The Islamic finance market is growing worldwide, feeding on the increasing demand for Sharia-compliant financial products. That’s where fintech startups can seize the opportunity and provide tailored solutions. But before expanding your suite of offerings or starting a business focused on the Muslim customer segment, make sure you know where you’re headed.
What to know about an Islamic mortgage
Islamic, Sharia-compliant, or “Halal” mortgages must fully comply with Shariah rules and avoid interest (Riba). There are several Islamic mortgage options, each structured according to one of the underlying principles: Ijarah, Musharaka, or Murabaha.
- Murabaha: The bank purchases the property at the current market price and offers it to the customer at a higher price (a profit margin included). The customer then pays the bank over time, in installments, over an agreed period. No interest is charged; the customer and the bank agree upon the profit margin upfront.
- Ijara: The bank buys the property and then leases it to the customer. The customer makes rental payments and, in some cases, can purchase the property at the end of the lease term. Property ownership remains with the bank until the customer makes all payments and buys the property.
- Musharaka: The bank and the customer team up to buy the property, each purchasing a share of it. The customer gradually buys the bank’s share of the property over time while also paying rent for the bank-owned portion of the property. The customer’s ownership increases over time until they fully own the property.
Most banks and financial institutions use a percentage rate to offer products tailored to Muslim needs. While the percentage rate can remind one of the interest rate prohibited in Halal mortgages, it’s not actually involved in this case. A percentage rate allows customers to compare the cost of halal and other financial services easily, and that’s it.
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Put a premium on user experience
Most often, you’ll need to differentiate your offering by tailoring user experience and options, not software architecture. If you’re creating an investment platform for Muslim users, you wouldn’t include alcohol-related investment options, would you? The same goes for user interface design and marketing: apart from creating a seamless user experience, they should be well-thought-out and respectful of Islamic culture and values.
One of our clients wanted to optimize the architecture and improve the design and customer experience of their Muslim-oriented mortgage offering focused on North America. So, we thoroughly researched this audience and will share some recommendations below.
Use case: website redesign
One of our tasks was to build an umbrella website for the client’s websites and redesign one of the existing ones with improved user flow. The current one looked a bit outdated and lacked a human touch. In addition, it needed a better representation of the target audience. After deeply studying the target audience, we provided the references the client was happy with and put our hands on creating a website that would look even better.
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StrideUp’s website is an excellent example of content that can build trust with a Muslim audience
Apart from the design tasks, we had to analyze the content of the existing web pages and improve the set of keywords for SEO so that the client and its potential Muslim customers would find each other instantly. To achieve that, it’s crucial to have someone on your team who can leverage a deep understanding of the specific target audience.
One of the other things we had to fix was the user flow for uploading documents for a further contract. We fully redeveloped it, so now the user can download all the documents needed for the contract immediately by using the temporary link from the “Thank you” page. Such speed can dramatically reduce the client dropoff, compared to cases where the user must wait around two weeks to receive the link after advisor confirmation and risk eventually losing that link.
Finally, we had to delete the duplicate pages and move most of the static pages from GR-2020 (Laravel) to WordPress to ensure more flexibility for the client and ease of user for its customers.
Continuous user experience improvement is particularly important in the low-competition niche environment. That may sound counterintuitive, but a solution users love in every aspect will be more immune to a strong competitor suddenly appearing in the market. The trust built by your business’s presence, reputation, and service or product quality will help direct the flow of clients your way.
In terms of value for our client, we achieved the following:
- The company saved up time and effort for its users and team
- Better user experience reduces the risk of potential clients dropoff
- We eliminated the risk of losing the data in the contract as the user and the advisor can now add the data simultaneously (previously, the data could be rewritten)
Use case: affordability calculator
Every customer appreciates transparency. For Muslim customers, it’s crucial because of their religious beliefs, too. One way to make a mortgage solution more transparent is to add an affordability calculator, so we developed one for our client.
Previously, the customer received the calculations via email. Now, based on the information the customer provided, the system assumes the amount of funds needed for a purchase or refinancing.
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Mortgage calculators by Canadian Muslim mortgage provider EQRAZ
What else to pay attention to
Some countries have specific regulations for Islamic finance, and the regulatory environment varies in different regions. Targeting a global Muslim audience is not the same thing as tailoring your solution to a Muslim community in a specific country, as legal requirements can vary. So, you’ll need to explore the legal intricacies as much as cultural differences.
If you’d like to receive more guidance in Fintech software engineering and a specific business domain, feel free to schedule a call with our CEO. As a Fintech Engineering Startup Studio and Innovation Lab, we love to help startups grow and achieve more by leveraging years of experience in the industry.
