The gathering of many people online to financially support a cause, business or individual. Each person giving a (small or large) fractional amount towards a fixed target amount.
The combination of the technology of crowdfunding with the structures of Islamic finance and principles of Fiqh Muamalat.
Ethis Pte. Ltd. (Ethis) is a FinTech company registered and based in Singapore (Reg number 201026801E). We operate EthisCrowd.com, the world’s 1st Islamic Real Estate Crowdfunding platform. The name Ethis fuses the words Ethical and Islamic in line with our aims to be a premiere platform where both ethical and Islamic investors can come to find projects in line with their values to invest in. EthisCrowd.com is a community of approximately 17,000 individuals from around the word.
PT Ethis Indo Asia (PT Ethis) is an Indonesian associated company of Ethis Pte Ltd Singapore. PT Ethis is licensed in Indonesia as a real estate developer (Reg No 4014061031101517), contractor, investor and broker. It develops real estate, and also handles project and financial management of projects in Indonesia.
In 2016, the Ethis team successfully acquired the world’s first Peer-to-Peer lending (P2P) crowdfunding license with Islamic Investments, awarded by the Securities Commission of Malaysia.
EthisCrowd.com empowers its growing community to finance the development of real estate projects around the world from the comfort of their homes. We connect EthisCrowd investors to social impact and other types of real estate opportunities in emerging regions of the world. We strive to ensure all our activities are ethical and aligned to the principles and spirit of Islam.
Ethis matches your investment with a credible developer that we have screened in the project you choose. In Indonesia, the investment will be placed with PT Ethis as the co-developer or project partner. This gives an extra layer of protection to ensure the funds are managed properly.
The developer or contractor will use the investment to start or continue the development of the project. Sales can happen before project completion, or for some projects sales are already confirmed before the crowdfunding campaign.
Units are sold to the end buyer or to an Islamic Bank. Once the payment is received by the developer, the agreed share is transferred to EthisCrowd investors.
Projects are screened by local partners first, then screened further by Ethis HQ in Singapore. A few criteria and considerations include:
- Developers must have valid registration documents and good track records.
- Legal registration, complete with the necessary documentation and permits
- Land ownership status
- Commercial viability, including sellability and availability of financing
- Strong sales plan and team, or pre-secured buyers
- On-site inspections and checks
- Social impact and environmental responsibility
The general process is that EthisCrowd investors enter into a profit-sharing or revenue-sharing agreement with the property developer for the project they choose to invest in. These sharing ratios are fixed, and the actual realised profits will thus depend on the sales and performance of the project the campaign is funding.
Payouts are made when the property is sold to the end-buyer or to Islamic Banks who then enter a long-term sale with the end-buyer. In Indonesia, PT Ethis works with BTN Syariah and Bank Syariah Mandiri.
Profits are based on conservative projections. In most cases projected sales prices are known and thus projected profits are known. However, there are no fixed profit or interest rates charged for financing. During our 2 years of operation our investors have been earning an average of 10% to 16% on their investment
The projected timeframes published have already factored in a buffer for delays but payouts may at times be delayed further due to business and external circumstances.
Registration to become an EthisCrowd member is free. The only fees you have to pay are those your bank charges for remittance when you transfer your investment to your selected project if it is outside the country your bank is located.
Ethis collects an operating fee of 5% from the total amount raised from each fully funded project. This amount is not deduced from the returns paid to the investors. Investors will receive returns as indicated on their contracts for all successful projects. If a project is fully funded but for some reason the project is cancelled, the funds of investors are returned and Ethis does not take its 5% operating fee.
Risk Management Info
It is important to understand that all alternative investments including real estate crowdfunding can expose investors’ to loss of capital. It is recommended to invest only surplus savings, and to diversify investments across various campaigns.
In the worst-case scenario, the full invested capital may not be recoverable. In the event of total failure, all capital may be lost.
Islamic finance functions based on risk sharing, not risk transfer. In any case, guarantees in Alternative Investment are only as strong as the parties giving the guaranty. Ethis has a strict and rigorous screening process to reduce project and counterparty risk, as well as market and external risks. EthisCrowd is encouraged to do its own due diligence before investing.
