Mufti Yousuf Sultan is the co-founder of IFA Consultancy, a pioneering institution in Bangladesh that provides training and consultancy on Islamic finance, aiming toward a Halal and Sustainable Economy.
In this fascinating interview with Future Startup’s Ruhul Kader, Mr. Yousuf talks about his journey to what he is doing today, the origin of IFA Consultancy, Islamic finance and venture capital, the history of Islamic finance, the origin and making of IFA Consultancy, the challenges of building an Islamic finance education and services company in Bangladesh, how IFA Consultancy works as an organization, the metaphysics of growth, the ambition of IFA Consultancy, the real measure of success and much more.
This was a much longer interview, so we had to divide it into two parts. This is part one, please come back later next week for the second part of the interview. Enjoy!
Ruhul Kader: Thank you for agreeing to this interview. How are you doing? What are you busy with these days?
Yousuf Sultan: Assalamualaikum. Alhamdulillah, I'm doing well. Since I'm a Shariah adviser to a number of companies, I spend some of my time on that. Before joining you, I just finished a meeting with a shariah-compliant venture capital firm. I had a question regarding one of their products. Therefore, I met with their leadership to understand and find ways to accommodate.
Later in the day, I have a meeting with AAOIFI. AAOIFI is a global standard-setting body for Islamic finance based in Bahrain. I am currently working as a consultant on a number of AAOIFI projects.
I am also a member of several of their working groups. In the evening, I have a training session with some delegates of IsDB, also organized by AAOIFI. The group is taking the Certified Shariah Adviser and Auditor (CSAA) training. I am the instructor. This is how I mostly spend my days.
Ruhul: I did not have a venture capital-related question for you. However, since you mentioned venture capital, I’m curious about your work in the venture capital space. For us, this is particularly relevant since many of our readers are entrepreneurs, founders, and venture capitalists. Can you please tell us about your work in the space and the relevance between Islamic finance and venture capital?
Yousuf: This is an interesting topic and one of my favorites. Before getting there, let me tell you briefly about myself first. I believe it will help with context and relevance. I spent my childhood in the UAE. For 30 years, my father was an engineer at Etisalat, the first telecom operator in the UAE and one of the largest telco companies in the Middle East. There, I spent my childhood and went to my first school. It was my parents' wish for me to study Shariah. That's why I came to Bangladesh. After returning to Bangladesh, I spent about two years in school before enrolling in a Madrasa.
In 2008, I graduated from the Madrasa, also commonly known as a Mawlana. In 2009, I completed Ifta from Jamia Shar'iyyah Malibagh, one of the most reputed and best Madrasas in Bangladesh, and graduated as a Mufti, Alhamdulillah. I then taught in two Madrasas in Bangladesh for almost five years, Jamia Shar'iyyah Malibagh and Jamiatul Asad Al Islamia, Dhaka as deputy Mufti. In addition, I worked as a part-time lecturer at the Islamic University of Technology for one year. I was involved in many Islamic media programs, mostly on television. I was also a Khatib in a mosque.
I first learned about INCEIF during a seminar that was jointly organized by the IFSB of Malaysia and the Bangladesh Bank in a hotel in Motijheel. After the seminar, I wanted to learn more about Islamic finance. Since I come from a Shariah background, I thought I could contribute more if I knew how to apply Islamic finance in practice. That was my inspiration.
In 2013, I attended a conference in Malaysia, where I currently live, for one week and visited various Islamic finance-related institutions. In 2014, I attended INCEIF to pursue a master's degree in Islamic Finance. In 2016, I started my PhD after completing two years of my Master's degree at the same institution, which is still in progress. Since I got busy with work, my Ph.D. has slowed down, but it is still in progress. At the same time, I joined an organization called Ethis, where I came to know about the startup world and venture capital.
Ethis denotes Ethical and Islamic. It is a worldwide pioneering and well-known Islamic fintech group. The group has a license for P2P financing in Indonesia. It has an equity crowdfunding license in Malaysia. In Qatar, it has a license from QFC, and in Dubai, a license from the Dubai land authority. Ethis also has a global Islamic crowdfunding license from Oman which allows conducting P2P or equity crowdfunding globally.
Up until September last year, I worked for Ethis in different capacities. Initially, I joined Ethis as a Shariah Consultant and gradually became more involved in their operations; I served as their COO at one point. Last, I was the Head of Shariah and Governance for the entire group.
We started a shariah advisory and consultancy company in Malaysia in October, similar to IFA Consultancy in Bangladesh. So I left Ethis.
At Ethis, I had the opportunity to work with startups and got a good understanding of venture capital firms. Malaysia has an accelerator program called Malaysian Global Innovation & Creativity Centre (MaGIC). I had opportunities to connect with them and other accelerator programs in different capacities including speaking at events, doing mentorship, judging at events, etc.
Coming back to your question, you asked about VC and startups and how Islamic finance is relevant. Let me begin by discussing VC briefly. Several studies indicate that venture capital borrows its concept from Islamic Finance's Mudaraba concept. Professor Murat Cizakca is a renowned Turkish academician, economist, and historian. Through his research based on Old Ottoman Empire documents, etc., he has shown that the Mudaraba concept, which originated in the Arabian world, traveled to Europe via Spain. At one point, it was known as Commenda in Europe. He describes venture capital as the modern equivalent of that.
