"The Shariah compliant short-term financing market is untapped and so rather than competing with others, we are enabling additional customers to access short-term funding."
We spoke to Bilal Ahmed, founding partner and CEO of Offa Alternative Ethical Finance, about ethical lending and how brokers can attract new customers with Shariah complaint short-term funding.
CR: What is Offa’s main product areas and specialisms?
Offa is an ethical bridge financier responding to demand for ethical and faith-based demand for short-term, property-based finance. Offa’s finance products have been developed to be Shariah compliant and Shariah experts are involved from product design right through to operation.
The market demand that we address is in the short-term financing of residential and commercial investment properties. Our product plans include refurbishment, planning and development finance, as well as some interesting profit and risk sharing products.
CR: Do you think demand for ethical lending will continue to grow?
There is increasing demand from customers for ethical finance which we have seen in the asset management industry, with the growth of the ESG (Environmental, Social and Governance) investing, as well as in the banking and finance sector, through ethical banks and fintechs. This sector is set to continue to grow as values, climate and social concerns continue to be of importance to society. Demographically, the millennial generation embodies this in their purchasing decisions.
Ethical for us is about negative screening certain business sectors, as well as positively being responsible, fair and transparent with our customers. As a Shariah compliant product, there are unethical sectors that we will not finance, for instance, property relating to gambling or adult entertainment. However, our offering embodies much more than that – our products are based on profits not Interest, we make a genuine attempt to understand the customer’s circumstances and any penalties for late payments go to charity. We are open and transparent and the customer always knows exactly how much to pay from the outset and this does not deviate depending on external market conditions.
CR: What are Offa’s main aims or focuses in 2021? Do you have any exciting news or plans you can tell us about?
2021 will be Offa’s second year of operation and we will be seeking to meet more of the unfulfilled demand for our residential investment bridge finance product and we see that line growing significantly.
We are planning to launch our ethical and Shariah compliant refurbishment bridging finance product this year and announce new funding partners to support our growth. That growth will entail increasing our staffing and having strengthened our top team recently we will be seeking further experienced individuals.
CR: How can brokers attract new customers with Shariah complaint short-term funding?
In many respects – the Shariah compliant short-term financing market is untapped and so rather than competing with others, we are enabling additional customers to access short-term funding. The beauty of this is that it provides an additional differentiated set of products for brokers and intermediaries.
Clearly by positioning an enlarged offering of Sharia compliant bridging finance products, a broker is well placed to attract those customers who would have looked elsewhere. The Muslim market is dispersed up and down the country and very engaged in real estate property transactions. They have traditionally avoided pensions, preferring to invest in property for their retirement – so Offa’s product has become an enabler for them and will be an attractive alternative to conventional bridge finance.
CR: What trends do you expect to see within the specialist lending market in 2021?
Specialist lending is becoming far less niche and more mainstream – in the sense that more and more people see it as a viable offering for their short-term financing needs. With better customer service, technology and professionalism in the sector that trend is here to stay.
On the other hand, customers will be more discerning about who they do business with and ensure that they are working with a firm with reputable pedigree, through its management team, in Offa’s case. The real estate market is expected to be less buoyant after the stamp duty relief period ends. However, I foresee investors will continue to look for opportunities to purchase better value assets as a result, especially when rental yields compare favourably with poor returns from bank accounts.
CR: If you could see one headline about the specialist lending market in 2021, what would it be?
“Bridging finance weathers Covid, buoyed by property investors' continued activity in the market”.