#Asia Islamic crowdfunding can change our world for the better


Islamic crowdfunding is an alternative to the Godless capitalist system where profit motive is the highest arbiter, according to author Umar Munshi

CrowdfundingUmar Munshi is President (Singapore Chapter) of TDA Entrepreneurship Community Indonesia, and Co-founder of Club Ethis Real Estate Crowdfunding

Islamic crowdfunding has the potential to change our world for the better. When an online community unites and pools resources, this community has the financial and social clout, and capability to create and re-create multiple aspects of the world and directly impact society.

Crowdfunding itself started and blossomed in the West initially amongst groups of like-minded individuals wanting to create something. In its infant years, crowdfunding was a fundraising tool for supporters of musical or arts projects until Kickstarter and Indiegogo — two pioneering platforms — went viral and kicked off this global revolution. Last year, these two platforms crowdfunded a total of more than US$1 billion.

A recent report by Massolution projects crowdfunding to reach a whopping US$35 billion in 2015.

There is a wide variety and scope of applications for crowdfunding, which continues to evolve and in recent years made strides into the investment world. The global crowdfunding industry is still dominated by the US, but Asia has recently seen strong growth – eclipsing Europe as the next-largest crowdfunding region.

Crowdfunding platforms are able to grow rapidly due to the ease of online transactions and Internet’s inherent virality. The ability to fund projects directly makes crowdfunding highly appealing, especially to Millennials. Investment-based crowdfunding has also benefited from the declining sentiment towards the financial world due to recent financial crises, continued insipid returns, and stock-market volatility have. The top-heavy nature of our financial systems, and its perceived role in the creation of inequality has also diminished its popularity.

Savvy and progressive investors are thus looking at crowdfunding as their investment vehicle of choice. The low-entry capital makes it especially accessible to the middle income and small-medium business owners.

There are three main objects of crowd-investments:

1. Crowdfunding of startups empowers entrepreneurs, but it has an inherently higher risk of failure. This power to create is however hugely appealing, and we all dream of having a share in the next big thing (a unicorn, in tech-speak). A startup’s crowdfunding success is increasingly taken as proof-of-concept or market acceptance and thus attracts further rounds of angel or venture funding.

2. SMB crowdfunding helps to bridge funding gaps for stable and growing companies to grow.

3. Real estate crowdfunding removes the high capital-barrier to entry. Democratising real estate will reduce the yawning income-inequality created by the wealthy’s monopoly over land and real estate assets.

There are four common structures of crowdfunding today – debt, equity investment, rewards and donations. Debt dominates crowdfunding, but this transfer-of-risk model is frowned upon in Islam as it treats money as a commodity. Usury is traditionally forbidden in Abramic religions.

Equity investment is where investors and business owners have shared ownership — sharing risk and reward is in line with Islamic guidelines (Maqasid Al-Sharia). In 2015, the Securities Commission Malaysia announced the licensing of six equity crowdfunding platforms, which is a positive step forward for crowdfunding in the Muslim world.

Rewards are typically for supporting startups, where the reward can range from the actual object of crowdfunding (pre-ordering) to a token of gratitude such as a t-shirt. Donations is purely philanthropic giving with no commercial return.Crowdfunding2

Why Islamic crowdfunding?

Online communities can share and pool resources to do good and bring benefit to society. Islamic crowdfunding allows the building of communities and promotes ethical and social responsibility which are critical aspects of the Islamic worldview. Islamic crowdfunding is an unprecedented opportunity that very rarely comes. We have been deeply entrenched in a Godless capitalist system where profit-motive is the highest arbiter. With this new wave, Muslims are empowered to create an ecosystem based on values of universal good, enshrined in Islamic tenets.

Notwithstanding Islamophobia, Islamic principles do not contradict the ideals of modern society – rather it complements and augments the natural affinity of humankind for justice and societal harmony.

The backbone of Islamic crowdfunding is community, whereas Islamic banking emerged from a much more corporate environment steeped in capitalist culture. When the overriding motive and mechanism revolves around community, profit motives cease to be at the forefront of decision-making. Decisions are based on a more holistic view of benefit, which results in many wonderful initiatives and movements for social good.

Islamic crowdfunding has the unique ability to empower the masses to create and re-create products, lifestyles and communities independent of monolithic corporations and governments. In essence, if harnessed properly, society is now able to shape its own world based on its own needs, wants and principles.

Islamic crowdfunding has taken some time to get off the ground but over the past two years, many new platforms have sprung up. Statistics are scarce but I estimate Islamic crowdfunding globally in 2015 to be at approximately US$25 million.

A prominent platform in the Middle East is Liwwa, which is Jordan/Palestinian-based and has crowdfunded small businesses to a total of US$500,000 to date. Interestingly Liwwa is one of the few Islamic platforms backed by both VC funds as well as Islamic banks.

Two larger regional platforms are US-based LaunchGood and ClubEthis (Ethis = Ethical + Islamic) from Singapore. LaunchGood is focused on Kickstarter-style reward-based crowdfunding of new ideas or causes, and has crowdfunded more than US$4.5 million to date.


Club Ethis focusses on real estate development crowdfunding of affordable housing in Indonesia, and has Crowdfunded US$2.2 million since March 2015. More significantly, the projects that crowdfunding has enabled it to start on will eventually provide more than 1,500 homes for the needy – talk about social impact!

Real estate crowdfunding is one of the fastest-growing segments of this booming industry, and is turning out to be one of the most lucrative forms of alternative investment. This sub-sector is projected to crowdfund US$2.5 billion in 2015.


Crowdfunding is a natural way forward for Muslims and Muslim countries. Muslims make up almost a quarter of the world, with a young and fast-growing population. The World Bank predicts that the Muslim world may be one of the first markets in which crowdfunding investment would be truly game-changing.

As Islamic crowdfunding matures and grows from strength to strength; it is up to Muslims as well as non-Muslims to participate in the creation of a truly ethics-based ecosystem that has the capacity to bring tremendous benefit to our own lives, and to humanity as a whole. Online communities can share and pool resources to do good and bring benefit to society.

The views expressed here are of the author’s, and e27 may not necessarily subscribe to them. e27 invites members from Asia’s tech industry and startup community to share their honest opinions and expert knowledge with our readers. If you are interested in sharing your point of view, please send us an email at writers[at]e27[dot]co

Image Credit: Olivier Le Moal/Shutterstock

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