Behind the Brand®

[00:00:00] Jeff Adamson: Welcome to "Behind the Brand," the podcast where we delve deep into the stories and journeys of remarkable change-makers and innovators behind some of Canada's most influential brands. I'm your host, Jeff Adamson, and today, we have a truly exceptional guest with us.

Dr. Mohamad Sawwaf is a dynamic force in the world of finance, ethics, and innovation. With an impressive academic background and a diverse portfolio of experiences, Dr. Sawwaf has dedicated his career to transforming the financial landscape and driving inclusive practices.

As the founder and CEO of Manzil, a company focused on ethically-conscious products and halal financing, Dr. Sawwaf has been at the forefront of pioneering ethical financial solutions that empower communities while adhering to the principles of Islamic finance. His journey encompasses roles in academia, advisory boards, and impactful organizations, all working towards one common goal – financial inclusion.

Today, we have the privilege of unraveling the story of Dr. Mohamad Sawwaf, his passion for ethical finance, and the pivotal role he plays in shaping the future of financial inclusion in Canada and beyond.

So I want to go way back here and I was looking at some of the work you've done, Mohamad, and you started out at Investors Group around 2007, 2009. What a great time to start managing money.

[00:00:58] Dr. Mohamad Sawwaf: I was in Winnipeg, in training, and Lehman Brothers was going down and I was asking everybody, like, is this bad?

Like, I came with a degree in science, right? Like I had an Honors Bachelors of Life Sciences from U of T. Yes, you know, I had, some skills in math and maybe business, but had nothing to do with finance. And I was just like, what is going on? And that was a big lesson in risk, I can tell you.

[00:01:27] Jeff Adamson: Like, tell me about that experience though, because like, presumably you didn't yet have a client base or did you take over a book of business?

[00:01:35] Dr. Mohamad Sawwaf: No, I started from scratch. Yeah, very good question. Started from scratch. So as I built my book of business, I actually built it the right way. Right? Because of those lessons, right?

So there was, there was a lot of focus on the downside or the risk element of long-term wealth management and I actually built my practice around those sentiments versus like, Hey guys, let's shoot for the moon and get those double-digit returns that everybody's promising you with.

[00:02:01] Jeff Adamson: And presumably, I mean, that's what people always say, like buy low, sell high. And when you're starting at basically the lowest point in the last like 10 or 20 years I mean, that's in some ways that's actually a good time to buy, but it was difficult to convince people to buy basically in one of the worst markets of all time. Like…

[00:02:18] Dr. Mohamad Sawwaf: Yeah.

[00:02:19] Jeff Adamson: Tell me about some of the interactions and experiences you had there.

[00:02:21] Dr. Mohamad Sawwaf: Well, definitely there's a propensity for clients to kind of not make any move. Like we're creatures of habit at the end of the day, right? So they don't want to make a move because that's risky in and of itself, right?

I have my existing relationship. You know, who are you? You're a 22-year-old kid. How can you give me financial advice? So we actually, we actually tailored our message and focus[ed] around things that were factual versus more advisory. So we also, we always used to say like, investments are a matter of advice and tax are a matter of facts, right?

So, “Hey, why don't we put a plan together that actually saves you on tax?” So maximizing your RRSP. Maximizing TFSA, which started to come out at the time. Maybe looking at overall financial planning elements. So maybe it wasn't investment-focused, but we would look at insurance and estate planning.
And of course, like your debt planning, right? So whether it be your mortgage, your car, like refinancing, all of these things to kind of really focus on cashflow and so the elements of investment and where those were going became less of an issue or a lesser part of the discussion.

[00:03:26] Jeff Adamson: And you moved from wealth management into more, you know, traditional banking with TD, but then you eventually decided to go back to school.

How did some of your early experiences in wealth management really kind of direct or influence your decision to kind of go back and get more involved in kind of the education side of finance?

[00:03:47] Dr. Mohamad Sawwaf: When I moved from Investors Group to TD, it was actually just around the time that I had also finished my MBA. I was doing my MBA part-time at Rotman as a result of number one, I think I wanted a formal education in finance. Like it was, let's call it seven years in. And number two, I started kind of hitting that corporate ceiling, right? You know, people around me were getting promoted.
It wasn't due to the lack of production, right? Like I was one of the top, kind of, producers, not only at the level of an advisor but also at the level of the director, right? Cause I also managed kind of a team that had built around me. And so, you know, I basically said, well, let's get this MBA out of the way, maybe that also kind of opens up new doors for me.

And the interesting part is that MBA really was the start of my journey into Manzil because, during my time as an advisor, there was a lot of sentiment within the community around pay Mohamad. Like we'd love to invest with you, but do you have products that are compliant for us? And, you know, that was what one of the main criteria is, and before I even knew anything about Islamic finance or even the particular products, I needed to get an education around it. And that was more informal based on research and understanding kind of the global marketplace of halal banking because it wasn't really available in North America.
And then I got into the MBA program and there was a professor there teaching an Islamic finance course. And so I had asked, I said, you know, is this actually part of the MBA offering at the Executive MBA? He's like, no, it's only actually for the full-time and part-time's. But he said, you know what? I need a TA. Why don't you be that TA for me? I said, perfect, right?

