Here’s 4 reasons why Muslims Are Flocking To Islamic Crowdfunding – And Why You Should Too!

Islamic finance is about more than just banking.  And Islamic crowdfunding is about more than just the money.

Most people know that the fastest way to retire early – or, at the very least, raise your savings, is through investing their hard-earned money in the right projects. But that is easier said than done. Finding an investment platform that can connect you with lucrative projects is no simple task – finding a Shariah compliant investment platform is close to impossible.

Enter a new kind of investment platform that has answered the prayers of many Muslims – Islamic Crowdfunding Platforms!

According to the World Bank, Islamic crowdfunding has the strong potential to be a game changer in the Islamic financial system. The good news is that it is certainly getting popular among Muslims. EthisCrowd.com alone has collected funds of more than $4 million for projects worth $30 million from ordinary investors, in the past three years. This number is only expected to grow.

So here are the reasons why Muslims are flocking to Islamic crowdfunding, and why you should too!

1-Islamic Crowdfunding and Islamic Finance

Islamic finance is based on Maqasid Al-Shariah, a set of principles that aim to bring well-being to the individual and community. Poverty alleviation, sustainable growth and improved standard of living are all key goals of implementing Islamic finance.

Some key features of Islamic finance are the prohibition of interest, honesty and transparency in dealings, and social responsibility. This is of course not only practiced by Muslims, but by a large group of people who share these universal values and morals. Islamic finance is not only for Muslims but for anyone who believes in honesty and fairness in business dealings.

Islamic crowdfunding follows the same principles of Islamic finance. It is completely Shariah compliant and based on the principles of wealth distribution and risk-sharing.

In the words of Umar Munshi (connect on Linkedin), CEO of the first real estate Islamic crowdfunding platform EthisCrowd.com:

“Islamic crowdfunding projects are structured on the basic principle of risk-sharing. This is fairer for both the investor and developer, as they will share both the risks and rewards. This is what makes it Islamic.”

2-Islamic crowdfunding and Social Impact

Islamic crowdfunding platforms generally prioritize projects that bring positive social impact to communities. This is very attractive to Muslims worldwide as philanthropy is very much an ingrained behavior in most Muslims. Global statistics are not clear, but in the UK alone, Muslims donated £100 million in the month of Ramadan!

One way that Islamic crowdfunding brings positive change is through affordable housing campaigns.

Home ownership is a forceful tool in helping low-income families break out of the poverty cycle and enjoy a higher standard of living. It is also a financial safety net that can be passed down generations. Studies show that homeowners tend to have higher economic opportunities as they are better able to focus on other forms of empowerment such as entrepreneurship and education. Their children tend to be healthier and do better in schools.

Here at EthisCrowd.com, we believe that shelter is a basic human right and not a privilege.

One successful example of an affordable housing project crowdfunded by EthisCrowd.com is the Cariu Campaign.

The project secured a total crowdfunding amount of S$345,000 from investors (the crowd), which the contractors were then able to use to build affordable housing units in Indonesia. 80% of the payouts have already been successfully made!

A popular crowdfunding campaign by EthisCrowd.com is on funding the installation of fiber optics. The project aims to alleviate poverty by providing internet connectivity to many Indonesians. This will empower individuals towards entrepreneurship and enable businesses to develop in the digital age.

3-Islamic Crowdfunding and High Returns

What truly sets Islamic crowdfunding apart from being another charity campaign are the high returns. Here at EthisCrowd.com, we get realized returns of 10 to 15%. That is even more impressive when you consider that banks on average provide 2-5% on deposits!

4-Islamic Finance and Financial Inclusion

Currently, around 2 billion adults lack access to financial services and their options in saving and boosting their wealth is limited.

While some Muslims may not be categorized as part of the ‘unbanked’ they too face similar problems in investing due to small savings and/or limited Islamic financial services. These Muslims would normally not enter the investment market, either due to shariah incompatibility of the investment or because they did not fall under the wealthy category to invest the large sums needed.

Islamic crowdfunding platforms are changing this norm, by matching investors with Shariah-compliant campaigns that accept a very low minimum investment amount to participate. They are the platforms needed for the middle-income Muslim to get involved in the investment market, and consequently, have a part in shaping the market.

Is there another reason for the rising popularity of Islamic crowdfunding that I haven’t mentioned? Let me know in the comments, and I’ll update the post with the best ideas (and a link crediting you). We always like to hear from you!

For more information on the type of successful campaigns that Islamic crowdfunding platforms do, please visit EthisCrowd.com.

Read more on What Is Islamic Crowdfunding?