Thus, venture capital is quite similar to Islamic finance concepts such as Mudaraba and Musharaka. Therefore, we have a soft spot for VC funds.
In Bangladesh, I would say people are either not aware of Islamic VC funds or do not have an interest in them due to different factors and perceptions. Malaysia, the Middle East, and other parts of the world have many halal investors and funds interested in angel investing, venture capital, etc. If our startups adhere to Shariah guidelines and run their businesses in a halal manner, then we could explore halal investing opportunities.
This is where our work at IFA Consultancy can be useful. For instance, I mentioned a venture capital firm earlier. In Malaysia as well as globally, they are the first Shariah-compliant VC fund. They disburse all their funds in a Shariah-compliant manner and their first criteria is that the startup has to be Shariah-compliant.
Ruhul: Venture capital and Islamic finance are fascinating topics. Hopefully, we’ll have another conversation on this topic in the future, Insha'Allah. Before that, I want to learn a bit more about you. You briefly shared your personal journey. Can you please tell us about your early life, upbringing, and your journey to what you are doing now?
Yousuf: I was born in Dhaka. My father was working in UAE before my birth. Two months after my birth, my father took me and my mother to Abu Dhabi. I studied there until class four in Bangladesh Islamic School, a school operated by Bangladesh High Commission. Although the curriculum was in English, since it was run by the Bangladesh Embassy, I learned Bangla there. We then returned to Bangladesh. My father stayed back. I attended two schools in Bangladesh: one in Gulshan and another in Badda.
My father had the ambition to send me to Madrasa. In the UAE, most people who wanted to study in Madrasa used to either go to Saudi Arabia or Egypt. My parents could not manage enough courage to send me to those new countries. Communication was not this easy in those days. But Bangladesh was an option. Madrasa education was well-established in Bangladesh and we have a lot of relatives as well. So, I stayed with my maternal aunty for ten years and studied in Madrasa. I used to visit my parents 2-3 times every year.
I went to Madrasa after class six. My first Madrasa was Kawran Bazar Jamia Amber Shah Islamia Madrasha and after completing three classes there, I went to Jamia Sharia Malibag, which I mentioned earlier, and where I also taught for a while. I completed my education from there. I completed Dawra, after which the graduate is usually called Mawlana, in 2008, and Ifta—a specialized course in Islamic jurisprudence in 2009.
If I talk about Abu Dhabi, I enrolled in school in 1992. The environment was good in those days. I’m not saying that things are bad now. But we had a practicing circle in those days in our community. We used to have tafsir every week. My father used to take me with him. That Ustad basically encouraged my father to send me to Madrasa. He encouraged everyone and Abbu probably picked up from there.
My computer tinkering first happened in 1993/94. My father had a second-hand computer and it was run on Windows 90 I guess. My computer game those days was Typing Tutor. My father used to play Typing Tutor with me and we used to compete on WPM - words typed per minute. Sometimes Abbu would win and sometimes I would win. We had floppy disks in those days. That's how I got introduced to computers. After a few more years, the Pentium computer by Intel came out and we bought a Pentium 2 and I had some more opportunities to learn.
While I was studying at Madrasa, I always had a computer at my home. Whenever we had a vacation, since my parents were abroad and I could not visit them on all vacations, I used to spend my vacations tinkering with various software. I would go to Farmgate and buy software collection CDs and then install all of them, use them and then uninstall them.
At one point, I was into blogging. I used to write in Prothom Alo blog, Somewherein blog, etc. This was back in 2007/08. Prothom Alo blog organized their first meetup in those days and I remember attending one of them.
In around 2010, we started a technology company called Shabaka Soft Limited. I was the managing director and I had two other partners. Our main plan was to build websites for Madrasas. There was a negative perception about Madrasa in those days. It has been around before. Our objective was to help madrasas put their curriculum online on their website so that people could see and understand what madrasas teach. We thought it would help reduce the negative perceptions.
We visited and built websites for many madrasas. We had a small team and offices in two places in Uttara. We also organized seminars and workshops for madrasa students. We organized the first IT Seminar for young Ulamas in Bangladesh. We did it twice in Bangabandhu Novo Theater. We did it in Comilla, Sylhet, and at many renowned madrasas.
I met a senior brother, Sadiq bhai, who was also from a Madrasa background, during these seminars. He is probably still in the IT business. I'm not in touch with him for a long time. I tried to reconnect but could not and I hope he will read this interview.
We invited Sadiq bhai to give a presentation at one of our seminars. We knew that he used to earn money online and draw money with his card. But we did not know anything else. We organized it in our office.
Sadiq bhai during a rehearsal of his presentation was showing us how to create an account in Odesk and earn through freelancing. I got really fascinated by this. Before the seminar, I applied for a Payoneer card and created an account on Odesk. That's how I gradually got into freelancing.
I learned basic coding from seeing our team build websites for Madrasas. We only had two web developers. So I used to sit with them and watch them work. In some instances, there were small changes that needed to be made immediately and I could not wait for our developers to come and fix them. So instead, I learned those things from them. Besides, I would also watch and read tutorials.
