Fresh from its first infrastructural deployment of tools to facilitate Shariah compliance services by Kuwait-licensed fintech Zad, Alpaca is eyeing more such potentials from clients in Islamic nations, CEO and Co-Founder Yoshi Yokokawa told IFN Investor.
“Our role is to provide flexible tools. Traditional infrastructure providers offer bulky toolkits that are hard to adapt. Ours are granular enough, like Lego pieces, that clients can build exactly what their Shariah committees approve. In the case of Zad, their committee set a high bar for Shariah compliance, so we had to further break down our components to make that possible.”
Leveraging on this joint development with Zad – an investment platform for Shariah compliant US stocks and ETFs – Alpaca is exploring opportunities with its existing clientele of nearly 300 financial institutions globally.
As a regulated broker-dealer providing clearing, custody and settlement services across the US, Europe and Asia, Alpaca’s focus is on managing mid-office and back-office functions – mainly by partnering with local regulated institutions who provide end-customer offerings.
“We chose to be an infrastructure provider because, while many companies serve end-customers, the global financial infrastructure isn’t aligned. So, we are building developer tools that companies can build on top of.”
Solutions developed with Zad on Alpaca’s Broker application programming interface (API) are scalable across other Islamic regions. For instance, the margin trading product is an asset-backed lending model rather than interest-based, adhering to Islamic law.
Specifically for US stock investing on the Zad platform, the Alpaca API was connected to profit-sharing accounts for cash management. For margin trading, support was provided using deferred payment sale structures with fixed markups to avoid conventional interest.
Beyond customizable solutions, Alpaca also packages its toolkits based on use cases – like building robo-advisors or trading apps. “We now have a packaged Shariah compliant margin trading toolkit, for instance. We’ll continue working with partners in the Middle East on expanding these offerings.”
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