So we actually taught that course over the next several years and that actually introduced the foundation of not only Islamic finance for me, but whether we could customize those solutions under the realm of, you know, the Canadian regulatory environment, the tax and legal you know frameworks that were already introduced. And so that was really the foundation that then allowed me to say, okay, well, this is potentially something that I can move forward with.

He then convinced me to do a second Master's in Corporate Governance and Finance, which eventually led to my Doctorate in Islamic Finance. But along the way, when I got into TD in more of a management role, and then of course, poached by a FinTech, all of those worlds started to collide, right?

You know, the professional background, the skill sets, the academic background, because I had this, let's call it this mentality of, well, if I'm going to start a bank, something in banking like that's a lot of money, that's a lot of intensive capital upfront, regulatory. Do I even have the experience in place? You know, we have an oligopolistic industry, like, but the FinTech really opened my eyes to be like, wow, with little capital, you can get kind of these very specific product licenses. And you can go out and do investments and mortgages and insurance, which we don't do currently, but we want to get into, while kind of designing products that still apply to the current regulatory environment without having to lobby for those policy changes.

[00:07:00] Jeff Adamson: The reason I'm interested in the education side is like, I used to work with a lot of people who had PhDs and Master’s and doing scientific research and or even industrial research or biotech.
What I found is that it seemed like, and I'm not saying one causes the other, but it seemed like, almost like a correlation between the more education someone got, the less entrepreneurial they seemed. I don't know if it's a case of just knowing too much, because I think knowing almost too little makes it a lot easier to start things…

[00:07:29] Dr. Mohamad Sawwaf: Yeah.

[00:07:30] Jeff Adamson: Because you can kind of just go in and if you knew what you knew four years in, you may not ever start, right? So how did, how was that process? Because you have like over a decade of education under you. I'm like, feeling really, really not even worthy of this conversation, Mohammed, based on how much education you have. I have a Bachelor's and I feel like that's not even enough right now.
So how did you, how did you make the leap then? Like, how did you say, even though I know a ton about, you know, some broad areas and some specific areas, that you're going to make that leap and start a company? Like what, what was the final straw that broke the camel's back on that?

[00:08:04] Dr. Mohamad Sawwaf: So I would say the entrepreneurialism or spirit was always there from the days of Investors Group, right? Like it was a hundred percent commissioned job. I was thrown out into the wolf's den and just say, basically you eat what you kill, right? Now, we had a formal structure and a company behind us and mentorship and all that stuff, that helped, right? So the sales, the BD, kind of the risk-taking element was there, but it was in a controlled environment.

The education piece, and it's a very, very, you know, interesting question that, and obviously [the] theory that you've posed, because I see it too, right? Like, there's a sense of paralysis by analysis, right? There are lifelong learners out there, and they'll never jump into a risk-taking endeavor just because of the comfort and the stability that they've grown up with or that just got comfort[able] with that lifestyle.

On my hand, you know, doing an MBA, I looked at that as a risk, right? Cause I'm just like, well, what's the opportunity cost here, right? Like I'm, I was making good money, but there was also this element of kind of, I still have to constantly prove myself and not only myself, but I have to prove a lot of people wrong.

[00:09:12] Jeff Adamson: Why did you feel that way though? Like, what was driving that?

[00:09:15] Dr. Mohamad Sawwaf: Listen, finance is a world run by white men or WASP-y men. In my company, I was probably the first Middle Eastern or identifiably Middle Eastern individual. Probably the first Muslim. I moved up really, really quickly. I became a director within less than three years. You know, I was the youngest at the time. So, you know, I always said to myself, like, if they're working 100%, I got to work 200% just to be equal. And that was something I could control, right? I could control my work ethic. I could control my output.

Then there became an element of, well, I started questioning leadership, right? And I'm like, well, why are these decisions being made? Because I'm on the field, I'm hearing something else, I think that we should be moving in this direction, but nobody wanted to listen to me. Even though I had my CFP, I had all of the designations, right? But I just felt that maybe a life sciences degree didn't really kind of help create an image, right?

And so I said, well, now that I want to be more involved in finance and really kind of more on larger impact style missions, you know, education was really a big focus for me. So getting the MBA out of the way, I never thought I would go back to school, Jeff. Like I hated my undergrad. It's like, after doing a science degree, we had, [you] know, 35 hours a week of labs, exams, and tutorials, it was horrendous, right? I was also working part-time, right? It's not like we came from means. So for me, it was always just about like, how can I make money?

[00:10:52] Jeff Adamson: That's a real grind.

[00:10:53] Dr. Mohamad Sawwaf: Constant grind! And so when I look back today, I really wanted to focus the element of my academia around what I'm doing today because I'm still involved in conversations or what used to be involved in conversations before, you know, the Doctor preceded my name, well, you're just biased, right? You're doing this business because you see an opportunity and we don't see the same opportunity that you do.

[00:11:20] Jeff Adamson: Really?

[00:11:21] Dr. Mohamad Sawwaf: Yeah! So when I come at it from an academic perspective, they can no longer question that because I've done the research and my dissertation was specifically focused on Canada.

[00:11:28] Jeff Adamson: Did you find that these WASP-y banks and organizations that weren't really listening to you? Did that change much after you got more educated or did they just find another reason not to listen?