After running Shabaka Soft for three years, we came to realize that we could not run it in a sustainable manner. It was a different time. None of us had any experience. We burnt a lot of money. We had an investment but we could not utilize it properly. Working with Madrasas was also not making much revenue as well. So we transferred our clients to another company and shut down the operation.
After that, I started to pay more attention to my teaching. Shabaka Soft was between 2009 and 2012. I did my Ethica certificate course in 2011.
Ruhul: Can you tell us about the origins of IFAC? What made you think that there is a need for an Islamic finance Shariah advisory and consultancy services institution in Bangladesh? When and how did you come up with the idea and get started? I'd love to hear the origin story of the first product/service that you built and why, like what the insight was, what was the context, etc?
Yousuf: That's an interesting question. During my madrasa days, I got the opportunity to learn about Islamic economics from my teacher late Mawlana Abul Fatah Muhammad Yahya, who authored a wonderful book on Islamic economics. Later I was inspired by a talk by the renowned scholar Mufti Taqi Uthmani to pursue studies in Islamic economics and finance. After graduating from the Madrasa I became a teacher. Around that time, I met a Kuwaiti Scholar online. He was visiting Bangladesh, so we traveled together and met several scholars in Bangladesh. This was somewhere between 2010 and 2011. At one point, he had asked: "Mawlana, I think you should study Islamic finance. There is a high demand for Islamic finance professionals and I think you have a lot to contribute there."
He recommended I take the Certified Islamic Finance Executive (CIFE) course offered by Dubai's Ethica Institute of Islamic Finance. The program was offered online and I completed it. I was probably the first Bangladeshi to earn such a certification. My expectation was to gain a thorough understanding of Islamic finance after completing the course. But after completing the certification, I realized I had just begun and still have a lot to learn.
Then I started building relationships with Islamic financial institutions such as banks and similar organizations, and I began attending conferences.
In 2014, as I mentioned earlier, I came to Malaysia to study at INCEIF. After coming here, one of my students Mawalana Khaled suggested that I create a Facebook group where people can ask questions about Islamic finance and I could answer them. He correctly noted that there was a lack of knowledge and awareness in the field in Bangladesh. So we created a Facebook group called Islamic Economic Forum to explore the issue. This group still exists, although it is less active now.
There are many Islamic programs in Bangladesh, both offline and online. However, most TV and related programs continue to draw very basic questions, not things related to business or economics.
With the new FB group, we wanted to encourage people to ask real-life critical questions related to business, finance, and economics. It did not take much time to catch on. Many people started asking questions about work, business, and other important matters.
After three months in Malaysia, I came to Bangladesh and we organized a meet-up from the Facebook group. Around 30 people attended. This was somewhere towards the end of 2014. IFAC founder, my colleague, and senior brother Mufti Abdullah Masum also attended that meetup. It was a small group but we had people from diverse backgrounds: business students, bankers, academicians, etc.
We discussed various issues and listened to each other. Everyone suggested starting a study circle. So we started a study circle towards the beginning of 2015. It was a small circle but many people used to attend. I left the country by that time and could not attend any of the study circle sessions. Mufti Abdullah Masum did all the struggle and hard work.
The study circle gradually evolved into a course. And we gradually realized that there is work to be done here. So we decided to put together an organization, which eventually became IFA Consultancy (IFAC)—IF stands for Islamic finance and AC stands for academy and consultancy.
We launched our first Certificate Islamic Economics and Finance course in 2017. The early days were difficult. There were many challenges. There was little demand in the market. So creating demand in the market became a major challenge for us. Since a formal education in Islamic Finance is not a requirement even for the Islamic bank and financial organizations—most organizations don't require any relevant certification during recruitment—people were not particularly looking for certificate courses.
Mufti Abdullah Masum has worked tremendously hard in those early days and continues to do so to this day. Things have improved over the last few years. From there, we have experienced some growth. We registered as a company in 2020.
Ruhul: This is interesting. You mentioned that Islamic banks and organizations don't require any certification in Islamic finance or relevant fields. Have you done any work here such as trying to work with banks and other financial institutions?
Yousuf: We are a training partner of AAOIFI. We run an exam center and candidate registration center for them. Before us, the Center of Shariah Board for Islamic Banks of Bangladesh (CSBIB), a kind of a consortium of Islamic banks, was the first exam center of AAOIFI in Bangladesh. We became the exam center in 2020.
In the last year, Bangladesh had 100 plus AAOIFI fellows who are either Certified Shariah Adviser and Auditor (CSAA) or Certified Islamic Profession Accountants (CIPA). As a result, we now have trained people across the financial industry.
We also have trained people from Islamic Banks, traditional banks, and even Bangladesh Bank. This has also helped create a demand for such professionals. But this is a very recent phenomenon. When we started there was no such demand or requirement. There is now an implicit demand where banks are subtly giving preference to people with relevant training.
We definitely try to present the case for the importance of having educated and trained human resources when we participate in workshops and conferences and meet with stakeholders. In our discussion with banks and regulators, we signify this because you can't do Islamic banking without proper human resources. This is the reality.
