingham if you like, but it's called the black country locally and selling imported faux leather folio folders and stationary and calculators.
Speaker 2:And we went around trading estates, knocking on the door, selling these wares. And I went along with an experienced salesman, somebody from London, and shadowed him for a day and went around all these places and it was my first taste of sales, first taste of pounding the street and literally pounding the street, going into doors, cold, selling a product that people didn't know anything about. You had to kind of sell its features, everything. I did it for all all of a day or two. And then I said to my dad, who, my cousin, had a restaurant in cornwall. Okay, I said, uh, I think I'd like to go to cornwall for the summer. So then then there was a wedding that weekend. I went to the wedding, my cousin came up, I jumped in the car with him afterwards and then left home for 12 weeks, so it was about 10 weeks.
Speaker 1:To work at the restaurant.
Speaker 2:I just worked in a restaurant and learned that trade. And again all front of house. Okay, but that was more customer service, cross-selling, additional dishes and testing myself. Yeah, what level of tips could I, you know, achieve? How good a service could I provide? How could I build a rapport? I remember some american guests came in, you know traveling around cornwall relatively young. They came in, they came in at lunchtime, served them and I got 20 pound 20 2020 in 1989. £20.
Speaker 2:Okay, significant money it was a lot of money. So, yeah, you learn the trade and aspects of soft skills very early in your life.
Speaker 1:What put you off of the original sales job? Because you were only there for a couple of days.
Speaker 2:So you have to and this will probably pop up later you have to really believe in the product. Okay, so going around saying genuine taiwanese leather as a euphemism for fake leather and this is before faux leather became environmentally friendly- or whatever, right yeah I.
Speaker 2:I really didn't like that aspect of sales. So sales is Islamically as well, and ethically. It should be very transparent. You should be highlighting the flaws as well as the benefits and you should believe in what you are selling. Right Again, if you don't feel comfortable in doing that or you certainly shouldn't feel comfortable in doing that walk away and find something else. But nevertheless, the experience was valuable.
Speaker 1:Stayed with you. Yeah, so 12 weeks in Cornwall restauranting and then you went back to. D-levels which were all I'm'm getting like economics finance economics, chemistry and mathematics.
Speaker 2:Okay, yeah, okay nice one so I was. I was good at chemistry and economics. Yeah, maths is a kind of baseline subject, but economics is the one that really awakened my uh, I guess awareness of how the world works. It's a great subject for that.
Speaker 2:People who are not familiar with economics don't realize what an academic subject it is yeah, for sure, and so people who go straight into economics at university often struggle, but an a level is quite a good standard. So I do recommend that people if they're going to go into economics, try and do it a bit earlier, because it's not. I guess it's always been confused with people saying it's business economics or home economics and all of that and it's. At a young age it was degrading the subject. But once you got into it it's highly technical, it could be highly philosophical, it can be highly political.
Speaker 1:It's a social science. It's a real social science. Yeah, it combines your mathematics and your ability to write essays and construct an argument and ultimately it's about people.
Speaker 2:It's the psychology of it. I think it's one aspect of it that's that's kind of microeconomics, but it's ultimately how you allocate scarce resources, fundamentally in business okay, okay.
Speaker 1:So you liked it enough, you went on to pursue it at university, after which you fell into audit and accounting.
Speaker 2:You became an auditor at deloitte yeah, so I mean I did economics and econometrics um. My dissertation was, uh, on growth, economic growth in bangladesh, foreign aid, but that was on my. That was how what I landed my short list was Islamic economics.
Speaker 1:Oh, so it was already there.
Speaker 2:And I guess foreign aid. Yeah. And it just happened to be, my supervisor was more of an expert in foreign aid and developmental economics, so I ended up picking that, but of course I'd investigated Islamic economics, so that stirring had begun.
Speaker 1:Yeah, was that just because you were a Muslim and you were trying to find, you know, ally your faith with your studies, as many of us try to do?
Speaker 2:so I think university is an important phase of discovery, where you move away, especially at that time, from a cultural islam, uh, where you essentially follow rituals and you learn yeah you learn arabic and you know to recite arabic as opposed to understand it and, yes, you get the sense of peace and whatnot, but you don't.
Speaker 2:You don't truly come into your own until you are on your own and you're at university and, uh, I think I remember I was just, I think I was probably feeling a bit homesick and one Friday I just stumbled into the prayer room at Nottingham University. I got a sense of peace. My friend circle started to develop around Muslims and we started learning together, practicing together and by year three, the final year, I was thinking about, well, how does this impact my chosen topic my economics, so I started doing basic reading on it, but there wasn't a wealth of books in the library on it.
Speaker 2:No no.
Speaker 1:Horace's Heaven's Bankers hadn't come out for another few years.
Speaker 2:Well there were a lot of books from the Islamic Foundation in Markfield, but they were the early editions. You're talking early 91. Okay, so you'd have to go to Markfield to get them. Fine, so I did this. So I got the World Economy Journal Prize for my dissertation on foreign aid and growth in Bangladesh.
Speaker 1:Was this before? Is it Grameen Bank? Oh yeah, yes, yeah, yeah, before that.
Speaker 2:Okay, I mean the basic answer is foreign aid is not a major success factor in economic growth. There are other factors that stimulate economic growth.
Speaker 1:So you're a proponent of Trump cutting all the aid to as many countries as possible.
Speaker 2:So no, foreign aid serves different purposes. So you know it is alleviation, but does it generate long-term economic growth? The answer is not really. And secondly, there's something called leakage in aid, as we're all aware of how much aid reaches the end point. So I studied all of that stuff, got a prize and that helped me obviously get a job at what was then a big six, a big six accounting firm. So I had at what was then?
Speaker 1:a big six, oh, big six.
Speaker 2:Back then A big six accounting firm. So I had three or four offers from the six, yeah, and I ended up going with Deloitte simply because they had the best pass rates in examinations at the time.
