Nosaibah Alrajhi, a former investment banker, is ready to launch Forus, a Shariah-compliant peer-to-peer lending platform that she hopes can help bolster the economic growth of Saudi Arabia and enrich both business owners and small investors.
“We bring together investors and SMEs (small and medium enterprises). Crowdlending will provide a steadier and safer return than say, investing in stocks or investment funds. If you compare it to real estate, for example, you need a lot of cash upfront to invest in property, but with P2P (peer-to-peer) lending it provides almost everyone with the opportunity to invest and get a return,” she said.
Having received a special license in July 2019, Forus will launch its platform in early 2020. For investors, it is quick and easy to register: You just need to complete a standard know-your-customer (KYC) process, and you will then be able to lend 500 Saudi riyals ($133) to 10,000 Saudi riyals to whichever companies you choose.
For would-be borrowers, Forus will undertake a credit and risk analysis that usually takes about 10 days. “We do all due diligence, and once companies meet our benchmarks, they’re listed on the platform, giving investors, both individual and institutional, the opportunity to lend them money,” Nosaibah Alrajhi said.
“We call it income investments, investors get their money back, plus fees.” Companies listed on the online platform are rated according to risk. Companies can borrow up to a maximum of two million riyals. “Investors can look at the companies’ financial reports, their strategy, their team, their products, as well as specific financial ratios that will help them make their decision,” she said.
A company will request to borrow a certain amount, and once this is fully pledged by investors, it will receive the loan. In turn, Forus earns a small commission. Loans are for six to 48 months. “Our marketplace is providing investors with diversified alternative options for investing, while businesses are empowered with an opportunity to grow and scale,” she said.
“We achieve this by minimizing friction, streamlining customer experience and providing a seamless, secure and transparent platform.” Nosaibah Alrajhi holds an MBA from Madrid’s IE Business School where research led her to spot a gap in the market for a fintech-based, peer-to-peer lender in Saudi Arabia.
PLAN FOR PAKISTAN
“If you look at the market today, there’s only a few banks who are willing to lend to SMEs, which banks see as quite high risk,” she said. In Saudi, there are roughly 16,000 SMEs looking for loans, she said. Forus uses a murabaha, cost plus financing, structure for its loans, which are not interest-bearing and so are Shariah-compliant.
In English, Shariah-compliant lending will refer to a profit rate rather than an interest rate, although in Arabic there is no such linguistic distinction. Nevertheless, Forus’s loans are Islamic. In Saudi, the biggest market is for Shariah-compliant financial services, she said, and hopes her platform will provide a win-win for investors and SMEs.
In the longer term, Forus plans to expand to Egypt and Pakistan, but for now the company’s focus is firmly on Saudi Arabia. “One of the main impacts we aim to have is transparency, which will then enable financial inclusion and help increase gross domestic product.” Within the next five years, Saudi’s financial sector will look completely different,” said Nosaibah Alrajhi, who leads a team of 10 staff at Forus.