Ruhul: You have already mentioned part of the origin story of IFAC. From what I gather, IFAC started in an organic manner. You started off with an online Facebook group which led to a study circle and then a course and then in 2020 you decided to put together an organization once you saw a need for services like yours. What went into building the initial operation? How did you put together the initial resources and get started?
Yousuf: This is an interesting question. And my answer will be different from other co-founders because all of us worked in different capacities and areas.
Since both Mufti Abdullah Masum and I come from the Madrasa background, we have always wanted to build something that would benefit people. We did not want to build something for the sake of building it. We are always preoccupied with the truth. That's why we talk about a sustainable economy. There is no difference between a halal economy and a sustainable economy. If you adhere to the values of the halal economy, you will automatically get a sustainable economy.
But we have started working in a field where there is neither awareness nor demand in the market. For example, being a central body for the Islamic banks, CSBIB offers some training to banks and financial institutions. Large Islamic Banks run some internal training programs. Outside of these two, we did not see many activities. There was no place for people interested in learning about Islamic Finance in Bangladesh. Even universities didn’t offer any degrees in Islamic finance.
Before getting to your answer, let me explain something here. IsDB was founded in 1975. That was basically the beginning of Islamic banking across the world. The first Islamic bank of Bangladesh 'Islamic Bank Bangladesh Limited' was established in 1983. Malaysia's first Islami bank 'Bank Islam Malaysia Berhad' was established the same year.
However, in 2022, if we look at the two countries, we would see that Malaysia started with a blueprint from the beginning. They have enacted laws like Islamic Financial Services Act, built the necessary infrastructure and institutions, and taken initiatives to institutionalize the entire industry. For example, the institution where I'm doing my PhD—INCEIF University—was established by the Malaysian Central Bank. If we compare Bangladesh, we feel a deep vacuum in the sector. That was an inspiration for us to work in this underdeveloped area.
And when we decided to start IFAC in this environment, it was not easy. We did not have much business experience. I had some minor experiences but it was not significant. Today standing in 2022, we are quite confident but that was not the case in 2017. Our start was unorganized and humble.
Our first course did not attract many students. Of the ones who attended, many were not regular. The same case was with fees: the majority would remain due. We did not have enough people. The trainer would do both preparing the classroom and taking the class. We didn’t have the luxury to invest any money. In fact, we operated as a mostly free service for a long time.
If you ask about the funding, my founder and I invested from our own pocket when we registered the company. Until now we have tried to grow organically without any external investment.
However, we are now thinking about expansion. We are seeing some demand and positivity in the market. Sukuk has been launched and there is a discussion going on everywhere.
Having said that, we always try to operate and grow in a sustainable manner, which you can call our inherent philosophy.
Ruhul: How big was your team when you started? What was the setup like?
Yousuf: Our team was mostly volunteer-driven in the beginning. Except for our two co-founders, almost everyone else worked voluntarily. They came for learning and volunteered with us on the side.
The operation was limited. For example, classes were only on Fridays. Preparing the materials and other documents was a major task. Our founder Mufti Abdullah Masum used to do most of it. He has worked hard, struggled, and done a wonderful job.
Now, Alhamdulillah, our team has grown. Being in the service business, we try to keep our fixed costs limited. We work with freelance trainers and consultants instead of having many full-time people on the team. It allows us to grow sustainably.
Ruhul: That makes sense. It allows you to keep your cost down and operates in a lean manner. Can you please give an overview and state of IFAC and tell us what IFAC does today, who the customers are and who you reach and work with for the people who don’t know about IFAC?
Yousuf: We offer three services: shariah advisory and consultancy, training and awareness building, and publication. We started with training. It is our main service until now. So far we have launched 21 courses on different topics of Islamic finance such as Islamic economics and finance, Islamic Banking, Sukuk, Islamic inheritance law, Islamic Fintech, CIPA and CSAA preparation courses, ecommerce and Shariah, Takaful, fiqh of riba, stock market, and Islam and several others. You can probably understand that we offer a diverse number of courses.
Many of these courses have completed a meaningful number of batches. For example, our first course, the Certificate course in Islamic economics and finance, which is a six months long course, has completed 21 batches and 22nd & 23rd are running.
We have about 1500 alumni who took our various courses. Interesting thing is that they come from diverse backgrounds. We have business students, lawyers, bankers, regulators, madrasa background people, doctors, engineers, and many other professionals in our alumni.
Besides courses, we do various webinars, workshops, seminars, etc. For instance, we do webinars on the fiqh of Zakat in Ramadan. After the last government budget, we did a webinar on the budget from the perspective of Islamic finance with high-profile guests such as IsDB laureate Professor Kabir Hassan and many others. When Bangladesh issued its first Sukuk, we did a webinar with guests from the Bangladesh Bank and the Ministry of Finance. When ecommerce became a huge topic, we did a workshop on ecommerce. We do workshops on entrepreneurship in the light of Islam. We had over 1500 participants in our various workshops. That’s about our courses, workshops, and training programs.
In consultancy, we have provided over 50 paid consultancy and Shariah advisory services so far to both individuals and organizations. A few major organizations we have worked with are IDLC Finance—we have already trained one batch of their people on Islamic finance and started another batch recently, Khaas Food, weDevs, As-Sunnah Foundation, Biniog.io—a crowdsourcing company, Sorobor, OnnoRokom Group, etc. We have worked with several cooperatives as well.