Speaker 1:And was that in Birmingham? Yes, I joined the Birmingham office. Yeah, because I started out at Deloitte as well. That was where I did my grad scheme three years there before moving on. What was it like at the time? Was it still good? I loved it there. I found it like a really good training ground. It almost felt like university part two, because you're with other young people who are studying for their exams and working together, and good place to make some money as well early on. How did you find your time there?
Speaker 2:So I agree with the former no-transcript. By those standards in those days where my friends from university were starting at 20 or 24 or 18. Oh really. That kind of depression.
Speaker 2:But, that's to be honest. That's still always been my approach. I try and look at the long term and the development more than the immediate remuneration. Certainly earlier in your career career you should do that. It's uh work to uh learn, not to earn. That's a very famous phrase from rich dad, poor dad. Um, before I knew the phrase, I was. I was actually doing that and and if I think about the three or four years I spent there, the exposure to so many companies, the insights that I got from talking to the CFOs and sometimes the managing directors of those companies across a range of industries especially if you're in Birmingham you've got a range of industries pensions expert team but I also did uh mortgage books. At the same time I was doing manufacturing companies and I was doing I mean super warehouses that were frigid freezers actually the freezers for the supermarket yeah, and they were.
Speaker 2:They were stocking uh, I mean talking multiple football pitch length warehouses that were freezers and you would to do the stock take. You have to go and do the life on a big coat, yeah, gloves and then that you would to do the stock take, you have to go and do the life. You would put on a big coat, gloves, and then you would randomly select what to what to measure, and it would usually be what's called intervention beef okay, from europe.
Speaker 2:You know the old beef mountain or the yeah yeah, you know there's overstocks and you'd go there and this is five-year-old beef it's still there that's quite cool.
Speaker 1:Do you think this is still, I think, for our younger listeners and viewers? A lot of them write in or you know message saying what should they be doing? What should they be doing at university? Should they even still be going to university? Should they start out, and should it be in financial services? A lot of them are attracted towards tech and software and engineering jobs these days. Um, do you think this is still a viable career path for young people today?
Speaker 2:I think it is because it's the knowledge industry. It's still a knowledge industry. I don't think in terms of the lower order stuff, like pure accounts prep, bookkeeping and filing invoices, purchase ledger, sales ledger that stuff has been overtaken by tech.
Speaker 2:But that's not the point. The point is actually understanding a business model and when you look at a balance sheet, when you look at P&L, when you look at a cash flow, you really deeply understand how the business model works. What's driving the revenue? What's driving the cost base? How is the margin being made in that business?
Speaker 2:you know what are its risks yeah and so financial understanding I think is is is critical to um developing a business. I'll give you an example my, my father, was a great entrepreneur, you know. He opened restaurants, I think like the second restaurant in north wales, the second one in walsall, the first one in north, that part of north cornwall. He was an entrepreneur but he was never great with uh financial management and uh. You know, I think if if he had had some of those financial skills, I think his businesses would have been a lot more stable. So we were always very um feast and famine right, you know typical entrepreneurs.
Speaker 2:Children, sometimes you had many, sometimes we didn't, you know, and it was, it was famine and mom, on the other hand, was, you know, the, the stability uh factor? Yeah, because she went on to become like a lecturer or Mum and dad got married during the War of Independence. As we call it in Bangladesh from.
Speaker 2:Pakistan, and so her education got disrupted. She couldn't finish the equivalent of GCSE's metric, so she came over shortly after I was born, and so again, obviously having a young child when my brother was born subsequently was an obstacle as well, but she kind of she's very much a self-starter. Both my father and mother were self-starters and she quickly educated herself. So she did a diploma at a local polytechnic. She did her NVQs.
Speaker 2:She became a classroom assistant. She started learning Arabic. She became a community person in the women's women from Pakistan and Bangladesh in particular, so a social worker, if you like. Finished off as a classroom assistant, taught many people. Some of those people actually ended up working for me at the bank who had no idea that they knew my mother. My mother had a different surname. Yeah, yeah, yeah.
Speaker 1:It was interesting, yeah, and it sounds like she had a real impact on you as a child and growing up and to this day.
Speaker 2:Yeah, and AED education. I think both mum and dad were keen on education. A the education. I think both mum and dad were keen on education, but mum was really the pious one you might say, and her family background was one of piety and very, very strong on making sure that Islam was embedded in our upbringing. And I think that certainly has always been an undertone to anything I've done.
Speaker 1:Mashallah. May Allah reward her and your father as well. So, deloitte, I know you did some time at Charles Schwab as well after that, but then, interestingly, I think, a VC reached out. Was it Saying they wanted to set up this Islamic bank in the UK? Yeah, tell that story.
Speaker 2:So I guess, just to bring the story up to speed, so Deloitte was great for exposure and technical knowledge, but you don't really learn true management because you're looking after clients, yeah, and it's kind of project-based. As you know, you've worked there. Charles Schwab was a real revelation because it was California. California, I think, has overtaken, is it?
Speaker 2:I think it's the sixth biggest economy or something now in its own right and it's because of some of the stuff, some of the culture that I witnessed. It's uh, charles rob was very innovative. It wasn't like working at a bank. I was doing an assignment there, actually a consultancy assignment, and I just saw the culture very innovative, uh, putting a priority on um, ideas, doing things better, new products Uh, it's not about the hours you do, it's really about what you come up with. They encourage you to don't work on the weekend, right, um, take some time off, do something else as well.
Speaker 2:It keeps you, keeps you fresh keeps you creative or during dot-com. This is uh, so it was the um 98, I think I joined. Okay, so it's before the crash in the dot-com bubble and they became the largest online stockbroker in the uk yeah and you can see why.
Speaker 2:And they were also growing very fast in california, out of california in in amer, and that really, I guess, informed my managerial skills. So what many people see in fintech today was already happening at Schwab. It was already dressed down, it was already about creativity and innovation. Having said that, it was the blend with the discipline of financial services and performance, making sure we could deliver performance as well. That it was the blend with the discipline of financial services and, you know, performance, making sure we could deliver performance as well, because they were accountable to the market and you know the market is everything over there. So, uh, it wasn't all. It wasn't just about a bunch of creatives sitting in a room, you know, chewing the fat, absolutely not. It was still delivering on business goals.
