Why did we look at DIFC Hive Accelerator?

Bondsmart has been developing its proposition for the past eighteen months. If you don’t know what we do read more here. We were at a stage where we needed to look at pilots, pre-sales and getting out into the marketplace and DIFC Hive ticked many boxes. Here’s our story how we chose to apply for DIFC Hive.

In Q2 2018 we needed ways to reach an audience that was motivated on technology change within a large enough commercial organisation and in a market that had inert demand our solution could move. Why these three things?

  • Need for an audience that was motivated for technological change. From the outset of the business, we had decided that B2B2C was our preferred route to market. B2C is expensive to build the brand and our solution did not seek to dislodge the way investment sales were done, we purely re-engineered it. We, therefore, needed to identify groups that had large mass affluent clients and people empowered to introduce new solutions into an organisation.
  • Large enough commercial organisation. When segmenting the customer number and size is an easy metric to divide clients into three tiers (gold, silver and bronze or 1,2,3 – whatever is an apt description for your tiers). As our focus was on organisations with a large retail customer base (why: because our model is to take a big value asset and break it into bitesize pieces) our focus on was Tier 1 and Tier 2 organisations. In reality, we needed these to be national champions rather than global as investment solutions generally are limited by the country conduct of business rules. Dubai had a large mass affluent client base (350k households) and concentration of large financial institutions organisations. That gave us a pool of sufficient large organisations to target that had the critical mass of clients we could help. The table below gives a snapshot of some stats.


Population (millions) 9.2 64.7
Percentage expatriate 88% 12%
GDP per capita  US Dollars 39,767 43,900
Five bank asset concentration 84% 64%


  • Inert demand we could move. I have had the benefit of being able to work in financial markets across the globe so was aware of trends in UAE and changing investment market. The UAE is a market where mutual fund penetration is low compared to other developed markets (<1% of their wealth for mass affluent investors). Direct security ownership is high. This is good as our model is to fractionalise direct assets. There is a large cash deposit culture too so the psychology to invest and lock away fitted with our buy and maintain strategy for bonds. Additionally, regulations and commission disclosures were coming into effect so transparency was on the table. The market structure, changing dynamics and wallet size of our target market saw we had a customer base in the UAE ideal for our solution.


So seeing where our business had reached and a market we could enter it was time to look at making it happen. Knocking on doors some cold and some warm through our network led us to the realise that fintech was a young concept in the UAE but the country was an advanced user of technology (smartphone penetration is 91% vs UK 85%). The industry had realised that technology was changing so it was interesting to see that one of the main UAE regulators had introduced a financial accelerator and working hub. We learnt of DIFC Hive existence and decided to apply when its doors opened. When this happens, we shall share how we approach applying.

Musings from Dubai

A greying society isn’t a local problem, it is happening across the world. The world’s population has never been older.

We were in Dubai in February as the local private investors are large buyers of fixed income assets.

Bonds and Sukuk (a certificate of ownership to cashflows from an underlying asset) are very popular instruments for investors in Dubai and across the Middle East.

With no state pension, local residents need their investments to pay out, to provide an income and to feel secure in it is not going to dry up. There are a number of large well-known enterprises that issue bonds and sukuk. The stream of future cash flows is more beneficial for older investors than selling units from a growth asset where the price of the asset may be higher or lower when a sale is executed to receive the cash.

Some popular names in the local market include DP World and Emaar Properties. DP World is one of the largest port operators in the world and owns UK ports in Southampton and London Gateway. Emaar Properties is a well know local property developer and owner of landmarks across Dubai.

We are working with a local regulated partner and met with financial institutions with client banks interested in buying local wholesale bonds. The minimum order size for middle east bonds is two hundred thousand US Dollars or more. Below are a couple examples fixed income instruments.

Our lesson from a few days with some major financial service providers is they are looking at ways to work with their clients more digitally and an opportunity to offer clients’ an existing asset well understand at a lower investment minimum will be advantageous to both client and provider. Additionally, a simpler way to present these securities helps the adviser and client in the advice journey.

‘Charles Darwin’ £10 note retiring a third poorer

The retirement of a coin of the realm can help us realise what happens in the life of money and what investment planning we should be making.

We all retire after a long life of work. ‘Charles Darwin’ has seen 18 years on the face on the British ten-pound note. In that time the value of that ten-pound note has fallen by a third. Inflation has eroded the purchasing power. These days more people need to generate more income from their money but it is not always easy.