Ethis takes care of that for you. Once the project is listed all the info about the developer will be posted on the webpage for the project. You can then proceed to do your own due diligence about the developer based on the information provided as you see fit. You may also contact Ethis directly with any further enquiries you may have that may not have been answered on the project page.
Socially Responsible Investment (SRI) Info
Ethis empowers the average investor. Real estate investment is typically available to high net worth individuals, and therefore average person usually cannot afford to enter this lucrative market. We level the playing field.
Crowdfunding allows for big capital to be created and mobilized by many. Crowdfunders can start by investing a small amount, and even spread more investments over multiple projects and campaigns at a time. Crowdfunders are also able to choose the campaigns they want to support.
Ethis is a platform for good. We match excess capital from our community of investors to projects for development of real estate in communities and territories that require help. We build subsidised estates and affordable housing. We support Corporate Waqaf projects and Waqaf land Development. We also develop eco-friendly projects.
At Ethis we invest in a variety of different kinds of projects. However, we have a strong preference for social impact projects. Our most preferred projects are affordable housing in Indonesia, a country that has a shortage of 18 million homes. We are proud to be among those helping the lower income citizens there move up from being renters to homeowners.
Our crowdfunding funds is often for real estate developers and contractors, not trading or flipping or buying property to rent.
We also use funds from our crowdfunding campaigns to provide bridging or temporary financing with short time-frames to real estate developer
Legality in Singapore
- Crowd funding may be regulated under various legislation in Singapore depending on the form or method of fundraising.
- For example, if the equity-based model is used, the crowd funding exercise would involve an offer of securities. This is subject to the requirements set out in the Securities and Futures Act (Cap. 289) (the “SFA”).
- On the other hand, crowdfunding arrangements which do not involve the offer of securities (for example, where contributions are in the form of donations or pre-payment for merchandise) are not subject to MAS’ regulations.
- This depends on the business model of the overseas crowdfunding platforms. For example, offers made through an overseas crowdfunding platform that solicits funds from investors in Singapore will be subject to prospectus and other applicable (e.g. licensing) requirements under the SFA such as; project or business proposal, the form of return (if any), how and when you might get a return, and the risks involved. However, given the borderless nature of the internet and the fact that many such crowdfunding platforms do not have any presence in Singapore, there are practical limits to the enforcement of local requirements. Thus, it is all the more important that consumers exercise vigilance when considering participating in such offers.
- Before you contribute funds through such overseas crowdfunding platforms, you should ascertain if the platform is authorised or required to be authorised to facilitate such offerings, including in Singapore. You are encouraged to deal with regulated persons. The regulatory regime of MAS aims at safeguarding the interests of investors by ensuring that only competent and professional persons provide financial services to investors in Singapore. If you deal with an unregulated entity, you should be aware that the protection afforded under laws administered by MAS will not apply.
- If you suspect that a person has breached the requirements under the SFA or FAA, you can report the matter to MAS by sending your feedback to [email protected].
- If you have suffered a loss as a result of a breach of contract, you can approach the Consumers Association of Singapore (“CASE”) or the Singapore Mediation Centre (“SMC”). You can also take legal action, which can be a time-consuming and costly process. If you wish to seek legal advice or to engage a lawyer to take legal action on your behalf, the Law Society maintains a list of all registered lawyers in Singapore which can be accessed on their website at http://www.lawsociety.org.sg/
MAS notes that crowdfunding is emerging in some countries as an alternative source of financing for start-ups and small companies. MAS is closely monitoring the developments in other jurisdictions on this front and looking into an appropriate regulatory framework for such new business models.
- There are no regulations at this time in Singapore for the type of crowdfunding activity Ethis is involved in. For this reason Ethis is not regulated by MAS. However, Ethis does report its activities to MAS in order to obtain regulatory advice and to make sure no laws are being violated. Ethis seeks to keep its business practices fair and transparent, and in doing so we aspire to implement crowdfunding best practices.
- The activity of Ethis does not qualify as equity crowdfunding nor does it equate to issuing any kind of security or futures. Ethis arranges profit or revenue sharing agreements between its investors and the developers of the respective projects being invested in.
The Mudharaba contracts are enforceable in Singapore. Each contract is formed after a process of offer and acceptance occurring electronically via e-signed contracts.