Speaker 1:Thank you for listening to Muslim Money Talk. If you like what you've heard so far, you might be interested in checking out what we do at Kestrel, the Muslim money app. Kestrel is a service that helps Muslims who want to grow their wealth without having to compromise, whether it's on their belief or user experience or price. I founded Kestrel because of how fed up I was at how poor Islamic financial services were in this country. Often people didn't use them because of how bad the user experience or customer service and indeed, how high in price they were. So Kestrel was the answer to that.
Speaker 1:If you download the Kestrel app today, it can help you by creating a budgeting plan. Plug in whatever bank account you have and it will create an auto budget just for you. You can then tell us what goals you're saving for, and we'll save towards them automatically into pots and then, crucially, link you towards Sharia compliant investment and savings products as well. So download Kestrel today and try it out for yourself. Now back to the podcast. And it wasn't growth at all costs which I think a lot of fintechs began to adopt, and no the 2010s.
Speaker 1:It's like let's split scale, let's worry about making money after. Yeah. It's like, okay, let's focus on the margins.
Speaker 2:You had to make, you had to make money for sure, um, and so I felt that I was managing my career. So I had the technical base, the accountancy. I did my mba as well at aston whilst I was. Whilst I was working, and you put that together, I felt I was ready for another challenge. And I think the other thing to to note was I was a restructure, I was making people redundant. By the end of it was the dot-com bubble burst. Yeah, it was all about restructuring and problem solving and troubleshooting, and I really wanted to build again, create again, as it were, and so this opportunity came. It was venture capitalists out of bahrain wanted to set up a, the first islamic bank. Hang on, I remember islamic economic stuff. I'd carried on my interest in it. Um, and myself and the late azar khan, we were working together. We worked together, we studied together in many, many places, and we both uh thought let's, let's, um, be proactive about this. So we started shooting off emails to people we'd heard yeah were involved.
Speaker 2:They kind of referred us to this uh recruitment agency in birmingham. It's interesting me they were setting up in birmingham another why was that like a muslim hub or well, it's really interesting. I mean, at one level you might say it's fate, it's kismet. I'm in birmingham. This is birmingham. Why would it happen this way?
Speaker 2:yeah and um, but actually I think what it was is uh, cost dynamics. Right, if you run your back office in um l in London and you don't want to offshore it, you want to onshore it somewhere in the UK. Birmingham's got the biggest Muslim population outside of London.
Speaker 2:It makes sense yeah but it's also got quite a vibrant financial services sector. It's where Lloyds Bank started. It's where HSBC, its predecessor, the Midlands Bank, started. There's a lot of financial services there, and so I was there, we were stockbroking was. A lot of stockbrokers were there as well. So, um yeah, that that was the reason. It was just they, the board, had decided independently of me, we're going to have a back office, and and what was the vibe back then?
Speaker 1:because it wasn't just the first islamic bank in the uk. I think it was the first new retail bank in a few decades in the UK, was it not? Yeah, yeah.
Speaker 2:I mean, I think as a high street bank, there hadn't been one for about 20 years, I think, if not longer. But I mean the problem was, even though that was the case, so it's exciting building a bank. There was the shadow of BCCI and its collapse yeah, prior as well.
Speaker 1:I wanted to ask you about that because Mohammed Parajah referenced it as well and said that it was kind of this cloud looming over the Islamic Bank of Britain project, where some of the goodwill from the public had been taken away by this collapse.
Speaker 2:I think there's a solitary lesson there about an industry. In this case, bcci was not an Islamic bank, but it was serving a similar demographic, but it wasn't Islamic it was Pakistani, yeah yeah, I mean it had a lot of East African influence as well.
Speaker 2:But the solitary lesson is it's not. You know, at one level competition's good, but not to the degree that, oh, I want my competition to fail because it damages the whole industry. So, as a solitary lesson for solitary lesson for now, we don't want any of the players today to really fail. Right, because we want everybody to be strong, because if one fails, everybody doubts the other one. They're all relatively small.
Speaker 1:We saw the repercussions of that when we were fundraising in the early 2020s and there were loads of Islamic digital banks trying to launch at the time. Many of them didn't work out for one reason or another, and constantly in pitch meetings, when it came to our second round, people would say, ok, well, it didn't work for them. It didn't work for them. These are three people it didn't work out for. That was say, okay, well, didn't work for them. Didn't work for them, these are three people it didn't work out for. That was just like a real, a real blow. Whenever we walked into the room, we were already on the back foot. So no, absolutely I agree with that I mean that's affected us.
Speaker 2:Uh, more recently I was. I was interested in uh, not that long ago, a few years ago, in um about three, four years ago in in acquiring a bank, but investor sentiment um collapsed because of silicon valley bank oh, of course yeah, so it's still.
Speaker 2:It still applies today for sure uh, and you know we spent a lot of money. We're on the verge of uh acquiring a bank and bang, investor sentiment collapsed. So it does apply today. So, anyway, coming back to islamic bank of britain, um, there were a number of challenges. Having said that, and because it was called islamic bank of britain, it gave me some antidote to bcci because it was like what, what is islamic banking? So you're opening up an educational uh dialogue and you're having to educate right from scratch. Right from scratch because Because people brought up here, up to that generation, were taking conventional banking, conventional products, and they kind of had a vague idea that interest was wrong.
Speaker 2:But you know, we're in the UK, the first generation immigrants or early second generation, it just wasn't front of mind. Until you make the case, until you highlight the ayah in the quran, until you go out there and start thinking, look, there is a different way. And so, being called islamic bank of britain, which, um, some people might say was a hindrance, but it wasn't, because if you look at the fastest growth in terms of customer acquisition, if you just shape that curve, it was in the first two years when it was called bank of britain and it was, I mean we, we, we had. Maybe we went too much on the arabic, certainly, I would say, but it was.
