Islamic crowdfunding and Shariah compliance regulation: problems and oversight

Abstract

PurposeThis study aims to identify the problems in shariah compliance and the weak oversight of implementing Islamic crowdfunding (ICF). Shariah compliance regulation is an essential subsystem in Islamic social finance ecosystems.Design/methodology/approachThis type of research is legal research. The research approaches are the statute, comparative and conceptual approaches. The study in this research examines Indonesia, the UK and Malaysia.FindingsICF is one of the fastest-growing sectors of Islamic financial technology (fintech). The Islamic fintech sector is showing maturity signals with a market size of $79bn in 2021, projected at $179bn in 2026. Malaysia, Saudi Arabia and Indonesia lead the Index by Global Islamic Fintech (GIFT) Index scores. However, low shariah compliance is still an issue in implementing ICF. This problem is caused by regulatory support that is still lacking and oversight of shariah compliance is not optimal. On the one hand, shariah compliance is the ICF core principle for Shariah Governance.Research limitations/implicationsThis study examines the regulation and oversight of ICF in Indonesia, Malaysia and the UK. Indonesia and Malaysia, a country with the highest GIFT index score in the world, and the UK, a country with an Islamic finance sector experiencing rapid growth.Practical implicationsThe research results on shariah compliance regulation in ICF are helpful as a comprehensive approach for developing sustainable Islamic social finance ecosystems.Social implicationsShariah compliance is the core principle of ICF governance. Its implementation can increase public trust.Originality/valueCrowdfunding platform and issuers in ICF must implement shariah compliance. Therefore, it is essential to consider the presence of shariah compliance requirements and a Shariah Supervisory Board (DPS).