The investor(s) and the property developer(s) are contractual parties to each contract. Ethis PTE Ltd or “Ethis Singapore” is not a party to the contracts. Ethis Singapore simply facilitates the contracting process between the two parties by sending and transferring the contracting documents between the two parties in the beginning of the contract, and monitoring the payout process from the investee company to the investors at the end of the contract.
- Ethis aims to build a community of investors and businesses where risks are shared and capital is channelled into real economic activity that benefits the communities receiving the investments. Essentially, Ethis contracts follow the basic Islamic principle of sharing risk while seeking profit rather than the model used by banks which is transferring risk while seeking profit. Part of implementing this principle is clarifying that there are no capital guarantees because guaranteeing capital in investment is akin to Riba (interest) and it also contradicts the principle of risk sharing. We exercise all options to practice responsible management at the highest level, but we do not guarantee anyone against all the unexpected misfortunes of life. This is because we don’t believe in one party only bearing to gain while the others bear the possibility of loss. We profit together or we share loss together.
- Islam is more than a religion; it’s also a way of life that contains a code of laws and ethics that deal with social, economic and political matters. Muslims are expected to live according to Shariah in all aspects of life. Shariah places restrictions on the types finance and investments that are permissible for the Muslim community. Islamic finance can be defined as the body of financial contracts and rules that have been adopted from the rich heritage of scholarly research in Fiqh Muamalat (Islamic law of transactions) and modified to comply with modern banking regulations while remaining in accordance with the principles of Shariah. In Islam money must be used in a productive way, and generating return on your money must be done through Islamically legitimate and ethical trade or investment. According to Shariah, group investments must include an element of risk sharing and ideally it should be confirmed that the investee will use the funds in a manner permissible in Islam. Generating interest on money is seen as income through exploitation and is fully prohibited in Islam. Shariah also does not permit trade or investment in unethical industries or commodities, such as: arms, gambling, alcohol, conventional banking or insurance, non-halal food or beverages, non-Halal entertainment and more.
All contracts that Ethis uses are based on Shariah compliant contract structures. The documentation is prepared by lawyers who have significant experience with structuring Shariah compliant contracts. We are currently in the process of obtaining official certified Shariah compliant status from recognized Islamic certification bodies in Singapore and Malaysia.
With any type of investment, risk is determined several factors. Shariah and conventional investments need to be evaluated using the same risk management techniques such as analyzing the business plan of the project, the track record of the one seeking financing in terms of cash flow as well as debt repayment, etc. For investments to be qualified as Shariah compliant however, there is an extra level of analysis that must be carried out to ensure the businesses that are seeking funding are adherent to the principles of Shariah.Investment in businesses involved in non-Shariah compliant industries or commodities, such as arms, gambling, alcohol, conventional banking or insurance, non-halal food or beverages, non-Halal entertainment and more, is not permitted by Shariah.
Other Common Questions
Crowdfunding is raising small portions of a total fundraising amount from a large group of people online. The funds raised from the crowd can be used for charity, or investment or a hybrid, whichever one is intended should be clearly declared by the platform hosting the crowdfunding service. It should also be mentioned by the project owner who is requesting the funds.
Investment crowdfunding is commonly divided into 2 kinds: Equity and Debt. When a project uses equity crowdfunding they seek equity investment from a large pool of investors online. The project owners or “issuers” give the investors an equity portion in their company in exchange for the funds invested. The investors can benefit from this model because there is no need to be an accredited investor to invest.
For debt based crowdfunding, a person seeking a loan will place their requested loan amount on an appropriate platform that provides crowdfunded loans, also known as Peer-to-Peer (P2P) loans. The loan amount is produced by several portions of the total amount being contributed by various members of the crowd. The interest amount and the repayment period will be determined by the credit score of the borrower. This score will be produced by the platform based on personal information gathered from the borrower. This method gives investors the opportunity to create a portfolio of loans to various people in order to diversify the default risk
EthisCrowd investors have a right to the returns or profits depending on the agreement within the contract. Payout occurs when an asset (land or property) is sold, or when payment is made for work done.
At Ethis we invest in actual property and not the resale of property and we require developers to have a claim or ownership of the land before we channel investments to them. Keeping this standard helps us to have a right to profits from the land whenever it sold, even if it is much later than the date we project. So the more likely misfortune is delay in profits if the project is delayed, or a loss of some of the capital if the land and or project is sold at a loss for some reason.