Crowdfunding – Now to meet the Islamic Fraternity Financing needs!

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Crowdfunding has been considered as the best means for micro- financing the projects of budding entrepreneurs and innovators across the world. The rise in the use of this model for financing has increased the money movement at the base levels or individual levels. The growing trust in the model has led many people to participate in this investment model. This has also sought the attraction of the Islamic communities. However, the conventional model is not aligned to the Islamic rules of financing. It is an online model, which is meekly regulated. But per Islam, there should be fairness to the investments and the returns expected.

In wake of this, many regions and economies across the globe are initiating dedicated crowdfunding platforms for the Islamic fraternity. These platforms are meant to promote the micro- funding option of crowdfunding to be used by the micro- entrepreneurs – but in an invigilated way. This is more synchronous to the Islamic rules. The entrepreneurs are free to post their projects. But these projects will be first validated by a committee. Based on the subject and objective of the project, the committee shall evaluate if it meets the business norms as specified by the fraternity. If so, it will post the project. The interested people can voluntarily participate in the funding process. They will also have proportionate stake in the project.

But, it must be noted that the returns on the projects are also monitored. They must meet the norms whereby crowdfunders can have a share in the returns generated through assets. However, the returns or interest on debt or debt form of financing is not suited for. This monitoring of the crowdfunding model helps the community to avail to the developing model for getting finance easily. Besides, with the customizations made and dedicated platforms raised for crowdfunding, the Islamic communities now have a free hand in doing business with this model, while not being afraid of breaking the rules or steering away from the path.

Crowdfunding has helped many developing countries grow because of the micro- financing options for the entrepreneurs to start their new ventures. The platforms promoting the related projects charge them with commission fees. This fee has to be paid irrespective of the success of the project. On the other hand, for the platforms backed with Islamic fraternities, they only require a stake in the project like that of shareholder. This stake not only gives them a power to vote for the progress of the project or the decision making but also ensure that the project is progressing well. It also is indicative of the willingness of the platform to share the final outcome of the project (which need not necessarily be a cent percent success or failure). In fact, in this case, even the platforms strive for the success of the companies.

The Islamic crowdfunding can be a boon for the fraternity and the followers as well. This should further get promoted as it only ensures better success rate for the projects.

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This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated by CoAssets.com. CoAssets is South East Asia’s first listed and largest real estate crowdfunding platform. If you have any Crowdfunding news or stories to share, please email [email protected]

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