Apart from that, we work with different stakeholders. For example, we have prepared takaful-related guidelines for the Insurance Development and Regulatory Authority (IDRA). Just last month, we received an invitation from Bangladesh Bank to exchange ideas on different aspects of Islamic banking and finance in Bangladesh. We have also exchanged views with BSEC. We informally engage with professionals from Banks where senior bankers take our opinion regarding their products and services. We are in discussion with several partners for formal engagement. We do this to build stakeholder awareness.
These are broadly our products and services.
We provide zakat calculation and consultancy services during Ramadan. We have so far done over 75 such consultancies with both organizations and individuals.
We do live digital programs on Islamic finance. We have so far done 60 live programs. We organized the first Islamic fintech-related conference in Bangladesh. We have over 39,000 followers on Facebook with almost 2 million page reach.
We have a free call center called Islamic finance call center where people can call with their finance-related questions every Monday and get answers from our certified Shariah advisors free of charge.
We have over 10 Muftis in our team, most of whom are AAOIFI Certified Shariah Advisors and Auditors (CSAA). I have been fortunate to work with organizations from around the world in this field but I have not come across any other organization with these many Certified Shariah advisors. It is quite rare.
Ruhul: I want to dive deep into your model a bit. You offer courses. How does your relationship with trainers work? Are they full-time trainers who work with IFAC or external trainers who collaborate contractually?
Yousuf: The certified professionals are involved with us in various contractual capacities. Many of them teach at different Madrasas and work with us on the side. However, we call them internal team members although they don't have full-time engagement with us. Our internal team members take the majority of the courses. They are highly qualified and talented. Almost all of them are Muftis.
We also invite external experts from time to time. Our standard procedure is that we provide a small fee. In most instances, people don't take these fees and instead provide them to our institution to use as scholarships to students who can't afford course fees. But in general, we provide a fee to the trainers.
Sadikur Rahman: Last year alone, we gave some BDT 125,000 worth of scholarships to our students.
Ruhul: When it comes to consultancy, how do you work with your partners and clients? Maybe you can pick one or two services and just describe the experience from the customer's standpoint, end to end, what is the full customer experience with IFAC services, as an example?
Yousuf: Shariah consultancy is a relatively new thing in Bangladesh. We are not aware of any organization that has done a similar thing institutionally in Bangladesh, although it is quite common in many countries including Malaysia, Indonesia, Pakistan, Middle Eastern countries, and many western countries such as the UK.
Financial institutions such as banks, companies, MFIs, Sukuk, fintech, etc are usually the first clientele of these services in almost all markets so far I have seen.
We have been trying to expand the horizon of Islamic finance in Bangladesh. Since the regulatory requirement to maintain Shariah compliance is only for the banks and organizations that provide Islamic financial services, other businesses and organizations are not much worried about shariah compliance.
Most businesses think that if my products are halal, it means my business must be halal. But it is not true. For instance, many corporations in our country sell halal products such as cement, FMCG products, etc. There is nothing prohibitive in these products. But the same company probably takes interest-bearing loans from banks or invests in interest-bearing assets. These loans and income from the interest are non-halal. So, although you sell halal products, for various other reasons, your business is probably not halal.
Even when you are taking funding for your business, you need to be mindful. Take startup funding, for example. Startups raise money using various instruments: SAFE, convertible notes, preference shares, and many other methods. VCs do all these different instruments. But not all of those instruments are shariah complaints. It means your main business is probably halal but the way you received the financing is non-halal.
As Muslims, it is obligatory for us to earn halal income. Otherwise, our prayers, duas, and good deeds will not be accepted. So it is necessary that the business we run and the income we earn are halal.
Many people, both businesses and individuals, come to us with financing-related questions. Interestingly, many clients of various Islamic Banks come to us with agreements and forms to learn our opinions about certain financing.
This is an improvement I would say. Because a large part of our society does not recognize the difference between Islamic and non-Islamic. The ones who do differentiate believe that whatever the Islamic banks are doing, we can accept that without question. But due to various reasons and lapses of the decision-makers, there are differences in shariah compliance levels between these banks. Regulators are now paying attention to these matters, but this was not the case before.
There is another set of clients who consult with us on various company matters for example launching a product, various agreements, etc.
Overall, we not only focus on shariah-compliant financing, but we also work on organization-wide shariah compliance. We help organizations maintain shariah compliance throughout the organization. For that, we may need to screen their legal documents, financial statements, policies, accounts, etc and we do that.
There are several benefits to Shariah compliance. One, of course, is the religious benefit. The second benefit is that it opens up new opportunities for financing if the company wants to attract Islamic financing. As soon as you have a shariah advisory body even if it is outsourced, it improves your eligibility to get financing from shariah compliant funds. This is one of the worldly upsides.
The shariah compliance also leads to enhanced governance, which translates into more trust from the stakeholders. And trust, in the long run, translates into yields. Shariah compliance is also a more comprehensive approach than ethical finance, impact finance, ESG, or UN SDG goals. Hence, Shariah compliance brings worldly benefits as well.
Ruhul: I want to go back to IFAC. How does your pricing work? Does it vary organization wise or do you have a basic pricing model?
