Islamic Crowd Funding

http://www.crowdfundinsider.com/2015/01/61654-shariah-compliant-crowdfundingplatform-
grows-in-singapore-indonesia/

Shari’ah Compliant Crowdfunding

Platform Grows in Singapore & Indonesia
January 26, 2015 @ 8:54 pm By JD Alois

Singapore based startup Club Ethis may be the world’s first Shari’ah compliant
crowdfunding platform and according to information provided by the portal it is growing
fast. Club Ethis is guided by 2 in-house Islamic scholars. Ethis believes it has shown that
Islamic Finance, crowdfunding and real estate development are complementary industries
and sectors that feed off each other to create short-term, potentially high-return
opportunities that are accessibly to the masses.

Launched in March of 2014, Ethis has surpassed $1 million in funding in less than a year.
Club Ethis is a real estate & business crowdfunding platform that is targeting the market
in Indonesia (apparently one of the top real estate markets in SE Asia), one of the largest
Muslim populations in the world. This is just a start though as their ambitions are
targeting the entire SE Asia market.

The stated mission of the funding portal is:

To develop a structured community funding ecosystem that is ethical and sustainable so
as to provide a high yielding impact investments for members and equity funding for
businesses and real estate developments leading to inclusive economic growth and
external benefits to society.

Club Ethis shared in a recent report they have over 500 “members” from 11 countries
including; Singapore, Australia, Brunei, Egypt, Indonesia, Malaysia, Saudi Arabia, Sri
Lanka, UAE, UK and the USA. Transactions on the platform have topped S$ 1.3 million.
Club Ethis has funded 11 companies to date. Two real estate projects have been
completed with two projects funding now. A “condotel” project in Indonesia raised S$
260,000. One of the projects crowdfunding now is a villa resort in Bali seeking a raise of
S$ 1.9 million.

Having grown rapidly in the past 9 months mainly from organic outreach and social
media, Ethis believes things are just getting started. The report states that they believe
they are well positioned to be the gateway for international crowdfunding across South
East Asia.
http://www.bloomberg.com/news/articles/2015-11-08/islamic-crowdfunding-takes-root-in-asia-inboon-
to-entrepreneurs

Islamic Crowdfunding Takes Root

in Asia in Boon to Entrepreneurs
Y-Sing Liau
November 9, 2015 — 12:00 AM HKT … Updated on November 9, 2015 — 11:59 AM HKT

# Singapore companies organizing online financing seek growth

# Malaysia regulator released equity crowdfunding rules in 2015
Muslim entrepreneurs and the less wealthy, increasingly shut off from bank loans by
stricter capital rules, can take heart in a new form of financing taking root in Asia -- Islamic
crowdfunding.

The practice of raising funds from a pool of investors via the Internet is emerging in
Singapore and seeking to comply with Shariah principles. Ethis Pte, set up in the city state
in March 2014, has raised S$2.5 million ($1.8 million) to finance buyers of affordable new
homes in Indonesia and is seeking another S$50 million by 2017, Director Umar Munshi,
32, said in a Nov. 3 interview. It plans to expand to Malaysia next year. Kapital Boost Pte
started on the island in July to fund small businesses in Southeast Asia.

The crowdfunding industry worldwide reached $16.2 billion in 2014, pioneered by online
hubs like Kickstarter, according to California-based research company Massolution. Gulf
Asia Shari’ah Compliant Investments Association said the "huge" potential for the system
is stifled by a lack of legislation. Malaysia introduced rules governing equity-style funding
this year, while Indonesia has no regulations and Singapore is in consultations. In October
2015, the U.S. Securities and Exchange Commission approved rules to allow small
investors to buy shares in crowdfunded startups.

“The potential for Islamic crowdfunding is huge, particularly if it stays true to, and focuses
on Islamic values such as profit- and loss-sharing,” said Suhaimi Zainul-Abidin, a founding
member of the Shariah association in Singapore. “The segment leads to more fluid
deployment of capital, helps solve financing issues faced by many small- and mediumsized
enterprises and allows small-time investors to sink their teeth into interesting but
bite-sized investment opportunities.”

Kapital Boost
Kapital Boost is looking to procure up to S$30 million to help fund small businesses
in Singapore, Indonesia and Malaysia ranging from meat suppliers to garment producers,
managing partner Erly Witoyo said in an e-mail interview on Nov. 2. It has raised S
$200,000 so far for seven companies, he said.

