Pakistan’s Al Hilal Shariah Advisors is considering expanding its business into the Middle East and Central Asia as it ramps up its domestic operations on the back of the Republic converting its financial system to be compliant with Shariah principles.
“We are exploring opportunities to provide Shariah advisory services to other countries. The Middle East is a very big market altogether and there are quite a number of Central Asian republics where awareness for Islamic finance is increasing now like Azerbaijan, Tajikistan and Uzbekistan,” Faraz Younus Bandukda, the firm’s founder and CEO, told IFN Investor.
Incorporated as Fortune Islamic Services in 2011, the firm rebranded in 2016 to Al Hilal Shariah Advisors. The company has four separate business functions covering Islamic finance and assets – which includes Al Hilal Securities Advisors.
Faraz shared that when he was operating solo back in 2011 as an Islamic corporate advisory service, many clients – especially those in the ultra-high net-worth category – asked him to also manage discretionary portfolios for them.
“When the customer comes in, they already have an account with a brokerage house. As the appointed firm, we are granted discretionary rights over that account. We decide where to invest, what securities to buy into, when to buy and when to divest those securities.”
This service is unlike supporting a family office, explained Faraz, “where you may need to get every approval from the client”. Though the firm has fully investment discretion, it works within certain pre-set parameters like risk measures and monthly reporting.
Al Hilal’s Shariah advisory services further opened another business line of investments in SME financing. While the initial approach was to conduct due diligence, a number of such clients also asked if Al Hilal could introduce other avenues for fund-raising activities.
“Once we are satisfied with necessary compliances, we circulate these as Musharakah opportunities to our portfolio management clients and network of contacts. We maintain two separate lines of business and over half of the clients are the same, where 30-40% only invest in SME financing.”
Faraz said a similar approach is taken for clients interested in new technology ventures or private equity potentials.
As a result of these complementary service offerings, the Al Hilal’s annual group earnings now come more from investment-related operations – with the discretionary portfolio and SME financing contributions making up roughly a third each.
The group’s latest venture is Hilal Invest – a platform allowing low ticket Islamic mutual fund opportunities for retailer investors. These are aggregated offerings from different asset managers in Pakistan.
Contributing about 5% of annual group revenue since the platform went live two years ago, Faraz said: “This is still evolving and it is gaining traction. In the next three to four years, this might grow to become a large portion of the revenue.”
Faraz assured that Shariah advisory services will remain a core focus for the Al Hilal group, given the 2028 national mandate. “We now get possibly 80% of deals structured in Pakistan routed through our advisory service and we also advise about two-thirds of the assets management industry in Pakistan.”