Speaker 2:We were using a calligraphic theme yeah, I remember even our cards had islamic calligraphy, but it was designed in an abstract way. But the point was is um, and I do remember people would come to me and say I opened an account? And I said well, you've opened an account, you haven't put a lot of money in. He goes no, but I want the badge. I, I want to pull out your debit card, your plastic, when I go to the restaurant okay, in front of my friends I'm paying for this.
Speaker 3:it was an islamic bank of. Yeah, yeah, my friends, I'm paying for this. It was the Monzo effect, yeah.
Speaker 2:I'm paying with an Islamic card, islamic Bank of Britain card. You know I'm reinforcing my Muslim credentials and so it was quite important. Having said that, there's a natural cap to that approach. So you're getting that core market who are interested and instead of focusing on share of wallet, which I think, unfortunately, unfortunately the original business plan there was much more about growth, not profitability and share of wallet classic. And I see all these circles and you mentioned 2010. I mean, this was earlier than that, right? Yeah, so you kind of see that.
Speaker 2:And when I achieved a board position in 2007, and I was commercial director, I quickly changed that. I said well, look, the original business plan said 350,000 Muslims are going to just walk through the door the moment we open a branch and call it Islamic. That will get them interested, that might get them signed up, but will it get them a share of? Will it get us a share of wallet? Because they've still got this BCCI thing. They're not going to risk their hard-earned savings. So we had started with a current account as well. That was probably another issue. And the asset side, ie the side that makes you money. We had gone into personal finance, something no one does today. Yeah.
Speaker 2:Because of the Consumer Credit Act, and the first phase of that actually led to quite a lot of arrears and defaults. I can imagine, and I remember asking a customer a default why did you default on us and not NatWest? Because you've got a NatWest card as well, right?
Speaker 2:Well you know you're thelamic guys, you'll be more, more compassionate, and so really, yeah, yeah and actually, and in personal finance generally, you're going to protect your home first and you're going to default on your credit card or your personal finance. That's kind of that's a well-known feature. So we tightened up the credit criteria. The second phase of that product was actually very good credit, but then we were selling Bank of Ireland's Albarac, as it was called, albarac's home purchase plans, not our own, and this is where I was a proponent of we need to do our own. So I guess, when I got onto the board, we then quickly launched our own home finance it was not regulated at the time and also the first buy-to-let product, which is what we're doing at Offa. So it's kind of come home.
Speaker 1:Yeah, the story continues.
Speaker 2:Yeah, so we're doing buy-to-let.
Speaker 1:So this was the first Sharia-compliant buy-to-let product in the UK.
Speaker 2:And we launched the first savings accounts, the first deposit protected savings accounts.
Speaker 1:Yeah, I think my dad was one of your first customers.
Speaker 2:Yeah, and that was a remarkable achievement as well. And I changed the structure. We kept the current accounts through the branches, in particular Albeit. We then added, you know, telephone banking and digital apps. But the key thing was let's. People are more likely to give me a bit of a savings. They're not going to move all their transactional accounting from santander or whatever. Yes, so let. But will they give me some savings? Will they? Because many people in my generation, the second generation immigrants were taking no interest. So I'd have a savings account, take no interest, it's the same in today's generation.
Speaker 2:But actually and if you talk to Rizwan at RFF and obviously I also understood this once I was running my own bank, as it was when I was running a bank is actually I'm just giving them more ability to make riba by not taking the riba, and we can talk about this. It's quite interesting. So, just coming back to it, I said let's get people to give us something, build their confidence in the bank and then, once we launch other products, we will have built up a balance sheet to fund those other products.
Speaker 1:And that something was the return in the savings account.
Speaker 2:Yeah, so I think the other thing was the technology. A lot of the issues with banks the older banks, not the Monzo's and the Starling's, but the traditional banks is what do they do at the board level? They tend to hire older, retired bankers. So then the cycle of innovation often gets stuck. So let me give you an example, one of the things I had to do we were making lots of losses post-crash. So this is not the dot-com crash now this is the financial crash, the Lehman Brothers crash and I had to restructure the bank.
Speaker 2:So I maintained what we call our capital expenditure, our tech spend, but just tightened my operating expenses, tightened my belt for consumption expenses, because you have to have a future. You've got to still invest in something for the future, and what we did was we were one of the first banks to really um, invest in the cloud through, uh, we use salesforce as it happened to be any serum, but salesforce were one of the leaders in the clouds and they were an up-and-coming company, yeah, and we built our mortgage product on there. So you know our home finance, the islamic mortgage product, the home finance product. It wasn't called hpp at the time, just called home finance. Hpp came out when it became regulated. This was roughly around the same time and, most importantly, we put our savings products on the salesforce salesforce platform and then on through the money supermarkets instead of doing it through a third party, which is the most common way of doing it now. So I saved a lot of cost by doing in-house development on a CRM system into the cloud.
Speaker 2:Now imagine if I went to a board back in the early 2000s and said I want to put all our systems on the cloud. I mean it's just a flat rejection, you know, because it's like it's too risky.
Speaker 2:It's the data, the, this, the that. One of the hallmarks of our transformation was when my chairman was not a banker. I'm the CEO of a bank. There were bankers on the board, but the chairman was not a banker. It was from the Qatar Investment Authority. He chairman was not a banker, um, it was from the Qatar Investment Authority. Okay, he was also the um COO of um Harrods and he was also on the board of Volkswagen, audi, porsche, so he was a bigger risk taker, not a risk taker, but he just had a broader perspective that actually the future is going to be different. Banking is going to be different, sure, and so it was remarkable. We had almost a bank every month visit us for our deployment into the cloud. Salesforce were inviting us to california to present.
