Developing an Islamic crowdfunding model: a new innovative mechanism to finance SMEs in the Middle East

Abstract

Purpose The purpose of this study is to investigate and discuss the viability of Islamic crowdfunding (ICF) as an alternative form of financing small and medium enterprises (SMEs) in the Middle Eastern and Islamic business environment. This study raised essential questions: what is the perception of ICF in the Middle East? Does the Middle East region really need an Islamic crowdfunding model to support SMEs? Is it possible to create a crowdfunding platform complaint with Sharia? What are the requirements for developing an Islamic crowdfunding model? Design/methodology/approach The methodology followed to answer these questions is a qualitative research design depends on in-depth interviews, literature review, historical analysis and critical discussion. Data analysis was conducted using NVivo to analyze 25 in-depth interviews with Islamic scholars, Sharia board members and Islamic finance experts from different Middle East countries such as Saudi Arabia, Kuwait, Egypt, Iraq, UAE and Bahrain. In addition, more than 115 transcriptions, memos and research articles were used. Findings The study provides a new Islamic Sharīʿah-compliant crowdfunding model as the main outcome of this study. In addition, the content analysis revealed four main themes to be the essential pillars to develop the ICF model. These provisions of Islamic Sharia are: Project Idea (Halal) (28.5%), Funding Goal (36%), Return and Risk (14%) and Funding Commitments (21.5%). The findings also revealed that the four types of crowdfunding (reward-based crowdfunding, donation-based crowdfunding, loan-based crowdfunding and equity-based crowdfunding) are legal and supported by evidence from Quran and Sunnah. Originality/value Despite the critical development in Islamic finance and the expanding number of young Muslims slanting digital Islamic services, empirical studies exploring this issue in the Middle East is still inadequate. Further, ICF has increased attention and there is an urgent need for financing new SMEs in the Middle East.

Bibliometric Analysis of Islamic Crowdfunding: A Literature Review of Its Journey

“…Other driving factors include perceived ease of use, perceived usefulness, and consumer innovation (Shaikh et al, 2020). The presence of crowdfunding has a positive impact on the success of fundraising, and crowdfunding platforms are effective fintech tools for financing entrepreneurs in the Middle East (Abdeldayem and Aldulaimi, 2022).…”

Financial innovation in Islamic banks: evidence on the interaction between Shariah board and FinTech

“…Hanbali, Shafiie, Hanafi and Maliki). Additionally, SBs can effectively offer advice and opinions on matters related to the management of banks in developing FinTech products that present less controversy, such as the development of smart contracts and agreements from the blockchain innovation and application (Evans, 2015; Oseni and Omoola, 2015; Koulu, 2016) and P2P crowdfunding (Abdeldayem and Aldulaimi, 2022). In this regard, SBs should have close discussions with other Shariah personnel to further investigate the new technology products or contracts.…”

“…On the other hand, crowdfunding is suited to the Shariah context, whereby the borrower and creditor can connect without the need for the two to live in the same country or even to know each other. By benefitting from FinTech innovation, IBs could venture into a new investment of P2P crowdfunding using the contract issued under Murabaha (mark-up) for buying an asset and the musharakah- or mudharabah -based equity financing model (Abdeldayem and Aldulaimi, 2022). Such financial innovation challenges the SBs to ensure Shariah compliance while encouraging financial innovation from the technology application.…”

The role of financial status, attitudes, behaviours and knowledge for overall well-being in Portugal: the mediating role of financial well-being

“…Similarly, Rehman et al (2014, p. 1) stated that financial wellness is “the knowledge and having control about personal finances that make one feel satisfied in the existing situation and also means, one’s ability to mobilize finances in a foreseeable future situation”. Therefore, one can conclude that financial wellness is a sub-dimension of financial well-being, which can be used as a measure, such as financial satisfaction (Abdeldayem and Aldulaimi, 2022; Rutherford and Fox, 2010).…”

“…van Praag et al (2003) demonstrated that the well-being domain with more impact on general satisfaction was financial, health and job satisfaction. Therefore, interventions could be designed if one could know to what extent financial well-being influences financial satisfaction, and in the long run, whether it enhances overall well-being and performance (Abdeldayem and Aldulaimi, 2022; Prawitz et al , 2006).…”