[00:11:38] Dr. Mohamad Sawwaf: So I would say a couple of elements. I think time allowed them to listen to me because I've been doing this now for quite some time. I have a business behind me that I can prove to them with [a] track record.

[00:11:49] Jeff Adamson: But did the business, I'm curious as to which, what do you think created the most paradigm shift in people's mind? Cause I think, and the reason I'm asking is there are a lot of people who also see things in the world where they're like, why isn't anyone listening to me about this?

[00:12:06] Dr. Mohamad Sawwaf: Yeah.

[00:12:07] Jeff Adamson: Like I think this is a huge problem and I can't get my point across here. So do I need to go and get a PhD? Do I need to start a company? Do I need to stage a rally? Like, what to you, you know, was the most impactful in shifting people's perspective of what you have done?

[00:12:20] Dr. Mohamad Sawwaf: I would definitely say the business because that's the proof in the pudding. Again, I have this chip on my shoulder to say I'm out here to prove people wrong and I'm still doing it. It doesn't matter whether I have a Doctorate or not, but the communication and the language that comes from me to them has shifted because my responses are based on facts now. My responses are based on research that has been done by third parties and not just myself, right?

So I think it's a combination, but I would say a lot of it, like, we now have financial institutions as partners. And that's not because of me, it's because of the proof, right? That I've built a business, I've de-risked it. There are people actually using our products and there is a real value to be had.

[00:13:07] Jeff Adamson: Yeah. And I think that I mean, this is a good transition into, into Manzil in general. So help our audience understand. So what is Manzil? What should people know about what Manzil's up to?

[00:13:14] Dr. Mohamad Sawwaf: I would say at its core, Manzil is a digital Islamic financial institution. We focus on not only manufacturing, right, halal products and we can go into that, products and services, but we distribute them directly via our platform or through others. You know, our focus has always been the two million Canadians that identify as Muslims, but it doesn't mean that you have to be Muslim to be on our platform.

You know, this is what we like to call an ethically-based platform. It's different, you know, kind of like Neo, right? Like you guys are challenging the big banks and in your own way. And we're challenging them in our own way, right? Because there is an underserved and underbanked Canadian population in general.

Like there's anywhere between 4 to 6 million Canadians are underbanked or unbanked. And we're going after a subset of that, but it doesn't mean that our platform can't appeal to all of them.

[00:14:13] Jeff Adamson: So what's the breadth of products that you offer? And I do want to double click on just the Shariah-compliant halal products in general, just because like I grew up in a small town in Saskatchewan, this is not at all on my radar.

I even confessed to you, you know, when we were talking earlier, I was like, I'm going to know so little and I am embarrassed to really even reveal this to you, but I think there's a lot of people out there where it's just not on their radar at all. If I'm not aware or if I'm not putting enough effort in to understand all the different struggles or contexts that people are coming up through, especially when it comes to finance, then it's very difficult.

And why this is important to us, is we hope to be a prominent bank in Canada. I think just for me personally, the more I understand about how can we make our platform more inclusive, how can we make it better for people from all walks of life. Especially given the fact that we also have just tons of newcomers coming to Canada as well. So I think not only I think is it ethical, but I think it also just makes business sense as well.
So maybe just go to the basics of kind of halal products, because I think that'll be a good way to start talking about like which ones you offer.

[00:15:15] Dr. Mohamad Sawwaf: The main principle of Islamic finance is you can't pay or receive interest. And so how is interest made? I lend you money and you give me more money back, right? In its most simplest form. So you can't do that. So if you can't do that, how do you create structures or products that can actually create revenue or profit at the end of the day?

And then one of the other elements is introducing an asset. We have what we call you know, the Manzil Mortgage Program. So how do we create a halal financing or mortgage program for residents in Canada, for residential properties? There is a couple of structures or there's [a] few actually, but two that we like to utilize. And the first one is super easy.

Jeff, you're in, you know, Saskatoon, Saskatchewan, and you say, Hey, I like this house. I want to buy it. You know, obviously, you would have come to us before, we would have pre-approved you. No different than what any other bank's underwriting criteria would have been. And then we say, okay, Jeff, you've identified this property. We are now going to go through a transaction that allows us to purchase this property on your behalf and immediately sell it back to you on the same day for a premium.

So for example, you know, let's say it's $500,000 and we do our internal, you know, profit rate calculation of like five and a half percent. And we say, okay, Jeff, over the next 25 years, you're going to make payments of $2,500 a month for 300 months and that's going to accumulate to $750,000, right? And so hence we've sold this property back to you for $750,000.

[00:16:53] Jeff Adamson: You’re essentially getting around interest-bearing with charging fees on the actual purchase value of the house.

[00:16:59] Dr. Mohamad Sawwaf: Exactly. So I've, I haven't actually lent you any money in this transaction, if you noticed, right? We've bought the asset and we've resold it to you. And you, you've asked for an installment plan. So we've given you the convenience of an installment plan at a premium.

[00:17:15] Jeff Adamson: So, okay, the first of many dumb questions are coming here, Mohamad. Why can't Muslims pay interest?

