1. Waqf-Based Crowdfunding:
Potential Mechanism for Entrepreneurship Development
By:
Samsinar Sulaiman
Dr. Shifa Mohd Nor
INTRODUCTION
Nowadays, the spirit of entrepreneurial among Malaysian citizen tremendously increase especially the involvement of Muslims in entrepreneurial activities. An entrepreneur is believed to be the driving force of the economy. However, lack of financial support threaten the developmental needs and growth spirit of the entrepreneurs. Entrepreneurs face difficulties in acquiring fund or capital to begin a new business (Kerr & Nanda 2009, Andersen & Nielsen 2012) due to lack of creditworthiness and business track record.
Generally, entrepreneur relies on financial intermediaries or bank loan as a source of fund (Abdullah 2016). However, financial intermediaries have their own standard on deciding which project to fund. Usually, establish firm or entrepreneur have more advantage in this respect rather than the potential entrepreneur. Hence, the potential entrepreneur needs other sources of fund or external financing to gain capital such as crowdfunding.
On 3 August 2016, the fifth Prime Minister of Malaysia, Tun Abdullah Badawi has launched the Waqf (Islamic Endowment) crowdfunding platform or known as WaqfWorld org. Described as the “world’s first” waqf-based crowdfunding, this new platform was announced at the 12th World Islamic Economic Foundation Forum (WIEF) held in Jakarta, Indonesia. This unique hybrid product of crowdfunding in the form of waqf represents a new mode of financing mechanism for entrepreneur by using Islamic mechanism and regulation.
This study will explore the potential of waqf-based crowdfunding as one of potential mechanism or source of fund for the entrepreneur.
OBJECTIVE
PROBLEM STATEMENT
Entrepreneurship is believed as one of medium to boost economic, therefore, the development of entrepreneur should become one of priority of our country. However, lack of financial support or sufficient source of fund has become the big hurdles for new entrepreneurs and start-up businesses (Kerr & Nanda 2009, Andersen & Nielsen 2012) once threatens their growth. Also, reluctant of banks to support young entrepreneurs and their start-ups due to their perceived risk profile and non-existence of collaterals triggered the requirement evolvement of new innovative product or mechanism to address the funding gap for new entrepreneur (Asutay & Marzban 2015)
Conventional crowdfunding have some elements that prohibited in Islam, hence it is not permissible for entrepreneur especially Muslim entrepreneur to utilize this mechanism as one of their source of funding. In addition, there are definite demand for new asset classes in the Islamic finance space show that are still unmet demand of financial Islamic services that need to fulfil (Abou-Gabal et al. 2011).
To present the solution of Islamic mechanism for entrepreneur development fundraising by utilizing crowdfunding and waqf as Islamic financial instrument or Shari'ah compliance crowdfunding.
METHODOLOGY
This study is qualitative by nature which employs library or literature based research methodology in order to provide theoretical foundation of the study. Data is gathered through secondary sources such as journals, proceeding papers, internet, bulletins, magazines and others.
FUNDAMENTAL PROCESS CROWDFUNDING A
Crowd
Intermediaries
Entrepreneur
PLATFORM
DISCUSSION
Crowdfunding Based Model Conventional
Potential Islamic
Instrument
Donation
Hibah
Sadaqah
Waqf*
Reward
Murabaha
Bay’(Sale)
Debt
Qard al-Hasan
Ijarah
Equity
Mudharabah
Musharakah
FUNDAMENTAL PROCESS CASH WAQF
*waqf is a form of donation, voluntarily act but with term and conditions. Therefore, it is a conditional donation
Institution of waqf(mutawalli)
Donor(waqif)
Beneficiary
(mawquf alaihi)
Table 1: Potential Islamic Instrument to implement in conventional crowdfunding based model
CONCLUSION
To conclude, there are possible potentials of a new hybrid product of Islamic crowdfunding based on the integration of waqf and crowdfunding in providing solutions to entrepreneurs. However, detail and cautious research should be done to ensure it to be materialize.