FUND PROTECTION IN EQUITY CROWDFUNDING BASED ON MAQASID VALUES IN MALAYSIA

Abstract

Crowdfunding, particularly equity-based, has widely been recognized as an alternative funding method for business projects and companies. This new trend has been strongly linked to the rapid development of Financial Technology (FinTech). From Shariah’s perspective, crowdfunding is in line with its objective in terms of wealth circulation. In addition, it enlarges the segment of the Islamic finance industry since its instruments can be modified to be Shariah-compliant. As a result, crowdfunding provides alternative financing to mainstream Islamic financial institutions. However, since this industry is still new, several issues are linked to modern crowdfunding, mainly regarding fund protection. Issues like lack of due diligence performed by platforms, incompetent projects and inadequate Shariah monitoring could threaten investor funds seeking profit and Shariah-compliant investment. Thus, this paper analyzes how far maqasid al-Shariah can strengthen crowdfunding activities, particularly the fund management aspect in Malaysia. Through the library research approach, it is discovered that three values associated with maqasid al-Shariah can be developed as a framework of application: promoting transparency, upholding justice and conducting Shariah-compliant oversight. While this conceptual study may be limited in data, it provides insights into how maqasid al-Shariah can be a direction in crowdfunding activities. Thus, the findings can benefit many stakeholders involved, including platform operators, funders, and project owners.