[00:17:21] Dr. Mohamad Sawwaf: That's a very good question. Because it's unfair. So, and money has no value. It really is a medium of exchange. We can lend you money, but it has to be one-to-one. And there's nothing in the Islamic economy or the Islamic financial world that basically talks about, you know, time value of money, you know, inflation. Because when we look at the rudimentary system of Islamic finance, like I'm talking about 1400 years ago, during the time of the prophet Muhammad, peace be upon him, they were dealing in dinars and dirhams. And these dinars were actually made out of gold and that dirhams were actually made out of silver. So an actual real commodity. Now it's fiat currency. It's paper. There is no backing on these currencies today to say, well, there's real value in here. So what do you have to do? You use the fiat currency to then purchase these assets. Now that you have a real asset, there is [a] value that can be created out of that asset.

[00:18:19] Jeff Adamson: But I guess even with fiat currencies like they are backed, they're not backed by gold per se, but they're backed by the government. The government essentially says that this is worth something. Does that matter at all?

[00:18:27] Dr. Mohamad Sawwaf: It doesn't matter at all because these governments also print money whenever they want to, right? It's not like their books are balanced, you know, the United States is $33 trillion in debt. Canada is $100 billion in debt. Like there's no fiscal responsibility here.

[00:18:45] Jeff Adamson: So like for Muslims that are looking at the amount of debt that Canada and the US, and many Western democracies are carrying, how do they look at that as a kind of member of these societies? Like to see the government who could have controlled a lot of what we do, and we pay taxes to, but then essentially those taxes go into, you know, paying down debt. Is that even on people's radar or are they just like, Hey, that's up to them, they can do whatever they want? Or is it a real concern for Muslims in a different way than it would be for people who are not Muslim?

[00:19:13] Dr. Mohamad Sawwaf: Yeah, I would say less of a concern because they've come to this country knowing that there is a tax bill to be footed. And we get promised you know, free health care and free education in return. Like that's the main promise, right? You know, the government doesn't come and say, Hey…

[00:19:38] Jeff Adamson: There's an exchange.

[00:19:39] Dr. Mohamad Sawwaf: …you know, come to our country, pay taxes so you can pay off our debt.
When you think about, you know, the mass amount of immigration that's coming into Canada, as you had mentioned, you know, this mandate of 500,000 to a million apparently like it's up to upwards of a million. We know that up to a third of those newcomers are coming from Muslim-majority countries.

So anywhere between 150,000, which bodes and ties well into Statistics Canada's, you know, future projection of the Muslim population, which as [of] now sits at 2 million, but will be 3 million by 2030, right? So how do you add another million? A lot of it's due to immigration and of course, you know, we have above-average birth rates as well.

[00:20:14] Jeff Adamson: Well, and also, I mean, a lot of Canadians don't know this, but like, and I don't know for how long this has been happening, but Immigration, Refugees [and Citizenship] Canada just released statistics from the last year and 98% of our population growth came from net immigration.

[00:20:34] Dr. Mohamad Sawwaf: Yeah.

[00:20:35] Jeff Adamson: 2% came from birth rates.

[00:20:27] Dr. Mohamad Sawwaf: So just to dig into a little bit further, because I saw some material on this. Of course, we have an aging population, lots of baby boomers. 300,000 deaths per year alone. And that doesn't include the emigration out of the country, right? So if you think about like, okay, we have 300,000 people dying already, right? So even if we brought in 300,000, we're net zero.

[00:21:00] Jeff Adamson: Yeah. Assuming no one leaves.

[00:21:02] Dr. Mohamad Sawwaf: Assuming no one leaves, right? So then add, you know, the people that leave or whatever. 500,000, it still doesn't really make an impact at the end of the day.

[00:21:10] Jeff Adamson: And plus, like there's serious implications to a falling population, which maybe is a topic for another conversation. I want to touch on, so a dinar used to be made out of gold. And so how do these countries today do it? Are they still on kind of gold-backed currencies or have they switched to fiat currencies as well?

[00:21:37] Dr. Mohamad Sawwaf: They've all switched to fiat currencies because they have relationships with the US, especially because of their oil. So they have, their currencies are pegged, right? But from a financial system, it's still considered, I would say fiat, but you still have Islamic banks and conventional banks operating side-by-side within those jurisdictions.

They're just introducing structures that are compliant, that work on, you know, this method that I spoke of previously, which is Murabaha or profit sale. There's also Musharakah, which is, hey, Jeff, let's go into a partnership on a particular asset, right? And that could be a home, and I would act as a silent partner and you would buy me out over time, and you'd still have, you know, the rights of ownership and all of that stuff. But there's also an element of risk-taking, right?

So this is one of the main things of making a financial transaction fair, is that it's not just one-sided. And if you happen to lose your job, I can't take advantage of you, right? Like I can't, you know, put you into default for no reason. Like, I need to be working with you and saying, Hey Jeff, like, when are you going to get back on your feet? Maybe we'll defer a payment or two, but we'll only do it for so long at the end of the day. And you know what? If you can't afford this house anymore, well, let's find something that's more affordable, right? So this is the element of humanity and compassion and empathy of banking that we don't have today that really needs to kind of come in.

[00:23:00] Jeff Adamson: And what you're saying like, no one could disagree with that. That should be the way that it should be done in terms of like, that's the ethical and moral way that you should approach someone who's down on their luck and perhaps can't, you know, afford to pay you back.
The reality that I see is that there are some people out there who make decisions freely and put themselves in situations or take advantage of others. So, for example, like fraud, basically charge-offs, it's a major line within any bank. And then, unfortunately, there's just, there's bad people out there that will take advantage of the people providing the money as well.

