Religious Banking Blindspot

Shaan Puri discusses how traditional banking overlooks significant opportunities in religious communities, specifically focusing on Islamic banking. He shares insights about a startup called Manzil that's addressing this gap in the market through Sharia-compliant financing.

• Islamic Banking Fundamentals:

  • Traditional loans with interest are not compliant with Islamic faith
  • Similar restrictions exist in other religions like Christianity
  • Money (fiat currency) is viewed as having no inherent value
  • Loans must involve shared risk and returns between parties

• Market Opportunity:

  • 22 million Muslims in America
  • Working models exist in UK, Africa, and Indonesia
  • No major solutions in US and Canada
  • Customers willing to pay premium for faith-compliant services
  • Similar to premium pricing for halal/kosher food

• Business Model:

  • Not a traditional bank - focuses on loan issuance
  • Uses other people's money (OPM) for financing
  • Takes 1-2% transaction fee
  • $10M committed on investor side
  • Average mortgage around $500,000
  • Target "super prime" applicants (doctors, lawyers)

• Startup Challenges:

  • Difficult to raise from traditional VCs
  • VCs struggle to understand the concept
  • Requires extensive education about the problem
  • Complex compliance requirements
  • Takes significant time to establish financial mechanisms

• Banking Industry Context:

  • Most "challenger banks" aren't real banks
  • They partner with established banks like BBVA
  • Getting banking charter/license is extremely difficult
  • Government hesitant to give licenses to tech startups
  • Recent breakthrough with first challenger bank getting licensed