A funding mechanism whereby money is raised from a large number of people (the crowd), using an online network, in compliance with the principles and rules of Islamic law (shari’ah). This technique allows small- and mid-size enterprises (SMEs) to have access to much-needed capital. It remotely links investors (providers of funds) with entrepreneurs (providers of ideas). The individual investor contributes a small amount of capital towards the overall fund. This provides a peer-to-peer investment platform that operates under shari’ah.
The providers of funds (investors) seek to earn returns on the capital provided through crowdfunding, while users of funds are able to finance their business requirements in a cost-effective manner (a lower cost of capital).
For more, see: Islamic crowdfunding.
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