By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
The rapid development of new and innovative financial technologies will clearly have a disruptive impact on Islamic finance in the foreseeable future since they, among many other things, also open completely new avenues for participation banking for investors.
One very good example is a new UK-headquartered real estate crowdfunding platform that just set up shop in Qatar. MercyCrowd offers for the first time to the people in Qatar opportunities for international real estate purchases through crowdfunding. Not only that, the platform puts an emphasis on socially responsible investments, which means it offers international premium property to as many people as possible and not just the wealthy upper bracket, and also obeys ethical financing and actively promotes donations.
How it works? MercyCrowd offers a debt-free approach to own or fund real estate. Via its platform, people can either become investors in lettable real estate with minimum investments as little as £50 and projected returns of between 4% and 10% annually plus a potential capital appreciation when the property is sold, or sponsors looking to fund their property through crowdfunding. Investors can choose from MercyCrowd’s portfolio, currently premium property in the UK and France, and buy as many “participation units” representing equity stakes in the property as they can or want to afford.
“Finance in today’s world is understood as being synonymous with debt, interest and injustice. We believe that an alternative is possible to the present financial intermediation system,” says Anouar Adham, CEO of MercyCrowd’s parent company Elite International Asset Group, which, apart from its headquarters in London, has offices in Paris and Doha.
Adham adds that he believes what makes MercyCrowd “uniquely different” is the company’s core strength that “sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society,” a notion that would particularly attract Islamic investors from the Middle East.
“We are confident that our debt-free approach will have enormous appeal and expect to generate a business of $100mn within the next three to five years, particularly by filling the untapped gap in the Middle East market,” he says, noting the MercyCrowd was committed to donating a percentage of their profits to charities on an annual basis.
That way, MercyCrowd in principle works similar to an Islamic Real Estate Investment Trust, only that the participation units are not listed and intermediaries such as trust management structures are eliminated.
Crowdfunding in Islamic finance is certainly getting noticed. The Kuala Lumpur-based Islamic Financial Services Board (IFSB), one of the highest authorities in international Islamic finance that issues guiding principles and standards within the Shariah finance system, in its just shortly released Islamic Financial Services Industry Stability Report 2017 highlighted crowdfunding as a core development in the Islamic Finance fintech space. The IFSB identifies at least five active Islamic crowdfunding platforms with a primary location in a country of the Organisation of Islamic Cooperation (OIC), namely equity loan platforms Liwwa (Lebanon), Beehive (UAE) and Shekra (Egypt), as well as AtaPlus, a financing platform for small and medium enterprises in Malaysia, and Danadidik, a crowdfunding platform for student loans in Indonesia. For countries outside the OIC, the report mentions EthisCrowd for real estate funding and investment and KapitalBoost for small and medium enterprises financing, both in Singapore.
Two particular Islamic crowdfunding platforms not listed by the IFSB need to be additionally mentioned, namely WaqfWorld, the world’s first waqf, or Islamic endowment, crowdfunding platform launched by Abdullah Badawi, the former prime minister of Malaysia, as well as Blossom, a Bitcoin-based Islamic microfinance crowdfunding platform in Indonesia.
“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 recreate multiple aspects of the world and directly impact society,” notes Umar Munshi, co-founder of EthisCrowd and KapitalBoost.
“Furthermore, 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,” he adds.
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