Analysis of Reward-Based Crowdfunding in Islamic Finance
Rahma Aulia Sidik, Yaga Tria Wandani Sukma
ABSTRACT
This paper explores reward-based crowdfunding in the context of Islamic finance, looking at its operational aspects, compatibility with Islamic principles, and overall framework. Examining how Shariah principles mesh with rewardbased crowdfunding mechanics and practices, the study evaluates how well it adheres to Islamic finance doctrines. The first part of the analysis outlines the basic ideas of Islamic finance, emphasizing its moral, legal, and Shariahcompliant foundations. After that, it shifts to explaining the ins and outs of reward-based crowdfunding, breaking down its incentive systems, operational framework, and effects on investors and project developers. The suitability of reward-based crowdfunding models with Islamic finance principles---such as the proscription of riba (interest), gharar (uncertainty), and conformity to moral investment standards---is then critically examined. The study investigates whether reward-based crowdfunding methods can be made compliant with the moral and legal guidelines set forth by Islamic finance.
Keywords: Crowdfunding, Fintech, Islamic finance
INTRODUCTION
Crowdfunding has become a disruptive force in the financial industry in recent years, changing the way that money is raised traditionally and putting entrepreneurs in contact with a large pool of potential investors. Thanks to the increasing popularity of different crowdfunding models, crowdfunding platforms have emerged as a popular means for both individuals and businesses to raise capital for their projects.
A model that has attracted a lot of interest is reward-based crowdfunding. With this model, business owners can provide non-monetary incentives or rewards to supporters who provide funding for their initiatives. Although reward-based crowdfunding offers investors and entrepreneurs special opportunities, there has been much discussion and debate regarding whether or not it is compatible with Islamic beliefs and practices.
Based on the tenets of Shariah law, Islamic finance forbids the payment or receipt of interest (Riba) and places a strong emphasis on risk-sharing, social justice, and ethical investing. Reward-based crowdfunding raises concerns regarding the permissibility of such transactions within the Islamic finance framework because it involves the provision of nonfinancial rewards.