In a blow for the dreamers (and even disruptors) Islamic Bank Australia has made the decision to surrender its restricted banking licence to APRA. Which it did last Friday
“This decision comes because of challenges in raising the necessary capital to maintain our licence,” the newly-renamed Islamic Money posted on its website.
“We understand the anticipation and excitement surrounding the launch of the first Islamic bank in Australia. The journey thus far has been one of passion, dedication, and unwavering commitment to providing Islamic financial services to our community.
“However, the current capital market conditions have proven to be exceptionally challenging at this stage of our endeavour.”
Islamic Bank Australia secured a Restricted ADI authority in July 2022 and, had they stayed the course, had another four months in which to progress to a full licence.
Anthony Wamsteker, IBA’s chair, told Banking Day there were likely to be further announcements towards the end of next week, and was guarded in his comments.
Asked about the biggest barriers to raising capital, he said: “Just generally the state of the markets; anyone who is in start-up world and not profitable.
“We knew at the start it would be challenging.”
Wamsteker said around 14,000 people signed up to the IBA waitlist, but the bank had not even got as far as onboarding a select number of clients under the RADI authority, even 20 months in the build.
IBA had A$10 million in capital when first awarded a RADI and was on the hunt for a further $20 million, or so CEO Dean Gillespie said at the time.
Depending on start-up and build costs and modelling on likely balance sheet footings (once licenced), and based on the capital raisings of other neobanks, it is likely IBA’s capital needs at launch would be a multiple of $30 million.
UAE-based conglomerate Abreco was one early investor.
The rhetoric in the notice on Friday was as upbeat as practical in the circumstances.
“We want to assure you that our resolve remains as strong as ever,” Islamic Money said.
“Our team is diligently exploring various options to navigate this setback and determine the best path forward. We remain committed to our vision of delivering innovative Islamic financial solutions that meet the needs of our community.
“In the interim, we will be operating under the name Islamic Money,” the former bank said.
“While we may have relinquished our banking licence, our dedication to serving you, our valued community, remains steadfast.”