Crowdfunding: Shariah Compliant Equity Financing

One of the two major models of crowdfunding is equity crowdfunding. Islam strictly prohibits riba or interest and promotes businesses. Equity crowdfunding helps business owners and partners escalate and expand their businesses by providing equity funds usually at lower cost from mass people. In simple definition, under equity crowdfunding a good number of interested investors invest their money in a business in exchange of proportional ownership. Equity crowdfunding is a great way of fund raising for the promising startups and enterprises in growth stage. Such business organizations are expected to offer much high return in future to their sponsors.

Equity crowdfunding is considered to be a lucrative option for both investors and fundraisers. Intelligent investors expect (and also get) much higher return from such investment whereas fundraisers can secure fund at competitive market rate. Furthermore, fundraisers have the liberty to choose their investors and the later ones can add value to the business. On the contrary, investors can keep close eye on the performance of the businesses they invest. Such freedoms are not available in case of bank financing.

In an equity crowdfunding, fundraisers or business owners publish the details of their businesses, amount of fund required, purpose of the fund, past and forecasted business performance, and the portion of the ownership stake they want to offer for each minimum unit of investment whereas interested investors offer their investment amounts on the website. Then qualified interested investors meet with the fundraisers to discusses the details and if the discussion turns out success, then they invest their fund. All of the steps of this process are completely but closely observed by bdcrowdfund to make sure interest of both of the parties served and only the eligible fundraisers get funds. Furthermore, bdcrowdfund supports the investors in every possible way to ensure the security of their fund.