The Islamic crowdfunding concept despite of no history as such in the past are still much demanded and appraised in the Islamic as well as conventional economies. Also, in the backdrop of a rising global Muslim population, attractiveness of the much necessitated halal products and services and increasingly conscious investors, the Islamic CF platform will serve to narrow the financing/funding gap which is currently posing a threat to striving entrepreneurships and subsequent economic growth and social benefit, especially in low-income and developing economies. Islamic value driven approach fits well within the growing fascination towards socially responsible and ethical investing. This paper has discussed the Islamic CF portals available in the Muslim world and how their mechanism is being applied. These platforms are not limited to Muslim communities rather they are general public focused and economic growth driven engines which if used with efficacy can result in astounding results.. We believe that if Islamic CF is made available to the financially inclusive economies, it will be beneficial for them for their development. Furthermore, to overcome religious and social barriers in order to vitalize economic progress resulting from innovative and creative entrepreneurship, Islamic CF platform will follow a more proactive approach regarding those projects which create positive value, over and above financial gain, such as those supporting the growth of green economies, conservation of resources, sustainable development, job creation and specifically, etc.
Table of Contents
Introduction, problem statement and research objectives
What is Crowd Funding?
The Founder’s Objective for Crowdfunding
The Funder’s Objective for Crowdfunding
Crowd Funding Models
What are SMEs and why they are important?
Islamic Finance and Crowd Funding
Working Mechanism of Islamic Crowd funding platforms: Shekra and Yomken
Shariah compliance of Islamic Crowd funding platforms
Challenges in offering Shariah compliant crowd funding
Conclusion
Research Objectives and Topics
The primary objective of this paper is to explore the intersection of crowdfunding mechanisms with Islamic Finance principles to address the funding gap for small and medium-sized enterprises (SMEs) and promote financial inclusion in Muslim-majority economies.
- Analysis of the mechanics of Islamic crowdfunding models.
- Evaluation of the relevance of crowdfunding in the context of Shariah-compliant financing.
- Examination of existing Islamic crowdfunding portals like Shekra and Yomken.
- Identification of legal, regulatory, and infrastructural challenges for Islamic crowdfunding.
- Assessment of the potential for social and economic impact through ethical investment.
Excerpt from the Book
What is Crowd Funding?
Crowdfunding is an innovative process for funding diverse and multiple new ventures, allowing entrepreneurially skilled individuals to request funding from the public/crowd, which in return will get the product or equity (Mollick, 2013). These founders of for-profit, social or cultural projects are the seedbeds of innovation and form the backbone of economies. The diversity of goals and funding in CF projects can range from small artistic venture, to entrepreneurs seeking hundreds of thousands of dollars in seed capital as their primary resource and the substitute to traditional venture capital firms (Larralde, 2010).
Furthermore, CF is also said as tapping the large dispersed audience, labelled as ‘the crowd’ for trivial sum of money to fund in a project or a venture. It is also called creative industry in some literature which is empowered by the internet or social media communication channel for more user interaction and tapping the large population through one gate. The notion of crowd funding has its history rooting from 17th century. Even the concept of modern crowd funding is of 2 decades now. It incepted in 1997 when a UK rock band raised funds for their reunion tour through online podium. Further this idea was elaborated and implemented by ArtistShare, which became the first modern day crowd funding platform in 2000 (Fundable, n.d.), and till date, various enhancement and innovations in the CF mechanism has been made to further boost the reach of this source of fund to the needy and viable projects.
Chapter Summary
Introduction, problem statement and research objectives: Discusses the motivation for integrating crowdfunding into Islamic finance to tackle the financial exclusion of SMEs.
What is Crowd Funding?: Defines the core concepts of crowdfunding as an alternative funding mechanism powered by digital platforms.
The Founder’s Objective for Crowdfunding: Explores why entrepreneurs seek crowdfunding as a source of seed capital and validation.
The Funder’s Objective for Crowdfunding: Examines the motivations of funders, who act as investors seeking social or economic returns.
Crowd Funding Models: Categorizes crowdfunding into donation, reward, lending, and investment-based models.
What are SMEs and why they are important?: Outlines the economic significance of small and medium-sized enterprises and their role in job creation.
Islamic Finance and Crowd Funding: Investigates the current landscape of Islamic crowdfunding and specific platforms serving the Muslim market.
Working Mechanism of Islamic Crowd funding platforms: Shekra and Yomken: Details the operational models and processes of the prominent platforms Shekra and Yomken.
Shariah compliance of Islamic Crowd funding platforms: Discusses how these platforms align with ethical standards, risk-sharing, and profit-and-loss principles.
Challenges in offering Shariah compliant crowd funding: Identifies legal, technological, and regulatory barriers to the widespread adoption of Islamic crowdfunding.
Conclusion: Summarizes the potential of Islamic crowdfunding to foster sustainable economic development and social progress.
Keywords
Crowd funding, Islamic Finance, Entrepreneurship, SME, Economic growth, Shariah compliance, Financial inclusion, Mudharabah, Musharakah, Innovation, Digital platforms, MENA region, Risk-sharing.
Frequently Asked Questions
What is the primary focus of this paper?
The paper examines how crowdfunding can be applied within the Islamic finance framework to support SMEs and bridge the financing gap in Muslim-majority economies.
What are the central themes discussed?
The work covers the history and mechanisms of crowdfunding, the integration of Shariah-compliant principles, and the role of innovation in financing businesses.
What is the primary goal of the author?
The goal is to demonstrate how crowdfunding can serve as an ethical and inclusive tool for economic empowerment while adhering to Islamic values.
Which scientific methodology is utilized?
The paper utilizes a literature review and thematic analysis to evaluate existing crowdfunding portals and theoretical frameworks related to Islamic finance.
What does the main body address?
It covers definitions of crowdfunding models, the importance of SMEs, case studies of portals like Shekra and Yomken, and challenges regarding legal and Shariah compliance.
Which keywords best characterize this work?
Key terms include Islamic Finance, Crowdfunding, Entrepreneurship, SME, Financial Inclusion, and Shariah-compliant investment.
How does the author distinguish Islamic crowdfunding from conventional models?
The distinction lies in the prohibition of interest, the emphasis on risk-sharing (PLS principle), and the commitment to halal, socially responsible projects.
What specific role do platforms like Shekra and Yomken play?
These platforms serve as case studies demonstrating practical implementations of product-based and equity-based crowdfunding adapted to Islamic requirements.
What is the biggest challenge identified for these platforms?
The author highlights the lack of standardized legal and regulatory frameworks, as well as technological barriers like low internet penetration in developing nations.
- Citar trabajo
- Salman Syed (Autor), 2014, Crowd Funding and its Application in Islamic Finance. Issues and Challenges, Múnich, GRIN Verlag, https://www.grin.com/document/430187