Witoyo said crowdfunding began in Asia in 2013 via CoAssets Pte and Crowdo in
Singapore, adding that there are about 10 to 15 companies providing such services in the
city state, Indonesia and Malaysia.
Islamic Crowd Funding
“Muslims comprise approximately a quarter of the global population, and yet Islamic-based
financial assets comprise only less than one percent of total global financial assets,” said
Witoyo, 41, a former Barclays Plc and Credit Suisse Group AG executive. “Especially in
Singapore, the options for investing in Shariah-compliant financial assets are limited.”

‘More Prominence’
The Manila-based Asian Development Bank estimates that average bank loans to smalland
medium-sized enterprises declined to 18.7 percent of total lending last year from 23
percent in 2007.

Kapital Boost currently only focuses on SMEs in Singapore and Indonesia, Witoyo said.
He said the process conforms to the Islamic principle of Murabaha. Investors buy an asset
on behalf of an enterprise, which agrees to buy it back at a mark up at a future time and
date, the difference being the profit rate, he said.

Ethis is in the midst of building 1,200 homes in Indonesia, according to Munshi. The
company plans to start raising money for Malaysian housing projects in the second quarter
of 2016 and will open a branch in Kuala Lumpur this month, he said. “As Islamic
crowdfunding grows, it will start to gain more prominence and importance in the Islamic
finance industry,” said co-founder Munshi.

Understanding Risks
Malaysia’s regulator issued rules on equity crowdfunding in February, capping fund raising
at 3 million ringgit ($688,000) in a 12-month period. The U.S. Securities and Exchange
Commission approved a measure last month that enables start-ups and small businesses
to procure as much as $1 million annually by offering shares.

“For Islamic crowdfunding, the issue is how do you ensure that all the Shariahcompliant
requirements are complied with by the particular crowdfunding
initiative?” said Megat Hizaini Hassan, head of the Islamic finance practice at law firm Lee
Hishammuddin Allen & Gledhill in Kuala Lumpur. “There needs to be transparency.”

Islamic crowdfunding has some catching up to do, said the Gulf Association’s Suhaimi,
adding that it’s hard to say what the size of the market is because it remains underregulated
in most jurisdictions.

“Many investors on these platforms may possibly be unsophisticated and may not fully
understand the risks associated with such investments,” Suhaimi said. “They may be lured
simply by the thrill of investing and the promise of higher returns.”
http://www.crowdfundinsider.com/2015/12/78122-global-islamic-crowdfunding-
aperspective-from-singapore/

Global Islamic Crowdfunding:

A Perspective from Singapore
December 2, 2015 @ 8:06 am By Umar Munshi

Islamic Crowdfunding has the potential to help us change our world for the better. When
an online community unites and pools resources, this community has the financial and
social clout and capability to create and re-create multiple aspects of the world and
directly impact society.

Crowdfunding itself started and blossomed in the West initially amongst groups of likeminded
individuals wanting to create something. In its infant years, crowdfunding was a
fundraising tool for supporters of musical or arts projects, until Kickstarter and Indiegogo,
two pioneering platforms, went viral and kicked off this global revolution. Last year, these
two platforms Crowdfunded a total of more than US $1 billion! A recent report by
Massolution projects this fast-growing industry to hit a whopping US $35 billion globally
in 2015.

There is an immense variety and scope of applications for crowdfunding. Crowdfunding

continues to evolve and in recent years made strides into the investment world. Real
Estate Crowdfunding is one of the fastest-growing segments of this booming industry
worldwide. The Global Crowdfunding industry is still dominated by the US, but Asia has
recently seen strong growth – eclipsing Europe as the next-largest Crowdfunding region.
Crowdfunding platforms are able to grow rapidly because of technology. The ease &
speed of online transactions, as well as the ability to fund projects directly makes
Crowdfunding highly appealing, especially to Millenials. Investment-based Crowdfunding
has also benefited from the decline in sentiment towards the Financial World. The recent
financial crises, continued insipid returns, and stock-market volatility have cast a dreary
gloom over the Financial World. The top-heavy nature of our Financial Systems, and its
perceived role in the creation of inequality has also diminished its popularity. There are
now even groups and movements campaigning against the perceived ‘Financialization’ of
the global economy.

Savvy and progressive investors are thus turning enthusiastically to Crowdfunding as their
investment vehicle of choice. The low-entry capital makes it especially accessible to the
middle income and small-medium business owners.

There are three main objects of investments through crowdfunding:

• Crowdfunding of Startups empowers entrepreneurs but has an inherently higher
risk of failure. This creative power is however hugely appealing, and we all dream
of having a share in the next big thing (called a Unicorn in tech-speak). There is
also a rising trend where a startup’s Crowdfunding success is taken as proof-ofconcept
and thus attracts further rounds of Angel or Venture Capital.
• SME Crowdfunding helps to bridge funding gaps, exacerbated by the credit
crunch, for stable and growing companies to expand.
• Real Estate Crowdfunding breaks down the capital-barrier to this favourite
investment of the wealthy. At this continues to gain traction, it will help reduce the
yawning income-inequality created by the disparity in the ownership of land and
real estate assets.

