Liwwa, based in Amman, is the result of Samer Atiani and Ahmed Moor’s shared belief in a dearth of funding for SMEs in the area: “The Middle East has one of the highest savings rates in the world, but people don’t use a lot of credit, and there aren’t a lot of investment opportunities,” said Moor. Liwwa has been created to address the funding gap for small loans in the area.
But the prospect of peer-to-peer lending in the Middle East faces an already-entrenched, rather different set of regulations to those currently being discussed in the West. Religious sensitivities have been a major factor in the creation of the model. The co-founders have had to be sensitive to concerns that Liwwa could be “haram” – contrary to the principles of Islam. It is forbidden in Sharia (the moral code and religious law of Islam) to “collect on the price of money”, as Moor explained, and thus there is no mention on the site of an interest rate. Rather, the term “profit rate” has been adopted – in order to portray investments as a “value-added service”.
“Beneficiaries” (entrepreneurs) receive a lease-to-own deal on pieces of equipment which they need to operate their business profitably. Liwwa beneficiaries specify the purpose of the loan they require, for instance, a business-owner in need of a van. Investors then finance the loan, at a fixed interest rate of 7%. All loans currently have 6 months to be repaid, though it is likely that other time-frames for repayments will be introduced in the future.
With reward and equity-based crowdfunding already under way in the Middle East, it will be fascinating to track the progress of Liwwa and its inevitable copycats in the region.