Yousuf: There is a general basis for the pricing of consultancy services such as the number of work hours, resources required, and costs, and then we add a markup on that. We follow the general model that is followed in the legal and other consultancy works. In working with an organization, we first understand their requirements and give a quote. We then negotiate, agree, and start working.
When we take on the work of ongoing shariah compliance, we work on a retainer or subscription model. We set the shariah governance framework, which is more like setting up corporate governance and controls. When an organization announces itself shariah-compliant, it needs some sort of monitoring and supervision, we do that under the shariah governance service. Usually, when we work as a shariah governance body of an organization, we do monthly one/two meetings, review documents and offer regular suggestions. We provide a detailed list of deliverables from our side to the client, explain their responsibility, and introduce a monthly fee.
The reality in our country is that we are nowhere near the international benchmark. Since demand is limited, awareness is not there yet and there is no regulatory requirement, people are taking these services out of their own will. So we are not in a position where we can impose a proper fee. We are still in the early stage of awareness and it will take some time.
Hence, we now share our quote, then clients tell us what they can pay, and we accept and get to work. We just want to accommodate everyone.
We believe that if we can help one individual or one entity to operate in a halal manner, we are successful. Our success is not through increasing revenue. We measure our success by the number of clients we are able to serve. However, we will need revenue to be sustainable.
Ruhul: As you mentioned, a large number of people don't necessarily consider that their business practices need to be halal. They don't see their personal religious practices and their work as something connected. The prevailing cultural environment has a lot to do with this sentiment. Promoting Shariah consultancy and training services in such an environment, what challenges have you faced so far? What have you learned about messaging and promoting Islamic financial education services?
Yousuf: The unique timing and the services that we offer have increased the challenges we face. Limited demand is understandable but we have to regularly deal with various perceptual challenges as well.
One perception is that our ibadah is what we do individually. It does not have anything to do with our business and finance. Whereas, without doubt, our earning is also our ibadah. The prevailing perception, which is partly inspired by the idea of secularism, is that we pray in the masjid, we fast during Ramadan, we go to hajj—but in our business, there can be corruption, cheating, low-quality products, giving less in quantity or quality, using harmful formalin in fresh produces, and all kinds of malpractices. In fact, in many instances, the person who is donating more to the masjid and madrasa, his real condition is this. This is one perception.
When you are talking about ibadah or worshiping Allah SWT, it's not only limited to some rituals such as prayers, fasting, etc rather our entire life including our economic life is also part of ibadah. We have been working to change these perceptions.
We have some dedicated courses for madrasa students and graduates. Fees for these courses are absolutely minimum to ensure that they can take the courses. These students eventually become Khatibs and Imams and people listen to these people. We want to educate them so that they can educate the mass on these important issues. Apart from that, we do physical workshops and similar educational initiatives from time to time to build awareness and change such perceptions
The second challenge comes from a social and political perception that Islamic finance somehow does not go along with the spirit of the Bangladesh Liberation War. Whereas, it has nothing to do with it. We have no distance from the spirit of the Liberation War and in fact, we are closer to it. Some others think it is somehow related to extremism or terrorism which is as absurd as it sounds. In fact, Islamic finance promotes welfare, justice, and fairness among the stakeholders.
Due to these perceptions, it sometimes becomes challenging for us to work. We need to speak about Islamic finance in a different manner.
Islamic finance is not only about religious obligation, rather it has benefits for everyone. There are now enough studies in the west where they are looking for an alternative to this capitalistic financial system. Income inequality has become a huge challenge for the world. If you look at the GINI coefficient data in the World Bank data room which measures income inequality and you will see that income inequality is highest in the Muslim majority countries. The people who are in power or have wealth are too wealthy and the people on the other spectrum of the society are too poor. Whereas income inequality is much lower in developed non-muslim countries. So when we explain Islamic finance to this group of people we try to say that Islamic finance is not about a particular religion, rather it is a particular way of financing and economic decision making that will ultimately improve human welfare.
I worked on a publication with the former award-winning governor of the Malaysian Central Bank, Tan Sri Dr. Zeti Akhtar Aziz, who was Governor for 16 years. The publication was on the comparison between ethical finance and Islamic finance.
You probably know ethical finance is hugely popular in the West, which came from Church-based finance where some principles are close to our Islamic finance. For example, they don't want to invest in weapons, pornography, or other things that are harmful to society. When we talk about Islamic finance, our principles are close to ethical finance but in fact, the principles of Islamic finance are even more comprehensive. Ethical finance has eventually evolved to socially responsible investment (SRI), impact investment, etc, which are measured through ESG (environment, social, and governance) criteria. We also see the emergence of sustainable development goals (SDGs) promoted by the United Nations.
In our publication, we have tried to show that Islamic finance is even more comprehensive than all those things. If you do Islamic finance, you can kill many birds with one stone, not just two. You can cater to a lot of different needs at once.
Again back to the perception, we try to explain that Islamic finance has nothing to do with politics, it has nothing to do with terrorism, etc. Rather, it is beneficial for all of us. Islamic finance talks about universal value-based financing.