Speaker 1:Here's a bank that does cashiering in its branches in the cloud yeah well, so the picture you're painting is of a very innovative young bank, of, like, young muslims who want to try and change this for the better. But I think on the other side of it and it was, I think, more what my generation experienced, where we saw not just ivb or rayon and some of the other banks as a bit more behind the curve when it came to digitization, customer service, that sort of thing, and I, for me, and my brothers, my friends, we all kind of felt like, if you were to go for an Islamic bank, it was downgrade compared to conventional services, mainly in the user experience space. What do you think caused that?
Speaker 2:So I think it's correct and the reason is so. I said I'd maintain my CapEx, but relatively it was quite small right relatively and it wasn't the plug and play modular systems that you have now.
Speaker 2:You were coding from scratch. And the third the third party software vendors at the time were charging a lot of money, so costs were significantly higher. That's why I went in-house. If I could have bought one off the shelf it would have probably cost me probably five to ten times more, really. So I just built it on a cloud-based platform. So you do workflows and you build it and you build into the call them APIs now, but the integrations into our core banking, which is quite an old legacy system. And, yeah, you're up against people who are experiencing I don't know, a big four, big six bank level of technology and we are, just like you guys, a handful of people putting it together on the cloud. Before all these tools were out there you know these developer kits, modular systems we were doing it from scratch. Frankly, I had a very, very strict CapEx budget every year and some of it had to go on computers for the staff and some of it went on just developing stuff, and so I think this is a kind of prevailing issue that I find in the industry.
Speaker 2:The comparison is again conventional. Yeah, okay, it's natural, but it kind of sometimes doesn't work both ways. And what I mean by that is people might say to me and I'm sure we'll come on to these sort of questions, we will why do you benchmark to interest rates? Right, and then on the other side they'll say I'm just going to, I'm not going to answer the answer, yeah, yeah, yeah. But on the other side they'll say, yeah, why are you more expensive than a conventional? So they want it both ways, right, they don't want you to match conventional on the one hand, but on the other hand they compare you to conventional. So either we have to say we're completely separate and distinct from the conventional, so it's different from, I don't know, fruit and meat, and you wouldn't compare the two, or you're saying actually it's food and we do compare the two, right In that equivalent.
Speaker 1:And so we can dive into it, which we will come to, because, for the first time, this is a new segment of the show that we're calling Halal Google or Halugal autocomplete interview, where we're going to have Sultan try this out for the first time, this format where we're going to hand him this card of your most asked questions around Islamic finance. So if you hold that there, that will appear on camera.
Speaker 2:So if I get to just peel something off, yeah, so you'll peel it.
Speaker 1:So you can see here these are the most asked questions around Islamic finance. They start off, as you know. We've covered up some of them, but we'll do it one by one, so go for it.
Speaker 2:Yeah, if you go for it if you hold it a little bit, this is from you. Call him Halal Google, halal Google, halugal. I call him Sheikh Jujal.
Speaker 1:Sheikh Jujal, I'm just taking it from Sheikh Jujal. Let's try that. It's heavily bleached, hacked on. So yeah, there you go. So if you hold that one up, why are? Islamic mortgages so much more expensive.
Speaker 2:So it comes back. First of all, we are comparing first of all to conventional okay, and we have to. Then, if you're going to do that, then we have to look at the structure of conventional versus the structure of islamic in terms of a life cycle of industry.
Speaker 2:So your big banks, your lawyers in that west or even your established building societies have been around for hundreds of years right you know, since the empire took off, and so they've built up, um, I guess, economies of scale at one level right where they can get a low operational cost but that is not the primary driver, it is a driver but they also get a lower cost of funds. Okay, so what do I mean by all of that? You go for a home purchase plan. You get a price. Let's just make sure let's equate that rent to a rate, just for comparison purposes. Say, you're paying six percent in halal, uh, in the halal product, and you're paying four percent with, I don't know, halifax or somebody like that. What's the main driver? So, first of all, this is where your financial skills come in right. Go into their accounts and work out what's their spread. That's the difference between what they get from customers and what they pay to their funders.
Speaker 1:What is their spread and how much they?
Speaker 2:affect the company for themselves. For Muslim organizations we call that the net profit margin. This is before your overheads. So overheads is a factor. Like I just said, we don't have economies of scale. But let's just stop. Before that You'll find most Islamic banks do not make more money than their conventional counterparts. So what's that telling you? It's telling you that it isn't about somebody exploiting you to make more profits. The islamic bank is not making more profits from you, so their spread, their, the difference between their cost of funds and their price that they're offering the product to you, is smaller, smaller so the margins, actually the margins are smaller.
Speaker 2:Fine, so first of all, that's okay, they're making less money from me. So then you have to look at the cost factors. It must be coming in on the cost side. So let's look at the cost of funds. There's, I guess, a range of reasons. First of all, let's just go for the specific reason Where's my cost of funds? An Islamic bank or an Islamic finance provider? An Islamic bank or an Islamic finance provider? So an Islamic bank, as you will note, generally are towards the top of the rate tables on their savings accounts yeah, for savings accounts.
Speaker 1:I think they're paying something like 4.5% to 5% today.
Speaker 2:So what's the impact of that? At their spread, even if it's lower than the conventional, out pops a higher price on the home finance side. So if muslims were prepared to put into an islamic bank at a lower rate, you'd get a lower home finance price. That's one okay. Secondly, it's the availability and diversity of funding. So people simplistically will say my funding is for my deposit accounts and that's the average price of my deposit account. What I pay to savers drives the cost of funding. But actually there are other sources of funding. So so, cooks, you know what we call it in the capital markets. So you might go into a sookook on your home finance book and you might be able to reduce the cost, just if the capital markets are paying or expecting less than the retail market, sure. And then there's corporate uh deposits, where local authorities will put money in providing your credit rating right, so you can diversify. And then there's what we call interbank.
Speaker 1:The interbank, yeah, where Islamic banks are lending to each other.
Speaker 2:Islamic banks essentially finance each other when they have shortfalls or one's long, one's short, whatever right. So the diversity doesn't exist for smaller players. You're either using wholesale funding, what we call the exact equivalent of warehouse lines, or investments, you know, like peer-to-peer, or you're a bank and you're largely reliant on your deposits, all of which are more expensive than their conventional counterparts. And then you then have to get into the investment mindset. Why does an investor want more?
