Dr. Md. Touhidul Alam Khan :
Crowd financing, also known as crowdfunding, is a method of raising funds for projects, businesses, or causes by collecting small contributions from a large number of people, typically through online platforms.
It enables individuals, startups, and organizations to access capital without relying on traditional financial institutions, fostering innovation and community-driven support.
This approach democratizes funding by allowing anyone to contribute, invest, or donate, often in exchange for rewards, equity, or simply the satisfaction of supporting a meaningful initiative.
The global financial landscape is witnessing a remarkable evolution with the rise of Islamic crowdfunding, a niche yet rapidly growing segment within the broader Islamic finance ecosystem. As the demand for Shariah-compliant financial solutions continues to surge, crowdfunding platforms that adhere to Islamic principles are emerging as a transformative force, fostering both economic growth and social impact.
By leveraging digital technologies, these platforms are connecting ethically conscious investors with projects that align with Islamic values, such as the prohibition of Riba (interest) and the promotion of socially responsible investments. This innovative approach is not only diversifying Islamic financial assets but also unlocking new opportunities in sectors like real estate, healthcare, renewable energy, and small and medium enterprises (SMEs).
The global reach of Islamic crowdfunding is expanding at an unprecedented pace, transcending geographical boundaries and attracting participants from diverse regions, including the Middle East, Southeast Asia, Europe, North America, and Africa. This growth underscores its potential to become a cornerstone of the Islamic finance ecosystem, offering a viable alternative to conventional financing methods.
By 2025, the global Islamic finance market is projected to sustain a robust single-digit growth rate, following an 8% increase in 2023, according to S&P Global. Within this context, Islamic fintech, including crowdfunding platforms, is expected to grow at a compound annual growth rate (CAGR) of 21%, reaching a valuation of $128 billion.
A global phenomenon with a local impact
Islamic crowdfunding has expanded far beyond the confines of Muslim-majority countries. Platforms like Seedrs, established in the UK in 2012, have pioneered equity-based crowdfunding, showcasing the universal appeal of crowdfunding initiatives while integrating a distinct ethical dimension by adhering to Shariah principles.
Emerging platforms such as Ethis, which operates globally with the endorsement of the Malaysian Securities Commission, highlight the potential of Shariah-compliant crowdfunding. In 2024, Ethis successfully facilitated over 53,000 transactions and managed more than 530 campaigns that focused on projects yielding positive social and environmental impacts. Another noteworthy example is LaunchGood, which leverages the Sadaqah (voluntary charity) system to fund humanitarian causes.
Crowdfunding is gaining traction beyond Muslim-majority regions, particularly in Europe, North America, and Africa. In 2024, Seedrs distinguished itself as a leader in equity-based crowdfunding, raising GBP 353 million (approximately US$ 442.69 million) for 266 initiatives in just one year. Additionally, Kickstarter, a prominent US-based platform, has facilitated an impressive US$ 8 billion in investments since its launch in the reward-based crowdfunding sector in 2009.
In Türkiye, where there is a significant Muslim population, crowdfunding predominantly operates on an equity-based model, enabling investors to contribute varying amounts, from small sums to larger investments. This approach not only emphasizes the key principles of crowdfunding-shared responsibility and community collaboration-but also aligns seamlessly with Islamic financial values. These examples demonstrate how Islamic crowdfunding serves as both a financial instrument and a catalyst for social cohesion and economic empowerment.
Unlocking potential through innovation and regulation
Despite its promising growth, the adoption of Islamic crowdfunding has not yet reached its full potential. While its efficiency, transparency, and ethical nature make it an ideal solution for addressing the financing needs of SMEs and supporting charitable projects, greater awareness, regulatory support, and technological infrastructure are needed to unlock its capabilities fully. Governments and regulatory bodies in Muslim-majority countries must take proactive steps to create enabling environments for these platforms to thrive.
For instance, the Philippines is currently developing a regulatory framework for Islamic crowdfunding, signaling its intention to play a proactive role in this market. Similarly, the Maldives, having successfully conducted pilot applications, is set to launch several Shariah-compliant crowdfunding initiatives in the coming year. These developments highlight the importance of regulatory frameworks in fostering innovation and ensuring the sustainability of crowdfunding platforms.
Technological advancements are also reshaping the landscape of Islamic crowdfunding. The integration of fintech solutions, such as blockchain technology and digital platforms, is enhancing accessibility, transparency, and efficiency. These innovations are attracting tech-savvy investors and entrepreneurs, thereby increasing the competitiveness of Islamic crowdfunding platforms in the global financial arena. By 2025, these advancements are expected to further solidify the position of Islamic crowdfunding as a leading investment option for Muslims who prioritize adherence to Shariah principles.
A path forward for Islamic crowdfunding
To realize its full potential, Islamic crowdfunding platforms must focus on diversifying their offerings and expanding their investor base. By appealing to a broader audience while maintaining their commitment to Shariah compliance, these platforms can position themselves as leaders in the ethical finance sector. This requires not only increasing the volume of funds raised but also enhancing their global visibility and reputation.
Moreover, Islamic crowdfunding platforms should strive to compete directly with the most recognized global crowdfunding platforms. This entails adopting best practices in terms of user experience, marketing, and project selection while staying true to their ethical foundations. By doing so, they can serve as reliable and efficient resources for both individual and institutional investors, thereby elevating the global standing of Islamic finance.
Islamic crowdfunding is more than just a financial tool; it is a catalyst for sustainable development and social impact. By aligning financial practices with ethical and religious principles, it offers a unique opportunity to address the financing needs of underserved sectors while promoting economic growth and financial inclusion. As technological innovations and regulatory frameworks continue to evolve, Islamic crowdfunding is poised to become a cornerstone of the global financial ecosystem.
With effective strategies in place, Islamic crowdfunding platforms can emerge as leaders in the ethical finance sector, supporting sustainable and impactful projects that resonate with the values of the Muslim community. This advancement will not only strengthen the global Islamic finance industry but also create a robust channel for fostering economic empowerment and social welfare. The future of Islamic crowdfunding is bright, and its potential to drive positive change is limitless.
(Dr. Md Touhidul Alam Khan is the Managing Director & CEO of NRBC Bank PLC).