Another perception we deal with is that many Muslims think that, although riba is haram, banking interest is not riba. This is a trend that was there during the inception of modern Islamic Banking and recently I notice that it is gaining popularity again. They try to say that banking interest is in fact a need and you can’t ignore it. So if it's not riba, then it’s permissible. And if it's permissible, there is no premise for Islamic finance. The main premise of Islamic finance is that riba is prohibited so we are proposing an alternative. We are having to fight this perception as well.
Another perception we have to fight is with our own people - traditional shariah scholars and students. While they are aligned that riba is haram and we need an alternative, they don't believe that true Islamic finance through Islamic banking will ever be possible. So you are not doing the right thing. Our take is that yes we are not able to do Islamic banking and finance 100% today but we can't sit idle. Riba is not a small matter. Allah says in the Quran: “O you who have believed, fear Allah and give up what remains [due to you] of interest if you should be believers. And if you do not, then be informed of a war [against you] from Allah and His Messenger. (Quran 2:278-9)”. So this is a serious matter. And we have to make an effort.
You can understand that our challenges are multifaceted. There are many different perceptions in society. One of the reasons behind this is our colonial past. Muslim Ummah across the world went through a long colonial period under different nations such as French and British. During those periods, our main concern was survival with faith and ensuring that our Iman reaches the next generation. That was it. We did not have any financial liberty or any other freedom. Consequently, due to a long period of a gap, these important matters such as shariah matters on finance and business-related dealings went missing from our public discourse and education.
The Islamic banking that we are seeing now has its roots at the beginning of the last century. People are now talking about Islamic finance in research, writeup, and conferences globally. But this is a quite recent phenomenon. Muslim countries started to liberate from different colonial rules mid last century and that’s when basically organizations like IsDB, which was established in 1975, and other similar organizations started to happen.
The entire industry is in its infancy compared to conventional banking which has been around for several centuries now. In many countries, there is no regulation and law, or guidelines for Islamic banking and finance. There is not sufficient awareness, no adequate educational initiatives in the universities, and a lack of human resources who can deal with Islamic banking. We cannot ignore this reality.
Ruhul: I have a few questions about Islamic finance. I will get to them shortly. Before that, I want to know a few more things about IFAC. Despite the challenges you mentioned, IFAC has grown meaningfully. What are some of the things that have helped you to achieve growth in a difficult market?
Yousuf: To be honest, I don't have any worldly answer. We ourselves can't comprehend how Allah SWT has helped us to come this far. Because if you compare us with other startups, we did not have anything substantial. None of us come from an entrepreneurial background. We did not have any funding. However, I believe what we always had and still strive to have is Ikhlass—meaning sincerity, and Amanah—meaning integrity. We pray to Allah in all our meetings so that we can work with Ikhlass and Amana. This is also relevant to our organizational culture.
We have a team that works with passion and dedication. They work with us with much less financial reward although their market value is higher. When they see that we could not afford them full-time, they work part-time with us. They make sacrifices regularly. I believe we are bonded together by passion. A passion for change.
Anywhere you look in our society today, you see decay, degradation, and corruption. A simple vegetable seller is not wary of contaminating his food or giving less in measurement. Whereas when we see in the Quran, Allah warns these people: "Woe to the defrauders! Those who take full measure ˹when they buy from people, but give less when they measure or weigh for buyers. Do such people not think that they will be resurrected" (Quran 82:2-4).
These were characteristics of different nations of the past. But we can see all these corruptions in our society. People who are looking to make a difference, when they hear something close to their passion is happening here, come to join the movement.
My utmost respect and dua for all our participants who joined our webinars, courses, etc because if you visit our classrooms even today, definitely it is nowhere near any standard institutions. The condition was even poorer in the early days. Still, people have come for a change.
Back to your question, I can't give you any worldly reasons for our growth. We did not put any significant effort into achieving growth. We did not have the resources to do that. We have wanted to do it sincerely and worked accordingly. Many brothers and sisters have come along and joined us. And Alhamdulillah, the initiative has moved forward.
Ruhul: Can you talk about the culture at IFAC? How do people work, and interact? As you mentioned, people don't work for worldly gains alone. They work for the Akhirah. The work is done with an ambition that transcends material gains. How does that play out in action? How does it play out from the functionalities aspects?
Yousuf: We try to run all our activities based on Ikhlass and Amana. The Ikhlass part is our main objective or vision. We do all our work for achieving the satisfaction of Allah. Of course, along with that, there are issues like saving people from haram, etc. Ultimately, through all these we will have a better society, life will be better, and people will live happier. In every meeting, we repeat these things in one way or another so that we are aligned with our vision and objectives.
Internally, we have a strong culture of accountability, Alhamdulillah. Even if we have issues between founder and co-founder, we have weekly meetings with all our heads where we openly discuss these issues, debate, and disagree with each other but at the end of the day, we understand that we are doing it for the organization and Ummah and we take it positively. It has taken us some time to get here since openly criticizing is not always viewed positively in our culture. Alhamdulillah, I would say that except for some rare exceptions, it has become a norm in our organization. We openly discuss and debate issues, we take lessons from every mistake we make and we move forward.
Operationally, we always try to keep our commitments, financial and otherwise. When we set deadlines, we try to meet those deadlines. Overall, a sense of accountability, and a sense of belonging is an overall part of our culture.