How do you manage things like risk and charge-offs and fraud in the halal setting, in the halal context?

[00:23:39] Dr. Mohamad Sawwaf: You know, that's a great question and I would say we would, we manage it just like anyone else would, right? Like, and Islamic finance doesn't preclude you from saying, well, just because they decided to breach their contract doesn't mean that you don't have rights over them, right?
We, in fact, absolutely have rights over them because we entered into a contractual agreement ethically and you decided to kind of break those ethics, right? So we go back to stats, we can go back to our book of business, [and] we have a 0% default rate. Since 2020, you know, we're almost four years in, we've gone through COVID, you know, we've gone through a pandemic, we've gone through a recession, we're still in a recession, apparently.

So, you know, as the economy on a macro level becomes more and more bleak, our underwriting and the way we attract, you know, creditworthy individuals to our program has been 100% success rate with not even one mispayment. And I think that holds true with many banks, right? Because, you know, OSFI has written these guidelines that we abide by, even though we're not an OSFI, you know, regulated entity.
But when we want to attract institutional investment, we have to act like them, right? From an underwriting perspective, from a risk perspective, and also focusing on all of these issues around AML and FINTRAC.

[00:24:57] Jeff Adamson: Do you think that you guys would benefit from OSFI stepping in and kind of officially regulating or is it best that they kind of don't at this moment? Because there's pros and cons.

[00:25:05] Dr. Mohamad Sawwaf: There are pros and cons. I'll give you an example that came from the UK. So in 2003, the FCA or the Financial Conduct Authority actually created an Islamic banking framework, right? And this was due to political will from David Cameron, Prime Minister at the time. He said, I want this and they made it happen.

And so what did that do? It opened up the door so we could look at the pros. The pros mean, you know, there's financial inclusion, we have optionality, we've created more competition in the marketplace, and we get to attract a demographic that has a need, but we can also kind of expand on that.

40% of UK Islamic bank’s clients are non-Muslim, right? And that's a big number because at the end of the day, you know, you ask them like, what was it? And it's not the religious values. It's, you know, they gave me a better rate or, you know, it was just more ethical. You know, it appealed more to my values, right? Like these are some of the elements that start to come out once you start to survey these individuals.

And so in Canada, we're oligopolistic in many industries, right? We, you know, we can talk about this till the cows come home.

[00:26:13] Jeff Adamson: Yeah. We love our oligopolies.

[00:26:16] Dr. Mohamad Sawwaf: Yeah. And, you know, it's all in the name of consumer protection. But it really isn't at the end of the day because, you know, the consumers are the ones that are missing out on competitive products being introduced in the marketplace.

I focus my thesis on financial exclusion and not necessarily financial inclusion, right? Because financial inclusion is really about the institutions creating products to create inclusivity. Exclusion is really a set of population[s] like us, that have the ability to bank, right? We are bankable. It's not like we're poor. It's not like we're, you know, at the bottom of the totem pole when it comes to income and net worth. But we actually choose not to participate.

And so these are and there's been studies that have come out of the states that call, that call these individual ghost prime, right? They're prime, but they're nowhere to be found. They're invisible. So how do you go after these individuals and say, Hey, I have a product that aligns with your values, religious or non-religious, your ethics, your morality, come my way?

And you know what, Jeff? It's been proven they're willing to pay a premium. They're willing to pay the penalties to get out of their existing conventional products in order to get into something more ethical. The pricing sensitivity is way less than trying to go after a market in a zero-sum game today.

[00:27:36] Jeff Adamson: You’re basically, I'm putting the pieces together here, Mohamad. You've got, you're appealing to a very targeted demographic of people. Like, you know who your customer is very, very clearly. I think more clear than probably any financial services company in Canada, in terms of how targeted and specific you are. These customers are profitable in terms of they're willing to pay for things, for different products that align with their values.

So then presumably you would have companies just knocking on your door and saying like, Hey, Mohamad, like, how do we partner up? How do we get into business together? How can we help make sure that every Muslim knows about Manzil and like, let's get you in every pamphlet for every newcomer who comes to Canada? Maybe let's even go to some of these countries and let people know about the options, like even before they come, how has that been going?

[00:28:26] Dr. Mohamad Sawwaf: It hasn't been going at all [laughs]. There's been many conversations. I can tell you, [that] I've spoken to probably every bank's newcomer program head that has had [an] interest in this.

But think of it from their end. And I tell them up front, I'm like, listen, guys, I'm not going to create a referral program, right? That ends up bringing newcomers your way. And you pay me 50 or a hundred bucks and you want to sell them on a credit card because they don't want a credit card, it's interest bearing. Or some sort of line of credit or personal loan. It doesn't work, right?

So if we want to partner, we need to partner on a real product or you make me an extension of your bank, right? So there's this concept of Islamic windows in the UK, when they introduced Islamic banking banks, like Abu Dhabi Islamic Bank and Dubai Islamic Bank came in and set up full-fledged banking systems and branches and all that stuff.

