Manzil To Expand Halal Financial Services

Manzil, which offers Halal-certified investment and home financing solutions, aims to help Muslim Canadians balance their financial needs with their ethical and spiritual obligations.

Governed by the motto “God over people over profit,” Manzil provides products that have been reviewed and approved by third-party Shariah-compliance advisors. In an interview with BetaKit, Manzil co-founder and CEO Mohamad Sawwaf said the startup’s mandate is “to bring a digital Islamic financial institution to Canada,” and cater to Muslim Canadians shut out of the traditional financial system by religious requirements.

Since its official launch in 2020, Manzil has seen an appetite for its offerings in the Canadian market. “The demand is there, the product-market fit is there,” said Sawwaf. “It’s really just all about now scaling the platform.” To support its growth, the Islamic FinTech startup has raised $2.44 million CAD ($1.91 million USD) in seed funding and made its first acquisition, purchasing fellow Toronto-based firm Muslim Will for an undisclosed amount.

Founded in 2017, Manzil provides Halal fixed-rate and variable-rate mortgages, using capital sourced from retail investors who have invested in another one of the company’s products: the Halal Manzil Mortgage Fund, which trades on the Neo Exchange and acts as a fixed income fund. Sawwaf claims the Manzil Mortgage Fund is “the only one of its kind in Canada.” CI Direct Investing is the portfolio manager for Manzil’s Halal investment portfolios, which contain its mortgage fund.

In partnership with Koho, Manzil also sells a Halal prepaid Visa card that is interest-free and offers cash back rewards. Additionally, the startup plans to launch Halal Wheels, a car financing product, within the next 12 months and is currently accepting members to its waitlist.

Manzil’s all-equity May seed round was led by Calgary’s Think Financial—the financial arm of True North Mortgage—with participation from Montréal FinTech accelerator Holt Xchange, US-based Innate Capital Partners, Jasaya Investments (which is owned by Jack Health and Cover Health COO Jauher Ahmad), FrontFundr chairman David Beatty, and some undisclosed angel investors from North America and the Middle East. The raise brings Manzil’s total funding to just over $3.5 million CAD.

According to a 2021 Statistics Canada report, approximately 3.8 percent of the Canadian population is Muslim—making Islam the country’s second-largest religious group next to Christianity at 63.2 percent, albeit by a large margin. The size of Canada’s Muslim population is only projected to grow in the coming years.

However, according to Sawwaf, the need to maintain religious compliance with Islam—which forbids earning or paying interest—prevents many Muslims from taking part in the traditional financial system or accessing common financial products, which are typically interest-based.

“What happens is, they basically don’t participate, they save a bunch of cash on the side, and that’s how they go about their life,” said Sawwaf. “They’ll rent, they’ll buy their cars in cash … and they’ll continually save cash, then, one day, hopefully, that cash is enough to actually buy a home. That’s the core problem.”

Enter Manzil, which is compliant with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards, and claims to be Canada’s first AAOIFI member. To ensure its offerings are consistent with Islamic religious principles, Manzil’s products have also been reviewed by a Shariah supervisory board, internal and external Shariah auditors, and a third-party Shariah advisory firm.

“Now they can participate in growing their wealth, they can participate in homeownership, they can actually participate in growing the economy,” said Sawwaf.

Manzil’s official 2020 market launch followed about two and half years in “R&D mode.” According to Sawwaf, there are “a lot of legal, tax, and regulatory issues” when it comes to building and structuring products like the ones Manzil offers. “That’s really why there’s no competition,” he said.

“We have been keeping a close eye on the growing demand for Halal financial solutions in Canada and we felt that Manzil is best positioned to cater to the needs and demands of this market,” said Think Financial founder Dan Eisner. “We could not be more impressed with Mohamad and his team considering all the barriers they have had and continually overcome to bring solutions like these to a heavily regulated market.”

Sawwaf claims that he has spoken to many Canadian banks, but none believe it is worth their time to spend tens or hundreds of millions of dollars to provide Islamic banking services. FinTech Wealthsimple has begun to move into this space with its Shariah-compliant ETF and Halal investment portfolio but does not offer any other Halal products, let alone mortgages (an area Wealthsimple has yet to expand to).

According to Sawwaf, the Manzil Mortgage Fund enables Muslim Canadians to gain “a very low risk, stable return,” similar to a savings account or GIC, without generating interest. Manzil leverages this capital to provide mortgages to its customers and shares profits generated with Manzil Mortgage Fund investors. Sawwaf described this approach as “a peer-to-peer type of solution … for Muslims, by Muslims.”

“Home financing has been a bedrock of halal finance in other countries,” said Innate Capital Partners’ founder Aamir Rehman. “Manzil is poised to lead this category in Canada, one of the world’s ten largest economies.”

To date, Manzil has self-financed dozens of mortgages. However, this retail fund can’t keep pace with demand for Manzil’s Halal mortgages—and over 10,000 families are currently sitting on its waitlist.

According to Sawwaf, Manzil saw “tremendous growth in 2021”—3.5x in customers and assets under management (AUM) compared to 2020, and is “on track” to grow it’s business 5 to 7x year-over-year in 2022. The CEO attributed this growth to “zero [Halal] options” in the Canadian marketplace and the relationships and trust Manzil has built with the country’s Muslim community and its leaders.

Manzil’s acquisition of Muslim Will marks the startup’s expansion into the estate space. Founded in 2019 by Nabil Orfali, Ammar Alhinawi, Samer Bahsas, and Maher Obeid, Muslim Will uses artificial intelligence to manufacture and distribute Halal-certified wills. As part of the deal, Manzil has acquired Muslim Will’s platform and 3,000 customers.

Sawwaf described Manzil’s mortgage and investing approach as “a peer-to-peer type of solution … for Muslims, by Muslims.”

Orfali told BetaKit that to continue Muslim Will’s vision of building an affordable will product for Muslim Canadians, the company needed “a partner like Manzil to take it to the next level.” Currently available only in Ontario, Orfali added that there is a lot of room for Manzil to grow Muslim Will’s business by expanding to more geographies and adding more document types.

In addition to rolling out car financing and expanding Muslim Wills, Manzil’s growth strategy involves moving into chequing and savings accounts, as the startup looks to build a “more robust wealth management solution.”

To date, Sawwaf’s thought process has been, “get to market as quickly as possible, with as little capital and resources as possible”—hence Manzil’s rollout of solutions in partnership with other players like CI Direct Investing and Koho. “Soon, what you’ll start to see is a more vertically-integrated approach,” he added.

Although Manzil’s products are available only in Canada currently, the company also has its sights set on moving into the United Kingdom (UK) and the United States, which Sawwaf says, like Canada, has a large Muslim population but no Halal financial options. While the UK houses full-fledged Islamic banks, like Gatehouse Bank, Sawwaf claims they aren’t competing on the digital and customer service side. “That’s where we think we can win,” he said.

Originally published on www.betakit.com