Ruhul: You mentioned some overarching challenges, additionally, what are some of the challenges for IFAC now?
Yousuf: We now have some positive challenges. We are seeing positive traction. We are seeing interest from large organizations and many individuals. I have shared that we have received invitations from regulatory bodies. These are good challenges.
We are looking to onboard some very good people, of course with our other limitations. We are looking for people who have a good understanding of Islamic finance and also understand the business world. We are looking for some multi-talented resources. This is one of the biggest challenges.
Otherwise, Alhamdulillah, we are sustainable. As I mentioned before, we don't have ambitious money-making goals which is usually the case with startups where people seek big exits or to raise big funding rounds. We don't have any such goals.
The perceptions, that I mentioned earlier, sometimes distress us. You are trying to do a good thing, changing society and doing good for people, but wherever you go, people are seeing it from different perspectives, even your own people. We would have grown more but due to these perceptions, it has been a challenge in various areas.
The good thing is that, in the last five/six years, we have been able to create a large number of supporters who believe in our work and appreciate our work.
Ruhul: If you were to draw on a napkin, the growth equation for IFAC over the next five years, what do you think the major variables would be? Is it different geographies? Is it new customers? Like what do you think are the A, B, and C in that equation for IFAC's growth for the next five years?
Yousuf: I think we need to expand. With all the negative things that I mentioned, there is a lot of positivity as well. We have a strong alumni network who work in different organizations, which has created many new opportunities. Our biggest variable would be the team for which we might have to look for funding. We have not considered funding until today but now that we are looking to expand, now we might have to think about it.
Geographic expansion is another component where we can expand our work in a few more cities in Bangladesh. Although virtually we can work from anywhere and in fact, we have participants in our courses from many different countries. But expanding geographically and expanding our team, I believe are going to be the main growth factors. Second, some strategic partnerships and referrals such as in the world of VC and startups are also I think important for our growth.
Ruhul: What are the future plans for IFAC in the next five years or so?
Yousuf: The work we have done so far is more of an informal type. Several of our training programs are now recognized by AAOIFI but not yet accredited by the relevant authorities in Bangladesh. On the training side, we want to introduce recognizable training on Islamic finance. We are trying to work with different universities in Bangladesh to create recognized diplomas and similar programs so that our students receive a recognized degrees. We have signed an MoU with a university for this purpose and hope to establish more collaboration in the future.
We are also regularly speaking with the industry people to build awareness and demand.
Second, we are seeing several Islamic finance-related initiatives such as Sukuk in Bangladesh. We are now formally getting involved with these initiatives as an institution. We believe that we have strong resources to support these initiatives.
We have many CSAA in Bangladesh. But many of them come from general backgrounds. They understand the fundamentals of Islamic finance but offering shariah resolutions is usually beyond their scope. We have certified shariah resources who are working on different shariah-related issues and in teaching. How we can formally collaborate with different shariah boards is something we are considering. We believe people will get more value out of our work. So far our work has been reaching more on the individual level than the institutional level. In the coming days, our target is to work on the corporate and institutional levels.
Ruhul: What are some of the lessons you have learned in building an Islamic finance consultancy and education-related organization in Bangladesh?
Yousuf: One lesson is that we should have worked more on awareness building regarding Islamic finance. There is limited awareness and hence limited need in the market. Had we worked with more relevant partners in the past, we would have been able to reach a greater number of people and create greater awareness in the market. Which we are now doing.
When working with people, our two principles, sincerity and Amanah, have been tremendously beneficial for us. Since we view the world from a religious perspective, it is true that when a slave is sincere towards Allah, it automatically makes him sincere to people and the work. It is natural for people to be self-interest-driven. But when we look at it from the religious perspective, we can transcend our limited worldview and see the bigger picture and bigger cause.
Ruhul: This question is slightly redundant but I wanted to ask, what do you want to build in the long run? What is the ultimate objective?
Yousuf: In the long run, we want every financial organization and every service in Bangladesh to be halal and operate in a halal manner. Since 90% of our population is Muslim and it is an obligation for everyone, we want no person to earn haram income. This is the main objective. We believe if we could achieve this everyone will enjoy the benefit of it. The corruptions and adulterations in our society today all are shariah non-compliant. When we will be able to build a shariah-aware nation, it will benefit everyone. This is what we are calling a sustainable economy.
Ruhul: That was the last question about IFAC. Anything else about IFAC that you wanted to share but I did not ask?
Yousuf: When we talk about shariah in the context of Bangladeshi institutions, the main thing is to ensure sound shariah governance. In many instances, many Islamic banks and institutions appoint people in their shariah board who are not adequately competent in shariah knowledge related to Islamic finance. The impact you can see where the Shariah board approves products that probably are not fully shariah-compliant. The consequence of this is grave. Due to one decision taken by the board, the entire nation may get involved in haram income and activities.
There was a time when people could say that we don't have enough competent people but now that can't be an excuse because now we have sufficient resources who are competent. For instance, we have competent resources at IFAC and can support institutions to operate their shariah board, insha'Allah. For us, it is not about material success, we want to contribute, which is how we measure our success.
This is something policymakers and general people should pay attention to and raise questions about.