Then you had Barclays and HSBC and Standard Chartered say, Well we're a conventional bank, but we'd love to appeal to this community. What can we do? And all you have to do is create a subsidiary. You know, you ring fence it in terms of the operations and kind of the flow of money. And you structure your products that appeal to this demographic group, right?

And that's what we call an Islamic window. And we're happy to act as an Islamic window for these larger institutions, but they just don't see it like that. Time and time again, we've told them like, why wouldn't you do it? And they look at it as a big capital cost, like [a] lift. There's a learning curve in terms of experience. And that's fine. That's definitely our competitive advantage. That's the most that we've created, currently. But I don't think they've come to the conclusion that the best route to access this market is through us.

[00:30:08] Jeff Adamson: And honestly, like it gets my blood pressure up when I hear stories like this because it's this whole, I don't know, narrative that we see in today's society of people saying one thing in public but then in private kind of saying like, no way, or with their voting, Hey, we need to protect the homeless. But then when you want to build a homeless shelter, they're like, not in my backyard.
Hey, I want all these really good things for society, but I don't want them to impact my quality of life. You know, we need to have schools for [the] underprivileged, but I want to make sure that that's not in my neighborhood. I want to make sure that my kids all go to the rich school. So it's things like that where, yeah, we want to support newcomers to Canada. We're, you know, really pro-Muslim, but then when you're given an opportunity to work with, you know, an exciting entrepreneur like yourself, who's clearly solving a problem, like this is the most well-defined problem that I've heard in a long time. They are not willing to really kind of walk the talk.

[00:31:01] Dr. Mohamad Sawwaf: You're absolutely right. And I've told this time and time again, like Canada again, from an economic perspective, macro, micro OECD, like we just got a report saying like our economy is going to stagnate until 2060. Okay. That's number one.

[00:31:16] Jeff Adamson: It's not looking good right now.

[00:31:18] Dr. Mohamad Sawwaf: We are the last G7 country to adopt Islamic finance [and] Islamic banking. Like even behind Australia, which is much more conservative. And they have one-fifth the Muslim population that we [have], they only have 400,000 Muslims. We have 2 million, like we're 5%. And so…

[00:31:43] Jeff Adamson: And it's growing quick.

[00:31:44] Dr. Mohamad Sawwaf: And it's growing, right? Absolutely! And there is an element of political will here or lack thereof, right? Like, you know, if Justin Trudeau or Chrystia Freeland came in and said, We want this done, it would happen no matter what. We continually lobby the government and Senator Colin Deacon can attest to this, right? Like I know he was on your podcast.

There is countless of times that, and we're lobbying at all levels, like provincial and federal, because there are some policy changes that are required because it, to make our product more competitive to our consumer base. Now we do have a lopsided marketplace in the sense that demand exceeds supply, that's fine. But what happens when supply is always there? And the demand starts to kind of wane off because of some of these policy changes that haven't been made, right?

So we're trying to stay ahead of the curve and say, let's get these changes in now so that as the market expands and as we expand our operations, we're ready, right? To capture that market versus saying, Hey, guys, you know, we can't, we can't be any more competitive because this law or this policy stops us from being so.

[00:32:38] Jeff Adamson: Yeah. And I feel like, I don't know, Canada is the really the only country that I've fully, fully lived in, so I've never really had to experience many other governments. But I feel like in Canada, we have a situation where, and again, maybe this is just politicians everywhere, but we're really good at like saying that we care about certain things, but when the rubber hits the road and when they actually have to either put their neck out or they have to take a risk or you have to make a decision that has consequences. It seems like our, you know, our governments haven't been really good at doing that.

[00:33:17] Dr. Mohamad Sawwaf: It's, it's a CYA mentality.

[00:33:20] Jeff Adamson: It's which?

[00:33:21] Dr. Mohamad Sawwaf: CYA, cover your ass mentality.

[00:33:23] Jeff Adamson: Yeah. Blend in with the herd. Don't stick your neck out. Yeah, maybe it's a little bit of the tallest poppy syndrome. We're just afraid of, yeah, of kind of doing something that is a little bit new or different.

But, like, you see this in so many different things. Like, we're not modernizing our country, and like, open banking was promised in, like, 2018.

[00:33:40] Dr. Mohamad Sawwaf: All lip service.

[00:33:42] Jeff Adamson: Exactly. A hundred percent. Real-time rails. Like these are just basic things where it's like having our entire banking sector working on dial-up internet. Or having regulations so tight that no one really starts a bank since before the internet in Canada.

This is not good for Canadians. And the answer isn't just [to] introduce more regulatory action or like put more taxes on the big banks. Like that's just going to make things even more prohibitive for any new entrants to get in, because they're going to look at it and say like, well, we don't want to be treated the same way those big banks are. And also big companies are really, really, really good at compliance.

[00:34:13] Dr. Mohamad Sawwaf: Yep.

[00:34:14] Jeff Adamson: Small companies are just trying to like figure out what they want to be when they grow up [laughs].

[00:34:09] Dr. Mohamad Sawwaf: Even the latest that, I don't know if you've heard, you probably have, like Chrystia Freeland is now attacking the big banks and saying, Oh, you need to introduce cheaper banking products.

[00:34:28] Jeff Adamson: Like bank accounts.

[00:34:29] Dr. Mohamad Sawwaf: Why does it need to come from her? Like introduce a system of competition and that'll automatically happen, right?

