Crowdfunding and the Opportunity Presented in the American Islamic Home Financing Product
Journal of Islamic Economics, Banking and Finance, Vol. 12, No. 4, pp. 122-13, Oct. 2016
22 Pages Posted: 28 Mar 2017
Date Written: October 1, 2016
The shifting paradigm of the primary Islamic Banking product in America, the Shariah-compliant home financing product, has fallen into a developmental conundrum. In an attempt to capture a larger segment, current Shariah-compliant schemes evolved to that which are void of Islamic attributes, fundamentally converging with that of the convention in function, form, and procedure. Correspondingly, a recent phenomenon in the present financial landscape, crowdfunding, has demonstrated an overwhelming resemblance to the teachings and methodology of Islam. This paper identifies the opportunity to create a home finance product centered around a non-interest bearing marketplace lending platform capitalizing on the pairing of respective attributes present in crowdfunding and Islamic Finance. Crowdfunding offers such attributes as cooperation, consultation, and altruism, while Islamic Finance offers such attributes as non-interest bearing, dissuading of debt, and conservative loan terms while being unambiguous.
While hindrances to the implementation of such a model definitely do exist, such as the relatively high value of real estate and risk of default, the crowdfunding platform offers a resolution and could evolve the next generation of the Islamic home finance product to one fully compliant with Islamic teachings. Ultimately, Islamic home finance product developers are urged to advance the development of products that incorporate the innate Islamic attributes found in crowdfunding platforms.
Keywords: Crowdfunding, Disruptive Finance, Cooperative Finance, Islamic Finance
JEL Classification: G21, Z12
Suggested Citation: Suggested Citation