Raghda Ibraheem: Issuing a single sukuk can involve eight different parties, each keeping its own records, and the process can take months. This week, a new fintech called WafrChain announced a blockchain built to fix that, saying Shariah-compliant sukuk can now be issued and paid on chain. It is the bet that Islamic finance’s biggest problem is not demand, but infrastructure, and that the next generation of Islamic finance can appeal to people of any faith. Joining me is Mahmoud Bouchelif, co-founder and CEO of WafrChain. Mahmoud, welcome to the show.
Mahmoud Bouchelif: Yeah, thank you so much for having me. Pleasure to be with you.
Raghda Ibraheem: Thanks. WafrChain announced this week a blockchain for issuing sukuk. Now, in simple terms, if you can explain, what problem are you fixing with that?
Mahmoud Bouchelif: Yeah. I think if you talk about Islamic finance, we have two layers of problems. We’ve got access and we’ve got service. We have maybe almost 700 million people who do not have access to simple bank accounts. And then we have the second layer of people who already have bank accounts, but they don’t have access to credit, access to investment products, access to funds, private equity, all of those products. The reason is the cost and the operational efficiency of managing these kinds of products. Sukuk is maybe one of the best products that are less risky from an asset class perspective, and not everyone has access to it. You would need maybe a 200,000 US dollar account to get access to that. So we want to solve for service in that.
Raghda Ibraheem: Yeah. And how can [unclear: “involve”] many parties and take months as well? Where do the delays really come from?
Mahmoud Bouchelif: I think the delays come from the fact that we have maybe 8 to 10 parties involved in the entire process, from the issuer to the trustees, the arranger, the custodian, the payouts agent, the distributor, the investor. All of those parties talk to each other, and they still use very manual processes to do that. [unclear: “And last call meetings follow ups.”] I call it the chaos of sukuk.
Raghda Ibraheem: It’s just impossible. Chaotic. It’s crazy.
Mahmoud Bouchelif: Yeah. So that process of having multiple parties at the same time, and the need for them to talk to each other, and it is still manual, then yeah, it becomes very chaotic, as you mentioned, very expensive because of the time we need. And it is manual, which causes of course a lot of delays.
Raghda Ibraheem: I imagine. Yeah. So let me ask you this. Tokenization is the big theme across finance now, but you started with sukuk. Why start there?
Mahmoud Bouchelif: I think we started with sukuk because it’s one of the best asset classes in Islamic finance and less risky. Very clear profits, and you can manage the risk of your portfolio with that. And also, we wanted to give access to this kind of asset class to people who are not able to access it. So that’s one of the reasons.
Raghda Ibraheem: Shariah compliance is the heart of Islamic finance. How do you make sure tokenized sukuk is genuinely compliant?
Mahmoud Bouchelif: Yeah. So we do exactly what the traditional world is doing. Usually when you launch a Shariah-compliant product or you have a Shariah-compliance entity, you have a Shariah board, and the Shariah board needs to review every product that you have. So certainly we have [unclear: “our Shariah approach to is”] reviewing our products on a frequent basis. And for our clients, they do have their own Shariah board, which also will be reviewed by them.
Raghda Ibraheem: Okay. So there is a process to it. Now, you say Islamic finance is for everyone, from any faith. Why would a customer choose it, other than Muslims, I mean?
Mahmoud Bouchelif: Yeah. Actually, the name of our company means abundance in Arabic, and the tagline is abundance for everyone. As you know, if anyone comes here to the region and they love to eat something local, whatever it is, it doesn’t matter, it’s a product that you like and you love. It’s the same thing in financial services. I think at the core of financial services there is a product, and when we add Islamic finance, it becomes a better product. Why would they choose a Shariah-compliant one? Because it’s much more transparent. It is fair and it is less risky. It is backed by assets. And the core of Islamic finance is all about fairness, transparency and access.
Raghda Ibraheem: Yeah. Now, you want to bring Islamic finance also to billions of underserved people. What stands in the way of making that happen?
Mahmoud Bouchelif: I think the cost of building banking products today. The way it is being done is so expensive. That’s why a bank, for example, in Morocco and Algeria or in Tanzania or in any part of the emerging markets, it doesn’t make sense for them to just open accounts for everyone, because the cost of maintaining the account and the operational cost associated with that is so high. So I cannot just open accounts. I need to make sure I make money with the customers that I work with. The way we solve for that is through technology, and also stablecoins and blockchain. We see there is a huge potential to bring this to those markets.
Raghda Ibraheem: Yeah, of course. Tokenization solves a lot of issues when it comes to underserved people as well. Now, your network is private and permissioned. Why not build a public blockchain?
Mahmoud Bouchelif: Yeah. So when it comes to financial services at the institutional level, I’m not sure any bank or any asset manager would like to expose what they are doing on a public chain, particularly for their customers when it comes to investment products or any product. I’m not sure you would like to expose your financial data on a public chain. This is what we want to do: we want to bring the traditional world to the chain world. But it has to be private and permissioned, because we want different parties to collaborate and connect to each other, and they can perform any transaction they want without exposing data to the world.
Raghda Ibraheem: Yeah. Now, what comes next after sukuk, Mahmoud?
Mahmoud Bouchelif: We have a set of products, from funds to equities to deposits, real-world assets, [unclear: “real estate worth”]. Another product close to my heart. So yeah, there are a lot of products that can be tokenized, and the vision is to bring access. We believe tokenization is one of the best tools to do so.
Raghda Ibraheem: Yeah. Thank you so much, Mahmoud, for being here with us today.
Mahmoud Bouchelif: Thank you. Pleasure. Thank you.
