Islamic crowdfunding is a model based on Islamic principles that involves gathering funds from several individuals with access to the same investment options. The model allows the investments to be made according to the Shariah law.
Islamic crowdfunding, also known as Islamic crowd investing, is a crowdfunding model based on Islamic principles designed to adhere to Shariah law. It has rules on the kind of investments permissible by Islamic principles. However, many Muslims face the dilemma of the crowdfunding platforms and halal investments to go for. Hence, we’ve compiled these Islamic crowdfunding platforms in 2024.
Let’s check them out.
Types of Crowdfunding
1. Equity Crowdfunding
Equity crowdfunding is a common type of crowdfunding. It involves the investors who are investing in a company acquiring shares. They’re called Equity owners and get financial benefits for lending you money to start a business. They become your partners.
Here are some reasons we like Equity crowdfunding and why we don’t.
Why we like Equity Crowdfunding
- It tends to raise the largest sum of money compared to other types of Crowdfunding.
- The financial benefits for the investors are an attractive incentive.
- The investors involved understand the risks associated with it.
Cons
- Business owners tend to give more equity than they can afford to investors.
- Reaching an agreement on the percentage to give the investors can be nerve-wracking.
2. Reward Crowdfunding
Reward Crowdfunding is an affordable and common way of raising funds for a business. It’s similar to equity crowdfunding, but the difference is that the owner will have to pay the investors for products or services. It’s a unique form of crowdfunding with its pros and cons.
Why we like Reward Crowdfunding
- It’s a marketing strategy for business owners to distribute their products in the market.
- The distribution of the products helps to build trust and loyalty in customers.
- The act of giving out the products helps to build reviews and feedback that can promote customer validation.
Cons
- Reward Crowdfunding raises a small amount since the reward is in products and services.
- It’s not the best Crowdfunding initiative for businesses with significant investments
- Competitions can easily replicate your creative products and services and leave you at a detriment.
3. Donation Crowdfunding
Donation Crowdfunding involves giving out to charitable causes without expecting any return. The return is mostly the satisfaction of supporting a non-profitable cause. Islam has encouraged this type of crowdfunding, and one of the most significant is the Zakat. The Zakat is the largest donation worldwide to Muslims. It’s a tradition in Ramadan towards the end.
Why we like Donation Crowdfunding
- It’s a charitable cause that puts Barakah in your doings.
- Supporting this noble cause elevates you in the presence of Allah (SWT) and among your peers.
- It brings contentment and divine satisfaction that can’t be explained.
Cons
- Building people’s trust to crowdfund for a donation platform takes a lot.
How Islamic Crowdfunding works with Conventional Crowdfunding types
Islamic Crowdfunding allows investors to support small businesses as a distribution of wealth. Hence, they target projects that have a social and responsible impact.
There are several crowdfunding platforms to reduce poverty and provide financial aid. For Islamic Crowdfunding, Mudharabah is used. It works based on the following.
- Profits are distributed between the business owners and the investors based on predefined agreements.
- Investors don’t have the power to influence the business.
- The agreements or contracts benefit the startups with their creative ideas.
To the above, the Shari’a rules prohibit investments in Haram activities like gambling, porn, alcohol, etc. The capital used to finance the project must be from a halal source. There must be no interest charged or paid. Also, a Shariah supervisory review should ensure the crowdfunding platform agrees to the rules.
Best Islamic Crowdfunding Platforms in 2024
1. Maydan Capital
Maydan Capital is one of the best Islamic Crowdfunding Platforms in 2024. It’s an equity Crowdfunding Platform that focuses on Islamic ethics. Mayden Capital is a Wahed Invest subdivision available in the UK, UAE, and the US.
It aims to connect ethical Muslim investors with ethical companies. It is mainly targeting companies with a technology background and social impact.
2. Ethis
This is a crowdfunding platform approved by the Malaysian Securities Commission. It’s a global platform that enables people to join impact-driven projects. It’s part of the Ethis Group and is operated by Ethis Investment Platform LLC. This is available worldwide to connect ethical startups with the right investors. Also, it has an Islamic Crowdfunding plan that you can use.
It works in sectors like Equity, Peer-to-peer lending, Islamic Social Finance, etc. The platform is active in over 70 countries, with an average of 500+ projects supported. Also, Ethis is Shariah compliant, making it one of the Islamic Crowdfunding Platforms 2024 that you can engage in.
3. Sadaqah
Sadaqah is a donation Crowdfunding Platform established to solve the problems of needy people globally. The platform aims to be the leading platform built on transparency to give hope to the ummah. Sadaqah serves as a bridge between donors and charitable projects. They cover projects related to refugees, widows, the old, orphans, low-income people, etc.
4. LaunchGood
LaunchGood is a donor-based crowdfunding platform established over ten years ago. The platform is a worldwide operation that connects Muslims with social and economic projects. They have different plans like Ramadan challenges, Giving Tuesday, etc. Also, they’re a zero-fee platform and trusted by many tonhost fundraising campaigns.
5. DubaiNext
DubaiNext is a reward Crowdfunding Platform that raises funds for small businesses. It works so that the funds are returned to the investors if the target isn’t reached.
But if the target is reached, the funds are sent to the business owner via an agency supporting small business growth -Dubai SME. All the business owners own the business, and the investors can choose between their products and services.
Bottom line
There are several crowdfunding platforms, but do you know which one to use? Don’t fret. In this article, we’ve covered the best Islamic Crowdfunding platforms in 2024 and explained the types of conventional crowdfunding. We’ve also explored how crowdfunding works with the Shariah principles and the rules.