Speaker 2:yeah because sharia carries a premium in the capital markets. Secondly, islamic is a very small proportion of the whole market, which means hard, hard to hard to impact the whole of the market. You're going to be impacted. Think about equilibrium. Equilibrium is the total, the equilibrium of the total cost of funds from people who demand funds and people who provide funds.
Speaker 1:So in terms of solutioning for this, in terms of economies of scale, I think we could get there right, especially with technology, digitization, becoming a digital bank. In terms of the actual availability of capital, increasing the amount of sukuk that's available in the world. Or imagine the deposits increase. People just put more and more deposits into an Islamic institution and perhaps they forego a bit of the return and the returns are more in line with a conventional player. Do you think that would help a long way? Would that go a long way in bringing the cost of these mortgages down?
Speaker 2:yes, because just imagine everybody wanted to put their equivalent of savings struck investable amounts yeah into islamic products. Well then I'm. If I'm an asset manager, what am I going to do with all this cash? At the moment, it's literally such a small percentage of people's savings that goes into islamic. But if everybody said we're all going to put all our savings and our spare liquidity into Islamic investments and Islamic savings, the asset managers will then be saying I've got to get this out.
Speaker 1:You have to do something.
Speaker 2:So either they're going to drop the rate so the cost of funds goes down, and then, secondly, that means they will get it out to people who need funding, like people like Offa, you know, and some of the other players in the market who want the funding, who are trying to get out cheaper products. So when people say that to me, I'll say where's your savings? Where's your savings? I've got. You know, I'm quite Islamic. I've got it with so-and-so bank. I said you got a good rate from them compared to what you know, alifax direct charging. Yeah, yeah, yeah. There's your answer.
Speaker 1:Really, in a nutshell, in a layman's terms, there's your answer so why aren't banks doing this more often, like why aren't they? Why aren't the islamic banks putting a call out like come on, please put more and more of your deposits and your funding into the same music analysis, bring it down? Why isn't there more of a concerted effort?
Speaker 2:So we're going into banking now as opposed to what Offa might be able to do, for example, or a finance house like a Nesta or a Strider or whatever. The more deposits you take because it's a balance sheet, deposits are liability, because you owe that back to the saver. You have to put it somewhere, don't you? Because balance sheet equals, so it can't just sit as cash. If it does, you've got to place it somewhere. You can't just.
Speaker 2:it doesn't you know, so you place it in the Bank of England as an alternative liquidity facility or you place it previously with Sukuk if you want to get a higher yield. That has a capital weighting. All assets have a capital weighting. If you've got a capital weighting means I need more regulatory capital. It means I need more shareholders. I need more equity. This is a natural leveling off until the bank makes enough profits to increase its capital. So it's getting a little bit technical now, but the bottom line is that it's linked to the equity piece.
Speaker 2:Okay okay so the banks today won't do that, and then if they went out and got a billion pounds of capital, they'd be like well, actually it's going to take me time to deploy the level of balance sheet to find the house, and so the returns go down for sure.
Speaker 1:Okay, but it sounds like it's solvable, is the main point it's solvablevable by scale and, I guess, industry aggregation over time.
Speaker 2:It really needs that education, awareness and everybody to start believing and supporting.
Speaker 1:And supporting yeah, their initiatives. So please support Islamic FinTechs, all the people you've seen on this show. Please give it a go. All right on to the second one. Yeah.
Speaker 2:So let's peel that one away.
Speaker 3:Do you want to go? Just let me peel it away and read it so I'm not reading backwards.
Speaker 1:We go highly effective blue tack if you lift it up so the camera can see. Do you want to read it? Why do returns seem to track the bank of england base rate?
Speaker 2:yeah, so I kind of touched on this yeah so I won't go too long into this one so we can cover some some of the others. First of all, tracking is not the same as being an interest rate and I think many people have established that if I'm, if I'm following something, it's not the same as being something. So contractually I'm not doing interest. But why am I tracking it? People always, always ask that. So it goes back to this kind of long explanation I've given.
Speaker 2:What is a good proxy for the cost of funds to be able to track it? What is a good proxy for the cost of funds? Well, because the whole system is based on interest. An Islamic might be weighted at 1% or 2% the cost of funds, irrespective of is it based on profit or is it based on interest. The cost of funds, ie what investors require, is going to be broadly follow an equilibrium, so it will coalesce to what the majority of cost of funds do. But people don't ask me that question as often as maybe they'll say why don't you follow the market, rent, which is the corollary of this. So if I'm on the street, why isn't it?
Speaker 2:you know those guys pay £1,400 a month rent on this house yeah why doesn't it follow the market, when you could establish that with tech these days, right? It'll be different area by area, yeah so imagine you're a shopkeeper and you sold your goods by reference to the sales price, but with no reference to how much those goods cost you. So I don't know. I'm selling a football and the going price for footballs is five pounds and I have to sell it at five pounds. But what if it's costing me ten?
Speaker 1:I'd stop selling it. I'd stop selling it.
Speaker 2:So it's not reasonable to ask any business. And you know, islamically the Prophet was a trader. You buy at one price, you sell at another price. So if I'm buying at a price, my cost of funds is at one price. I have to look at it that way. And secondly, by the way, the market rents are often higher than the cost of finance.
Speaker 1:Yes, yeah, of course. So it's worse for consumers. I guess the distinction is why is the cost that you buy at linked to interest in itself? And that's because it's part of the wider system that we just live in. There's nothing we can really do about that.