[00:34:38] Jeff Adamson: The people at the big five are probably just looking at them being like, Oh, this is perfect. They're like, that's it? They're like, Oh, we get to, like, we get to have this, you know, [the] moat that we've been building for 200 years that is actually defended by the government and it, you know, they're, we thought you were going to like open up the gates.

[00:34:57] Dr. Mohamad Sawwaf: Yeah.

[00:34:58] Jeff Adamson: All you're making us do is create like a free account? Oh, wonderful. [Laughs]

[00:35:02] Dr. Mohamad Sawwaf: For a small subset of the population, right? Newcomers or whoever, right? Like it's just, it's ridiculous. It's ridiculous.

[00:35:10] Jeff Adamson: So what's the long-term vision for Manzil? Like what is your dream state that you want to get this company to?

[00:35:16] Dr. Mohamad Sawwaf: My dream state is a fully-fledged, you know, multi-product platform that includes core banking, you know, financing, wealth management, which we have already, but, you know, expanding all that.

You know, there has been people [that] say, Hey Mohamad, like, would you actually want a bank license? And I'm like, I don't know if I can survive without one, why would I want to involve myself in the additional compliance and capital requirements and all that? And all the restrictions, right? Like I'd rather, I would rather jump on somebody else's license, right? And let them deal with it and you can be my back office and let me completely white label and go after this market, right? Because that's what we're really good at doing.

Right now, we have mortgages, we have, you know, wealth management or investments. We have a partnership with Koho on the prepaid front. We have an estate planning solution called Manzil Wills, but we want to expand that into commercial financing and car financing. We want to get into core banking products like halal chequings and savings accounts and credit cards. So once we start to kind of build those out and we are lining those particular partners up to facilitate that, you know, we're happy, I think, right? Like that's a lot of products.

And Canadians are unique, right? Like there's a lot of data around loyalty in banking.

[00:36:33] Jeff Adamson: Lasts longer than marriages in Canada.

[00:36:36] Dr. Mohamad Sawwaf: 17 years, right? So that's number one, that's going for us. But then of course you introduce a niche kind of system and a captive market. Well, and zero competition, does our lifetime value go into the 20 and 30, and 40 years? Potentially yes, absolutely.

[00:36:52] Jeff Adamson: It's also way more defensible. A lot of people maybe don't understand this, but like, in order for the big banks to do anything, it's extraordinarily expensive. It's like turning the Titanic. There could be a pile of cash sitting on the ground, all the big bank would have to do is just lean down and pick it up, and they're not going to. It's not worth their time. And the cost of them bending over and doing something is so, so high.

The banks spend more on just maintaining their archaic technology than all of the capital that all the startups raise collectively every year.

[00:37:26] Dr. Mohamad Sawwaf: Wow.

[00:37:27] Jeff Adamson: That's how much they spend on just maintaining their systems. And these systems are from, they're written on 1950s code.

[00:37:34] Dr. Mohamad Sawwaf: [Laughing] Yeah.

[00:37:35] Jeff Adamson: You know, Hanna Zaidi was on the podcast and she was literally saying like, you have to find someone who's like retired in the 80s and get them to come out of retirement to work on these systems and…

[00:37:43] Dr. Mohamad Sawwaf: That's hilarious.

[00:37:44] Jeff Adamson: Because like it's just a, it's a dead coding language.

And so the defensibility of your business is huge too because It's very difficult for someone else to compete because they'd have to really redesign a lot of their systems to, you know, not be interest bearing, which in all of them are, everything is built around making money off of interest.

[00:38:01] Dr. Mohamad Sawwaf: Yeah, absolutely. Like as agile as we were, it was a three-year R&D process with our Bay Street lawyers and advisors and accountants and auditors, right? If this had happened. So imagine at a larger scale, what that would take and the amount of decision-making and the bureaucracy and the changing of back offices, right? To accommodate such systems.

[00:38:23] Jeff Adamson: And I think what's like, what's exciting to me about what you guys are doing, like, I'm just thinking through the life of someone who comes to Canada. First of all, that must be terrifying. I would expect like, if I went over and lived in like, Indonesia, it would probably be a bit of a culture shock.
When I'm thinking through someone who comes here, you're like, and my wife's not from Canada, she's from Ukraine. You know, when she got here, you're just trying to figure shit out. Like you're just trying to do the basics. Like, how do I get a phone? How do I get a bank account? Like, how do I…

[00:38:49] Dr. Mohamad Sawwaf: Yeah.

[00:38:50] Jeff Adamson: To layer on another like layer of difficulty and that you have to kind of find a bank that aligns with your values and then potentially to be left hanging without any ability to really get a mortgage, to buy a home, to participate in home ownership, property ownership, I think is like something that so many millions of Canadians have benefited from over the decades.

[It] is actually terrifying to me, like how much our economy is dependent on housing and like the middle class being supported by how like high housing prices and what that implications that it has for people who can't afford a million dollar house in Toronto right now. But then to layer on, it's like, not only are houses incredibly expensive, but there's also no option for you to buy one. So to like, potentially put an entire class of people in a position where you're never going to be a landowner in the country that you've chosen? That seems really unethical to me.

