Blockchain enabled Supply@ME Capital (SYME) a London fintech firm owned by Italy’s AvantGarde group will be offering Shariah-compliant solutions in inventory monetisation. “With the COVID situation, there are companies in several sectors in the Shariah space which have significant working capital shortfalls and needs,” said SYME CEO Alessandro Zamboni.
Supply@ME Capital recently signed an MOU with iMass investments in Abu Dhabi UAE and iMass will work with Supply@ME to offer Shariah-compliant funding.
In an interview in Salaam Gateway, Zamboni states, “There are few competitors in our field in the MENA region, our closest one being Falcon Group, which has a different business model.”
UAE’s iMASS will be responsible for inventory funders origination, client companies’ origination as well as SYME corporate development by supporting the operations in the UAE. SYME’s Shariah-compliant solution was approved by scholars Mohammed Elgari and Sheikh Yusuf Talal DeLorenzo last month, the company said in a disclosure to the LSE.
The Shariah solution can support companies in halal sectors with physical inventory including metal, capital goods, retail and pharmaceuticals. The platform connects “client” companies to investors where they can sell their unused inventory for capital. The client companies keep the stock in their warehouses. Investors fund the inventory via a Shariah-compliant securitisation scheme.
SYME’s investors are institutions as well as professionals including funds, banks and family offices.
Zamboni explained the platform relies on three important factors:
- The size of the inventory to be monetised (now the range is nearly 10 million to 15 million Euros)
- Marketability of the asset/inventory that the client company generated (and will generate) a margin for each sale (“margin test”)
- Credit risk: the rating/proxy of rating cannot be below CCC
Once a client company is eligible it is included into a portfolio of corporates to monetise via the Shariah framework. Zamboni said the standard contract for client companies is three years.
SYME earns revenue by charging a due diligence fee to potential client companies that are assessed on their credit worthiness and the marketability of the inventory. Once the company monetises its inventory via the platform, SYME charges an annual monetisation fee, that is offset by the proceeds of the monetisation.
After Year 1, in Years 2 and 3, the platform charges the rest of the monetisation fee.
At the end of Year 3, the company can buy the inventory or allow the platform to pick up the unsold units and sell on to third parties. Zamboni explained that from the investor’s perspective, the platform issues a sukuk (also potentially packaged via a Shariah fund) with a three-year expected maturity date (and four years as legal maturity date), with underlying inventories across several sectors.
SYME is targeting small to medium sized enterprises. It is aiming for an average ticket size for client companies of £10 million but it can accommodate inventory of up to £100 million.
Zamboni said there are opportunities for client companies in emerging markets in the Middle East as well as in Indonesia, North Africa and South America. The company’s existing conventional offering is operational in several markets including Italy, Europe, UAE and USA.
“We are open to working with different stakeholders as well as Islamic financial practitioners to enhance our offering,” said the CEO.