Speaker 2:Well, not necessarily. It just happens to be that the cost of funds. So, just to go back to that Muslim is interested in putting savings into a bank account, and this is my earlier point they will always compare it to what the conventional is providing. So, yeah, so and so bank, islamic bank, is providing um, four percent. Oh, and I don't know, hsbc is doing two percent. They're comparing it right. So it's, it's, it's, it's positive. So, and if interest rates in the economy go down, and HSBC are now giving you 1.5%, typically you see people drop their rates, even on the Islamic side, because their cost of funds has changed. So the only way to properly fix this is to have a completely segregated system, and you do get that. So you've got. You know, we had in the old days the unsolved finance to a degree. You've got FIDA as well, where you're getting a deposit at a percentage and it's a circular, closed system, and then you're putting it out to other people and the difficulty is scaling up. The difficulty is scaling up because Getting that capital.
Speaker 2:Because even the people who might be putting money in to those companies, they will just be comparing their rate of return to what they might get elsewhere, and it may not even just be a conventional, it might be compared to I don't know what a curate might be giving or somebody else might be giving, and so the problem is you've always got that comparison it's not a self-sealed system like in central heating.
Speaker 1:Yeah, yeah, understood, Okay. Okay, I think the next one's probably going to be similar-ish yeah so let's remove that.
Speaker 2:I might just remove it, and then we'll hold it up is uh, is this just interest by another name?
Speaker 2:so, uh, the answer is emphatically no, because the, the definition of the interest is, uh, through the contract, which has been certified by the scholars. So it's, it's that contractual relationship between, um, the person taking finance and the person, um giving finance or the entity giving finance, yeah, is governed by the act, the contract, and it's really important that that contract does not embody riba. And how do we know that? Yes, we have got principles, but we're practitioners. I have to get it referenced to scholars and, uh, often very eminent scholars. Right, you know who have, who have looked at these things, and we know there's a wide body of opinions. But the reality is, you've got, you know, the majority of scholars in terms of, you know, places like that support Aofi and Majmafiq Islami and all of that. They've kind of accepted this.
Speaker 2:But I kind of these arguments don't actually bear that much weight when I'm, shall we say, with the layman in the high street pounding the street. One of the things you've got to look at is are these reputable scholars who've approved it? So there'll be scholars who say they're not. There'll be other scholars who say take interest-based mortgages because of Zoria, all of that, but part of it is your peace of mind and your spirituality, isn't it? And there's almost like a risk transference. These scholars have allowed it, they are reputable, there's a wide acceptance.
Speaker 2:So, even if you had some doubts and many people do should you operate on that? Because, given that you're not a scholar, you're muqallid, you're blind to a degree, the sense that you're not a scholar, you're mokallid you're. You're blind to a degree, the sense that you don't have a qualification. So you submit your I guess your opinion to the opinion of somebody else and if that person got it wrong, are you blameful? You have to kind of almost think about it like that yeah, and then probably you're not blameful because, in good faith, you reviewed the fatwa certificate, you looked at the product, you tried to understand what it's based on and you went for it, and fatwa are contextual, so something that may apply in this country may not apply in another country, and that's another thing that people often forget.
Speaker 1:Not just country, but also time.
Speaker 2:Yeah, and in the time country but also time. So when there was no Islamic equivalent to mortgages, then zurudiyah might have been a compelling argument. Where you've got now maybe 6-7 providers of home finance, is that really applicable?
Speaker 1:that's the thing right, because I think what a lot of people we talk to, a lot of customers of home finance and people who are considering it. They go through this and they they usually come across a fatwa. I think there was one which was given a couple of decades ago saying the zaruria um for necessity, for your first home which you're going to live in, you can take a conventional mortgage. So they think about that and they're like okay, but is my intention really that I'm doing this out of necessity or is it because I just want a cheaper mortgage? Exactly that's the thing and what is my real intention there, and I think that's what weighs on a lot of people. And then they see all these different home purchase plans on the market which are sharia compliant. So they're like okay, so how many people are not abiding by that fatwa? To the point that they're actually using these products because they do exist, so people must be buying them.
Speaker 1:And I think that's the conflict that exists and I'm a big believer. Having said all that, I'm a really big believer in we just need to make a good product for people to remove that choice and that conflict from them. So, on the one hand, it's digital convenience and customer service and excellence, and that's really what we're focusing on at kestrel, but on the other hand, it's the price perspective as well so the first point um wholeheartedly agree, it's what offers focused on completely so you've got the team that did the first buy to let, yeah, but we're doing it again now.
Speaker 2:Yes, there was some cumbersome elements of the first iteration, but that knowledge has come through in the second iteration to make it one of the slickest processes. I think sagira explained a lot of a lot of our applicants don't have to provide a single piece of paper. Yeah, to get a home finance, that's quarter of a million three hundred thousand pounds. That's amazing, right, and very quickly as well, not just amazing for islamic but amazing in general yeah and but.
Speaker 2:so that covers your first point. I wholeheartedly agree, that's something in our gift. But price and this is what I might say to the layman and most of them some of them have business will understand business Would you consistently, in the long term, sell something at a loss? Would you expect somebody to do that? And if they prove to you that they're making less money than those guys, then maybe the burden of that price has to be shared while we build the industry.
Speaker 1:yeah, it's going to take time it will take time, and I think it just feels like it's been going on for a while now. So how much more time?
Speaker 2:yeah, and that look truly. Uh, you need somebody to do something big. You know, combine these balance sheets of all the balance sheets are all literally a drop in the ocean yeah of the British Islamic banks and the compared to the big conventional yeah, I mean you've got to, you've got to really be breaking. You know, you've got to really get into 20 billion yeah as a balance sheet yeah where I can really start making those waves, and that's that. And how do we get there?
Speaker 1:well, everybody's gonna, everybody's gonna get in there, which I think you've answered most of the other questions now, but we'll just peel them off, just peel them off for the sake of it so the next one is some fatwas. Yeah, how do we deal with conflicting fatwas? Let me have a look. What's the idea.
Speaker 2:Some fatwas say conventional mortgages are okay, we've covered that one. Yeah, the next one.
Speaker 1:So this is an interesting one why are so many islamic banks?
Speaker 2:run by non-muslims yeah, I'll tackle that and let's just go for more. So how can islamic finance?