There are four common types of crowdfunding today – debt investment, equity
investment, rewards and donations. Debt investment is based on fixed-interest returns
with capital guaranteed. Equity investment is where investors and business owners have
shared ownership – this is in line with Shariah law. This year, the Securities Commission
Malaysia announced the licensing of six equity crowdfunding platforms, which is a
positive sign for crowdfunding in the Muslim World. Rewards are typically for supporting
startups, where the reward can range from the actual object of crowdfunding (a form of
pre-ordering) to something simple like a t-shirt. Donations is purely philanthropic giving
with no commercial return.

Why Islamic Crowdfunding?

Alternative investments allow individuals to not only profit, but also do something good to
bring benefit to society. Crowdfunding allows the building of communities and promotes
ethical and social responsibility which are critical aspects of the Islamic Worldview.
Islamic Crowdfunding is an unprecedented opportunity that very rarely comes. Muslims
have been trapped in a capitalist system where money and profit are the main motives of
life. With this new wave, Muslims are empowered to create an ecosystem based on our
own value-systems.

Islamic Finance will never be the same again, once Islamic Crowdfunding has greater
outreach and acceptance. The backbone of Islamic Crowdfunding is the Community,
whereas Islamic Banks emerged from a much more corporate environment. When the
overriding motive and mechanism revolves around community, profit motives cease to be
at the forefront of decision-making. Decisions are based on a more holistic view of
community benefit, which results in many wonderful initiatives and movements for social
good. Islamic Crowdfunding has the unique ability to empower the masses to create and
re-create products, lifestyles and communities independent of capitalist corporations or
bureaucratic governments. In essence, if harnessed properly, society is now able to
shape its own world based on its own needs, wants and principles.

Yet Islamic Crowdfunding has taken some time to get off the ground. Until 2014, there
was only a handful of Islamic Crowdfunding platforms worldwide, but over the past 2
years, many new platforms have sprung up. A prominent platform in the Middle East is
Liwwa, which is Jordan/Palestinian-based and has Crowdfunded small businesses with a
total of US $500,000 to date. Interestingly Liwwa is one of the few Islamic platforms
backed by both Venture Capital Funds as well as Banks.

Statistics are scarce but I estimate Islamic Crowdfunding globally in 2015 to be at

approximately US $25 million.
 Islamic Crowd Funding

Two or the larger Platforms outside the Middle East are LaunchGood from the US &
ClubEthis (Ethis = Ethical + Islamic) from Singapore. LaunchGood is focused on
Kickstarter-styled reward-based Crowdfunding of new ideas or causes, and has
Crowdfunded more than US4.5million to date. Club Ethis focuses on Real Estate
Development Crowdfunding of Affordable Housing in Indonesia, and has Crowdfunded
US2.2million since March 2015. More significantly, the projects that Crowdfunding has
enabled it to start on will eventually provide more than 1,500 homes for the needy – talk
about social impact!

Real estate crowdfunding is one of the most lucrative forms of investment. This subsector
projected to Crowdfund $2.5 billion this year. This form of crowdfunding may be
more complex, as Real Estate regulations and markets differ greatly between territories.
Conclusion
Crowdfunding is a natural way forward for Muslims and Muslim countries. Muslims make
up almost a quarter of the world, and we have a young and fast-growing population. Even
the World Bank predicts that the Muslim world may be one of the first markets in which
crowdfunding investment would be truly game-changing. As Islamic Crowdfunding
matures and grows from strength to strength, it is up to Muslims to participate in the
creation of a truly Islamic ecosystem that has the capacity to bring tremendous benefits
to our lives, and to humanity as a whole.

Umar Munshi is a co-founder of Club Ethis, the world’s first Shari’ah-Compliant Real
Estate platform & Kapital Boost an SME Crowdfunding site. He is also a partner at
Amanah Asset Management, a firm specialising in Islamic Finance Consultancy and
Events. Mr Munshi has been immersed in Islamic Finance for three years, focused on
creating market awareness and reaching out to the larger community. Mr Munshi has
been an entrepreneur since the age of 18, and has developed startups in F&B,
Healthcare, Technology and Education in Singapore, Indonesia, Malaysia and Saudi
Arabia. At the age of 23, he was recognised as a nominee for the Young Entrepreneur of
the Year Award by the Singapore Malay Chamber of Commerce. His strength is in
developing marketing concepts and innovations in new and emerging market niches