How Namara seeks to empower the underserved with microloans

Generation Start-up: The Sharia-compliant financial services provider offers cash advances to the unbanked

Mohammed Alnamara, founder of Namara, says the company aims to help people who live from one pay cheque to the next. Leslie Pableo for The National

In late 2020, Mohammed Alnamara, the founder of Namara Properties, a construction and real estate company based in the UAE, observed a key trend among his employees.

They were borrowing money to pay bills every month, even for Dubai Electricity and Water Authority charges, because of conventional financial institutions’ reluctance to extend support, he recalls.

He capitalised on this market gap and launched Namara, a Sharia-compliant micro lending platform and financial provider, in June 2022, to target underserved individuals seeking microloans.

“One of our customers works as a secretary at a company and earns Dh4,500 [$1,225]. She gave birth at a private hospital where she needed to pay Dh9,200 to get her kid’s birth certificate,” Mr Alnamara, founder and chief executive of Namara, says.

“No banks would lend her because her company is not listed with any bank. This is like many local companies with turnover of millions but not listed with any bank.”

Namara verified that she had been working in the company for three years, getting a regular salary and decided to loan her the money.

The Dubai-based financial technology company aims to help people who live from one pay cheque to the next.

A lot of entrepreneurs and companies may be doing well, but are not listed with any banks, so they cannot take credit cards and loans, the founder says.

People may have to deal with emergencies in the middle of the month and need money, he adds.

Micro lending is a small loan provided by lenders to businesses and individuals to enable them to manage their expenses.

The global micro lending market size was valued at $29.39 billion in 2021 and is expected to expand at a compound annual growth rate of 13.4 per cent from 2022 to 2030, according to market research and consulting business Grand View Research.

The benefits to borrowers include little to no collateral for the loan along with secured micro financing. In addition, borrowers who do not qualify for traditional loans are benefitted by micro lending as it offers quick and secure financing options, the research found.

The global acceleration of FinTech and digital payment solutions since the start of the Covid-19 pandemic has unlocked new financial opportunities for millions of people who previously did not have access to bank accounts, according to the World Bank’s Global Findex 2021 report, which is released every three years.

About 22 per cent of the GCC's population is unbanked, compared with 60 per cent in North Africa, research by consultancy Strategy& has found.

Anyone in the UAE who has a salary above Dh2,500 and a valid mobile number and Emirates ID can apply for microfinance from Namara.

The start-up offers cash advance valued between Dh500 and Dh5,000, and it needs to be repaid in one to four months.

“We plan to increase the repayment tenure to 12 months and offer bigger loans in three to four years. Currently, our customers are mostly salaried employees,” according to Mr Alnamara, a Palestinian-Emirati born and raised in Dubai.

“We don’t just target low-income people. Sixty-three per cent of customers who apply for Namara loans get paid more than Dh40,000 per month.”

The company deals with customers who are unbanked, those who face emergencies in the middle of the month, and those with high debt-to-burden ratios who aren’t eligible to get a loan, says the founder, who’s an ex-banker.

Depending on the client and their profile, Namara will charge between 0.5 per cent and 3 per cent for issuing loans to earn their profit.

Before a customer checks out from Namara, they are showed a schedule of the amount to be repaid, by when and how it needs to be repaid.

The FinTech, which uses tawarruq and murahaba arrangements, says it has no hidden fees and aims to be customers’ financial safety net.

Namara also includes a side hustle platform, which allows anyone working a 9-5 job to make extra income for a fee.

Another feature on the app allows customers to consolidate their bill payments, including utilities, du or Etisalat accounts and Salik bills.

Namara employs rigorous underwriting processes to assess borrower creditworthiness while adhering to Sharia principles.

“We take 45 minutes to process a loan and do our due diligence in 21 minutes,” the founder says.

“I am an ex-banker, at the bank we’d check four to seven variables to check a customer’s profile. At Namara, we check 21 to 30 variables, starting with monthly income and deductions to digital footprint. We like to call that our secret sauce.”

The start-up also implements robust risk management practices to mitigate default risks and ensure financial stability.

“We pride ourselves that our default rates are less than 1 per cent,” says Mr Alnamara, who is a finance graduate from Sharjah.

Namara focuses on sustainable growth by scaling operations, expanding into new markets, and diversifying products while maintaining social impact and ethical finance principles.

It will soon roll out a debit card that offers multiple perks and benefits, and a money management feature, which will include budgeting tools and investment insights, he adds.

The company, which has crossed more than 120,000 users in less than 10 months of going live in the UAE, plans to expand to Saudi Arabia and Egypt by July this year.

“Revenue is generated through profit-sharing fees rather than traditional interest charges, ensuring compliance with Sharia principles,” he says.

“Namara may generate additional revenue through ancillary services such as origination fees.”

The start-up collaborates with Islamic financial institutions, community organisations and government agencies to expand its reach and credibility, according to the founder.

Namara adheres to all regulatory requirements governing micro-lending and Sharia-compliant finance and is in discussions with authorities, including the UAE Central Bank, and is committed to achieving full compliance with their regulations, Mr Alnamara says.

The start-up has raised $5 million as of date and is currently in its Series A funding round seeking to raise $25 million.

“We are raising and have raised funds through family offices,” the founder says.

It is based at in5, the incubator under Dubai’s Tecom Group.

“In5 is our base and they helped set up the company, guiding us throughout by helping us overcome obstacles that can influence a start-up’s early performance and ability to achieve sustainable growth by providing a holistic support system,” Mr Alnamara says.

The company is currently hiring and has a 16-member team. They initially hired through connections and referrals and started with three people only.

Referring to challenges faced while launching the start-up, Mr Alnamara says the first was to build a product that had not been built before.

But the main challenge remains fund-raising, he adds.

“However, we are confident in our product and optimistic that we will achieve our business goals with the right support system around us.”

Q&A with Mohammed Alnamara, founder and chief executive of Namara

What successful start-up do you wish you had started?

I wish I had initiated Namara sooner, but our team is stronger today than ever with our collective strategic foresight and entrepreneurial ambition.

What new skills have you learnt from launching your venture?

I've acquired a range of skills crucial for success since Namara’s launch – from strategic planning, financial management and team leadership through to negotiation tactics, customer relationship management and digital marketing. The journey has embedded within me the adaptability that founders must have to succeed in the ever-evolving market landscape.

If you could start all over again, what would you do differently?

If I were to begin again, I'd look to launch Namara sooner and put a greater focus on client engagement because their importance and satisfaction is paramount for the success and growth of any business.

What is your next big dream?

My only ambition is to become a global solution by expanding and growing in different countries. We want Namara’s slogan – Your Financial Safety Net – to reassure customers around the world.

Who is your role model?

Sheikh Maktoum bin Mohammed, Deputy Prime Minister, Minister of Finance and First Deputy Ruler of Dubai. There are many reasons I admire him and commend how the financial landscape across the UAE is swiftly growing under his leadership and due to his support for FinTechs and creative solutions for the industry.

Where do you see yourself in 10 years?

In a decade, I envision myself as a seasoned entrepreneur, having successfully grown Namara into a globally recognisable brand. I also hope to actively mentor aspiring entrepreneurs and contribute to initiatives focused on sustainability and social impact.