Halal robo-advisor Wahed debuts in Malaysia

Investors can manage their funds in different portfolios, which are reviewed every 3 months, on a single online application platform


Kareem says 2 key aspects which make Wahed opt for Malaysia are the country’s regulator ecosystem and strong financial infrastructure foundation (pic by Muhd Amin Naharul)

WAHED Inc, the world’s first Islamic financial technology (fintech) company, has been providing access to Islamic value-based investing to over 130 countries, including key markets like India, Pakistan, Nigeria, the Middle East and North Africa.

On a single online application platform, investors can manage their funds in different portfolios which are reviewed every three months, facilitated by algorithm processes and required minimum human supervision.

Launched in the US in May 2017 and expanded to the UK a year later, the app “Wahed Invest” provides a diversified portfolio option to users such as the US stocks, sukuk and gold exchange-traded funds (ETFs).

The platform currently serves at least 20,000 accounts worldwide, and it has now arrived in Malaysia — a country which has about 19.5 million Muslims or 8.2% from the total of 242 million population in South-East Asia.

Wahed chief product officer Kareem Tabbaa said the company aims to make Malaysia its hub for Asia-Pacific markets after taking two years to get a licence to operate.

“Since 2017, we have been working on the products (study), operations and working with the regulator to get the licence and become fully operational,” he told The Malaysian Reserve last week.

Kareem said Wahed is also in the early stages of penetrating the Indonesian market which has some 85% of the total South-East Asia’s Muslim population, or 12.7% of one billion Muslim adherents in the Asia-Pacific region.

After its incorporation in 2015, Wahed secured a US Securities and Exchange Commission (SEC) licence in two years.

The company was subsequently licensed by the UK Financial Conduct Authority Boards of Representatives in 2018. Currently, it has a sandbox programme running in Bahrain.

In Malaysia, Wahed is among the three robo-advisors approved by the Securities Commission Malaysia (SC) so far, apart from StashAway and MYTHEO.

Next year, two firms Raiz Invest Ltd and RoboWealth are expected to join the market space after receiving the SC’s greenlight, which illustrates the fast growth in the automated investment platform industry and in the fintech market in general.

After its incorporation in 2015, Wahed secured a US SEC licence in 2 years and is now listed on Nasdaq (source: Facebook)

Ready to Be Halal Investor?

The Wahed app caters to all investors and is designed to be user-friendly for new investors who want to start investing their money the “halal way”.

According to Kareem, Wahed Invest allows retail users to invest money from as low as RM100.

Users just need to answer some know-your-customer (KYC) questions, including a face recognition process, and profiling inquiries which would allow the “robo” to recommend suitable investments.

Based on your risk profile, the programme will suggest investment plans to fits the person’s risk profile.

“These portfolios are made of different funds, so there are diversities and people will not be stuck or only exposed to one stock, but rather establish their money in the market in general.

After you opt for the recommended investment, which you can also add on subsequently, we will then invest in that portfolio on your behalf,” Kareem explained.

Wahed plans to offer Malaysians about four to five funds, including Malaysian stocks, US stocks, sukuk fund and gold ETFs.

“All of the portfolios will have the same funds but the percentage would differ.

“A conservative portfolio will have more sukuk and fewer stocks, while an aggressive one will have a certain allocation to US stocks and some allocation to the Malaysians stocks. You can see the allocations through the app,” he added.

Kareem said the KYC process would be very smooth and be concluded within minutes. Wahed only charges from a 0.39% to 0.79% annual fee — making it very affordable for a new entry.

Wahed Invest allows retail users to invest money from as low as RM100 (source: Facebook)

Ensuring Halal Returns

In order to ensure all returns are halal, Wahed has a full-time ethical review board, which undertakes a rigorous screening process and produces annual “purification” reports.

This full-time “Shariah board” currently has four members, including Associate Prof Dr Aznan Hasan, the former SC Shariah advisory councillor.

“This is part of our mission to ensure full transparency, so that if we want to establish our existence here, we need to make sure we have qualified scholars in that particular country,” Kareem said, adding the board is reviewing its holding on a quarterly basis via the institution quarterly report.

He said this is to ensure investors’ profits will exclude any prohibited elements including weaponry, tobacco, alcohol, gambling, adult entertainment or cryptocurrency activities.

This full-time ‘Shariah board’ currently has 4 members, including Aznan Hasan, the former SC Shariah advisory councillor (TMRpic)

“Before any fund is added into our portfolio, it needs to pass our Shariah board’s approval. We will also make sure users understand exactly what they are investing in and how the profits are generated.

“Should we find that companies are involved with interest, we will highlight it to our users, suggest them to purify their investment by doing charity for that portion as it was generated from impermissible resources,” he added.

Wahed uses cloud server — Amazon Web Services — to store investment data, which Kareem said is backed by a strong information technology team with DNA from Microsoft Corp, thus ensuring all data are kept safely.

Making Malaysia the Halal Hub for Asia Pacific Kareem said two key aspects which made Wahed opt for Malaysia were the country’s regulator ecosystem and strong financial infrastructure foundation.

“We thought the rules in Malaysia were very straightforward as explained by the regulator and we had a very collaborative approach among us, which is hardly seen in other countries. That made it easier for us to reach the decision although we had to comply on certain parts, which had to be done for the interest of investors,” he said.

“Secondly, you need important custodians, payment gateway and processes to ensure a smooth user experience. All of that is available here in Malaysia,” Kareem said.

He added that the regulatory environment is very accommodative with a market ready for its offerings as there is now no real userfriendly alternative to do equity or sukuk investments for retail investors.

“In Malaysia, fintech startups have been growing rapidly which tells you how users are more tech-savvy and ready for technology adoption compared to other demographic which is not really receptive to new ideas. So, that certainly helps us here,” he added.

According to the Fintech Malaysia 2018 report, the country reached 85.1% of online banking population, 85.7% of Internet penetration and 75.9% for smartphone penetration.

Mobile banking penetration and purchasing online products via smartphone are still low standing at 40% and 28.4% respectively. For Wahed, the high level of connectivity presents an opportunity to market its innovative products which can be tailored for the local market.

“We plan to introduce a more customised portfolio, so users can decide on their own after they are equipped with investment knowledge.

“Now we allow users to change their portfolio every three months if they are newbies to any type of investment. We will guide them on this. In the future, the more advanced investors can have greater control over their portfolio,” Kareem said, adding that the average age of their customers is 30 years old worldwide.

In Malaysia, Wahed has received queries from millennials as young as 18 years old, which is a huge advantage for the fintech firm.