[00:39:40] Dr. Mohamad Sawwaf: Let's extend on that. So, Muslim homeownership participation is 50 percent less than the average Canadian. So let's just start there.

So what are they doing? They're renting. Okay. So, how long have you been renting? We have thousands of clients, and we have 15,000 families on a waitlist, which equates to about $7.5 billion of required financing, like, to date, right? Like, that's the immediate, like, if you think about TAM, SAM, SOM, like, that's the SOM, right now.

They've been renting for 10, 15, 20 years. Why? Because they've been saving up the difference in cash to use, to buy the house. To buy the house fully in cash, Jeff.

[00:40:15] Jeff Adamson: Yeah. Outright.

[00:40:17] Dr. Mohamad Sawwaf: But what's happened? The growth rate has superseded their savings rate. So now there's a gap that's required via financing, which they won't do traditionally.

I have met professionals, doctors, lawyers, engineers, [and] business owners that choose to rent because they want to align themselves with their faith rather than going into something that they consider sinful that could put them into hell in the afterlife, right, [rather] than homeownership.

But then you also have this issue of like, well, you can't control sometimes where you live. Like lots of families are getting kicked out because you know, there's too many kids in the house, right? Like, well, I don't want to rent to a family of six. Okay, well, you can't live here. Well, go find something, somewhere else to live. What do you do at that point, right? So now you've lost stability, right? You've lost kind of that family unit.

You know, there was another study that came out and said the lifespans of Canadians are actually much more affected by whether you are actually renting versus a homeowner, than having cancer or smoking or drugs or alcohol. Imagine that.

[00:41:22] Jeff Adamson: Yeah, that stress. Yeah, that stress of not owning your own home and the owner potentially taking power over you and saying, like… And then, I mean, this actually happened to my wife and I not that long ago. The landlord wanted to get in on the housing market and said, Okay, I'm going to sell the house. That's a real stress that millions of Canadians have.

And you're totally right. I think it's one thing for people to complain, Oh, hey, I can't afford the 10 to 20 percent down payment on my house. I feel like a lot of Muslims are, have got to be like, Bro, you're worried about the 10 to 20%? How about a hundred percent?

[00:41:51] Dr. Mohamad Sawwaf: Yeah.

[00:41:52] Jeff Adamson: And then sitting there and then watching your savings grow, Hey, fantastic. But then also watching the housing market grow and outpacing your savings rate and then kind of look at it and say, at this rate, you know, the home price rate is growing faster than my savings rate and so at this rate, I'm never going to ever own a home.

[00:42:09] Dr. Mohamad Sawwaf: And even the savings rate, Jeff, we're talking about cash-only savings because they can't invest in GICs or low-risk investments, which are all interest-bearing.

[00:42:19] Jeff Adamson: God, it just keeps getting harder.

[00:42:21] Dr. Mohamad Sawwaf: So now you're being forced to go into equities. If you really wanted to, right? But you also have to have a long-term approach, right? The risk profile has to match. And most of the time it doesn’t.

When you're talking about, you know, people with the minimum 20 percent down payment that we require, our LTV, which we call FTV finance to value ratio actually sits at around 50%. So imagine these people are sitting on 3, 4, $500,000 worth of a down payment that they were setting aside to actually buy the house in cash for that much, but it's not, and now they've moved it into a down payment for their first home. The economic impact of not being able to move this population from exclusion to inclusion is huge, right? Because there's cash sitting on the sidelines, uninvested in the economy, uninvested in these banks, where it could be reinvested.

And there's a social impact piece. How many people that are renting, shouldn't be renting, that should be moving into home ownership, and freeing up rental stock for those that actually need it?

[00:43:23] Jeff Adamson: And this is an example of a non-zero-sum game. And I love talking about these situations because, for almost no cost to anyone, zero, you can create an enormous value for society.

[00:43:34] Dr. Mohamad Sawwaf: You can create another industry.

[00:43:36] Jeff Adamson: Yeah. And it's not like someone loses and Muslims win. It's not like that at all. It's actually like, literally everyone will win from these types of changes happening. First of all, I wanna thank you so much for coming on and educating myself, and hopefully, some of our listeners got as much out of this as I did. And this has really opened up my eyes and I think it's got my imagination going, which hopefully it gets other people's going too because, you know, we want Canada to be a place where people feel welcomed and that they can pursue their dreams. And this is clearly a gap and it's a gap that can be addressed with not a lot of effort, by not a lot of people.

[00:44:13] Dr. Mohamad Sawwaf: Right.

[00:44:14] Jeff Adamson: But will benefit, you know, millions of people.
I want to thank you for coming on and I'm grateful that you've kind of taken this up as your cause and because I think that Canada will be a much better place if you can achieve your mission. So thank you very much, Mohamad.

[00:44:25] Dr. Mohamad Sawwaf: You're most welcome and thank you for having me on the show. Appreciate it.

[00:44:34] Jeff Adamson: Thank you for tuning into Behind the Brand. If you enjoyed today's show, please subscribe and leave a review on your preferred podcast platform. If you’re interested in learning more about Neo Financial, visit us at neofinancial.com.

Behind the Brand is a production of Neo Financial and MediaLab YYC. Hosted by Jeff Adamson. Strategy, research, and production by Keegan Sharp, Alana Tefledzuk, and Kyle Marshall.