Speaker 2:ever truly compete okay we've talked about that to a degree. Right, it's really interesting. One, the non-muslim one, um. If you look at, uh, let's take the top four islamic banks in the uk. Look at their history, uh, if you made it cumulative, um, for the largest part of time, most of them will have had the majority of the time been run by non-muslims. Maybe, maybe, val ryan, it's probably 50, 50 because of my 10 other, but that's that happens to be, uh, the actual fact in the in the industry, there's two ways I look at it at one level. At one level, it's if that person running the bank is the most qualified person, can really generate some of those objectives that you talked about slick, high technology, lower cost of funds, better price products. Well, muslims deserve the best person, whether that person serving them is muslim or not. True, that's one level. The other way to look at it, though, is is it if the? I don't know, if the guy who runs bmw drove a mercedes, what would you think? Right?
Speaker 2:what would you think you? You would lose some trust in you would, you would lose some trust in that product yeah and for me it's not whether it's about a muslim or a non-muslim.
Speaker 2:It's important that the person running that institution is a firm believer in the products that they're selling. Are they able to come on your podcast and truly present their belief in these products in a sincere and authentic way, then, and that they they use them themselves, and so if, for me, muslim or non-muslim isn't the issue, it's what I, what I want to see is that those, those people running the banks, are believers in their own products.
Speaker 1:And ascribed to the same value.
Speaker 2:Because it's and maybe it's not their faith, but the ethical. All these banks say their products are ethical. Yeah, so you need to be making the case by example, making sure that you're taking those products and you can sell it. You can explain it, that ethical nature, and so that's not my challenge. I'm not making a judgment on any of them. They may be taking their own products and maybe that you know. But that's the challenge. That's what I look for. As a consumer, I like authenticity in anybody I deal with. True.
Speaker 2:In any product that I buy. Yeah, I deal with in any product that I buy.
Speaker 1:And a quick shout out to James Bagshaw, who is again one of the shareholders here at Kestrel, in that he's not a Muslim, but he's a full believer in Islamic finance as a truly ethical alternative to conventional financial services, and there are quite a few people like that out there.
Speaker 2:There's Richard as well, richard Thomas and there's a lot Stella. I mean, look, that's what I'm saying. There's plenty of examples of non-Muslims right. It's not about Muslim or non-Muslim, and some, I mean I remember there's a really good little anecdote to finish. Maybe to finish or not finish depends. We got invited to Radio 2, simon Mayo's show.
Speaker 2:Okay, right to talk about Islamic finance. When was this? This is probably 2015, 16. And I sent my head of marketing, tim Sinclair. So there you've got this show. Popular Culture. It's not Highbrow, it's not Chat, radio 4, right, it's Radio 2. Simon Mayo, famous broadcaster, yeah, and tim sinclair, you know, you know, local of warwickshire comes into the studio and starts talking eloquently and beautifully about islamic finance, and that, for me, is a piece of art. Right, you've got a, a non-muslim talking to another non-muslim and he is articulating and explaining islamic finance and why it's good for society, why it's ethical, you know why, why it's a great product, incredible. And that's what we've got, that's what we've got to achieve. Right, that's what we've got to achieve?
Speaker 1:yeah, for sure, I think. I think that's ultimately how we do this. We're running running quite short on time, but I think, just to kind of tie this off, is there a need for a new Islamic bank in this country to solve these problems? How do we go about it? Is it a new bank? Is it the fintechs working together, partnering with banks? How do we do this?
Speaker 2:I've mentioned that there will be a time where we're going to have to see some aggregation, some coming together of some of the players. In the meantime, the market's big enough that people like Offa whilst we're competing with our friends at Nesta and Strider, we're also collaborating. There's plenty of space. We need to be collaborating to push the message. We want the industry to be strong. That's it because it will facilitate those opportunities down the line. But does it really make sense for what I call um fractionalized players to come together and still create a small business? No, I need I need all of them to be breaking a billion. I need all of them to be breaking a billion, including offer, so that when we combine we have a head start. We're at 5 billion day one.
Speaker 2:And look, I'm dreaming. It might be that shareholders and everybody else has different ideas, but that's what's needed. You asked me what's required. We're going to have all these organizations. First, they need to be successful. I hope they are all successful and be that at some point we're gonna have to come together to achieve scale do you think there's room for a foreign player to enter the market?
Speaker 1:who has that capital?
Speaker 2:yeah, I know, I know we're running out of time, but there's a really interesting concept that I like to talk about is this stakeholder alignment. All the chips are with the shareholders. Today, despite all this talk around, you know, it's widened to stakeholders. We've got to do customers, employees and suppliers and all of that, and the environment and the government everybody's a stakeholder. But the reality is, who's got control? It's the shareholders. So, whether you're foreign or not, the values have to be indefinite and perpetual. Islamic values haven't, you know? The values are still the same, and that is the concern I have that how do you protect the values? Or else you get the scenario where an organization is set up for one thing serve communities and it ends up doing something else and then it leaves people with a hole which the fintechs will hopefully are filling, but then you've had that disruption yeah I've had that disruption and I think how do you protect that?
Speaker 2:the ownership goals have to be, um, a little bit more altruistic than just turning a profit. Right, yeah, it's, it's got to be, yes, good for society, but it's about filling that requirement and that when we talk about values and beliefs and authenticity, it's just got to be there. So if that foreign entity was owned by a WACF, a social. Wacf, where the perpetual values are protected. That might be and it's very long patient capital.
Speaker 1:That could be potentially you that might be, and it's very long patient capital that could be potentially. You know what a bombshell to end this on. I feel like that's a whole different topic in podcasts that we did yeah, we could talk.
Speaker 2:I mean, there's a whole bunch of topics we could talk about, yeah absolutely, but we are completely out of time.
Speaker 1:But uh, sultan, thank you so much, an incredible conversation. We'll have to have you back on at some point yeah, let's, you're welcome.
Speaker 2:I'd love to come on amazing.
Speaker 1:All right, assalamu alaykum.
Speaker 2:Wa alaykum as-salam.
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