The ‘Charles Darwin’ image sits alongside a compass, boat on a calm sea and hummingbird gazing at flowers. All of these calm pictures are a counter to the topsy-turvy would he retires from. The old £10 note will cease to be legal tender at the end of 1 March 2018. Now polymer has replaced paper which is expected to have a life of twice the old paper note. Times have changed.

With more people needing an income and fewer places available as a decent and secure home then technology can be a way to simplify investment decision making. We want to simplify the way that people earn an income from their investments, make it easier to see that cashflow and make informed financial decisions.

Bonds in the industrial revolution and technology revolution

Modern finance engineer’s solution that are more complex and therefore harder to understand. Let’s look at the humble bond, where did it come from and how does it fit in today’s complex investment world?

Two hundred years ago, before today’s technology revolution, we were in the midst of the industrial revolution.

Railways are a great example of what a bond is and offers.

Building railroads is expensive. They have long lives to generate an income but are costly to build.

The builders of railroad’s wanted to avoid selling too much equity and needed more money than they could raise by selling shares alone, so they borrowed. In return for loans, companies bonded themselves to investors and promised to repay borrowed money at future dates. Companies documented their promises with bond certificates.

Bond coupon rates varied among companies and varied through time. Like today, investors demand higher interest rates from riskier companies.

According to a historical bond database in the past 185 years, railroad companies have issued bonds in denominations ranging from $2 to well over $1,000,000.

Bond issuers realised two things over this time.

One, it is easier to deal with a small number of large denomination bonds; however

Two, the average investor prefers small-denomination bonds.

Railroads decided $1,000 bonds were the best balance of sales and operating problems. Nowadays, institutions are the gatekeepers for large number of investors so as a result truth one trumps truth two. Therefore, the minimum in the market is $100,000 or even $200,000. The mega-wealthy rule in bond markets. This we hope to change.

In the past a private investor could buy a railway bond and earn the coupon but not anymore. Financial services have developed middlemen, barriers to entry and dealing rules that prevent private investors lending to big business.

Contributory podcast to Malaysia based IFN Magazine

This week we contributed to a superb publication based in Malaysia and recommend a subscription to their great news updates and platform. A brief extract from IFN is below…

This week, IFN spoke to Lawrie Chandler, the director and investment unit head of UK-based Edale Group, to discuss the concept behind the new BondSmart Sukuk platform, an online fintech venture designed to provide mass affluent investors with a steady fixed income stream through Shariah compliant channels.

“We have been investing into Sukuk for 10 years and I’ve always noticed how it seems to be an asset class of the elite and the mega wealthy,” said Chandler. “If I am a priority banking client or an average everyday investor, unless I’ve got US$200,000 to spare it is very difficult for me to participate in Sukuk. This is a way to bring about an opportunity for investors to access that.

“The attraction is of course the underlying asset – big companies, paying a big profit rate, and getting security of capital, which generally other asset classes don’t offer.”

The firm has used the principles of crowdfunding to build a co-investing concept where investors can effectively buy a slice of beneficial ownership in a Sukuk facility and receive the equivalent return. Unlike mutual funds or equity investment, where the value can go up and down and the volatility can be off-putting for those seeking a steady return, Sukuk offer a fixed income stream that Chandler suggests could become increasingly valuable – especially as global demographics develop.

“Essentially, we have simply added a crowdfunding front-end onto a traditional institutional investment process allowing people to pick and choose the type of bonds they want access to,” he explained. “A lot of people will be retiring over the next decade and will be faced with the challenge of moving from wealth accumulation to expenditure. We see a big demographic demand from older investors who will need access to income. And there are a lot of client groups who want access to this asset class and can’t get there. So far, the only way for the everyday investor to access Sukuk has been through mutual funds, but the problem there is that you don’t necessarily know what your yield will be.”

So what is the difference with the new retail platform?

“We effectively give people a key to get into a penthouse apartment, where the Sukuk are laid out on the table,” said Chandler. “They can buy a seat at the table rather than paying for the whole meal.”

The firm is currently speaking with a range of financial institutions in the Middle East and Malaysia to discuss white-labeling the platform and rolling it out directly to Shariah-conscious customers.

“We want to give people the opportunity to buy cash flows from big businesses and known brands, and get a better return than they would from cash in the bank but through a less scary route than the stock market – essentially, a halfway house,” explained Chandler. “We are hoping to have a couple of those channels live within the next few months.”

This is an excerpt from an interview with Lawrie Chandler, the director of Edale Group, discussing the new BondSmart retail Sukuk investment platform. To learn more or to listen to the full conversation, log on to www.islamicfinancenews.com/podcasts.