Islamic crowdfunding takes root in Asia in boon to entrepreneurs

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Muslim entrepreneurs and the less wealthy, increasingly shut off from bank loans by stricter capital rules, can take heart in a new form of financing taking root in Asia — Islamic crowdfunding. The practice of raising funds from a pool of investors via the Internet is emerging in Singapore and seeking to comply with Shariah principles. Ethis, set up in the city state in March 2014, has raised $S2.5 million ($US1.8 million) to finance buyers of affordable new homes in Indonesia and is seeking another $S50 million by 2017, Director Umar Munshi, 32, said in an interview. It plans to expand to Malaysia next year. Kapital Boost started on the island in July to fund small businesses in Southeast Asia.

The crowdfunding industry worldwide reached $US16.2 billion in 2014, pioneered by online hubs like Kickstarter, according to California-based research company Massolution. Gulf Asia Shari’ah Compliant Investments Association said the “huge” potential for the system is stifled by a lack of legislation. Malaysia introduced rules governing equity-style funding this year, while Indonesia has no regulations and Singapore is in consultations. In October 2015, the US Securities and Exchange Commission approved rules to allow small investors to buy shares in crowdfunded startups.

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