In recent years, the development of financial technology (fintech) in Indonesia has significantly impacted the access to capital for Micro, Small, and Medium Enterprises (MSMEs). Two popular fintech innovations in the context of sharia financing are Sharia Securities Crowdfunding (SCF) and Sharia Peer-to-Peer (P2P) Lending. Both offer different solutions for MSMEs to obtain funds in accordance with sharia principles.
Definitions of Sharia Securities Crowdfunding
Sharia Securities Crowdfunding (SCF) is a method of raising funds through a partnership scheme, where business owners can issue sharia-compliant shares or sukuk through online platforms managed by SCF operators. In this scheme, investors purchase the shares or sukuk, thus acquiring a portion of ownership or debt in the company, adhering to sharia principles.
SCF has distinct characteristics, such as partnership relationships between investors and issuers. Investors and issuers form a partnership where profits are shared according to the ownership proportion. The financial instruments used in SCF are sharia-compliant shares or sukuk. Funding is provided directly by investors into MSME businesses through the SCF platform. Additionally, the required documentation is simpler compared to traditional financial institutions, making it more accessible to MSMEs. The funding period through shares is permanent, while sukuk has a specific maturity period.
Also Read: Export Financing with Securities Crowdfunding
Definition of Sharia Peer-to-Peer Lending
In contrast, Sharia Peer-to-Peer (P2P) Lending is a platform that connects borrowers (MSMEs) with lenders (investors) directly to provide financing based on sharia principles. In this scheme, funding is provided in the form of loans that must be repaid with ujrah (fees) or profit-sharing. P2P Lending’s main characteristics include direct funding between lenders and borrowers through the P2P platform. The financial instruments used in P2P Lending are loans that must be repaid with ujrah or profit-sharing. Credit risk in this scheme is borne by the lender. The funding period is temporary and determined in the initial agreement. The required documentation must also be completed by MSMEs for credit evaluation.
Key Differences
The primary difference between SCF and P2P Lending lies in the relationship between investors and issuers or borrowers. In SCF, there is a partnership relationship where investors own a portion of the MSME business or project. In contrast, P2P Lending forms a creditor-debtor relationship, where investors provide loans that must be repaid by borrowers. This difference reflects the different business models of the two schemes.
The financial instruments used also differ. SCF uses sharia-compliant shares or sukuk, while P2P Lending uses loans with ujrah or profit-sharing. The funding period in SCF is permanent for shares and temporary for sukuk, whereas in P2P Lending, the period is temporary and specified in the initial agreement.
Additionally, the risk borne by investors differs between the two schemes. In SCF, business risk is shared between investors and issuers, creating a closer relationship and joint responsibility in developing the business. In P2P Lending, credit risk is fully borne by the lender, who must consider the borrower’s ability to repay the loan.
Advantages
Sharia Securities Crowdfunding offers several advantages, making it an attractive alternative for MSMEs seeking capital. One major advantage is that SCF opens up capital access for MSMEs that are not bankable or find it difficult to obtain financing from traditional financial institutions. The process of issuing shares or sukuk in SCF is also simpler compared to the IPO process on stock exchanges, making it more accessible to MSMEs. Furthermore, the potential for dividends and capital gains makes SCF attractive to investors who want to participate in developing sharia-compliant businesses.
On the other hand, Sharia Peer-to-Peer Lending also has its own advantages. The platform facilitates MSMEs in obtaining loans without needing assets as collateral, making it more accessible to MSMEs with limited assets. The process of disbursing funds is relatively quick and flexible, allowing MSMEs to obtain the needed funds promptly.
Challanges
However, SCF also faces challenges. Financial literacy is essential for MSMEs to attract investors. MSMEs must be able to create an attractive and informative business prospectus to attract investor interest. Additionally, strict supervision is needed to ensure that all processes and operations of SCF comply with sharia principles.
Nevertheless, P2P Lending faces challenges such as high credit risk for lenders. Lenders must have a robust system for credit evaluation and risk mitigation to avoid borrower defaults. Additionally, financial literacy and a good understanding of sharia principles are required for all parties involved.
Conclusion
Sharia Securities Crowdfunding and Sharia Peer-to-Peer Lending are two distinct financing models that provide important solutions for MSMEs to access capital according to sharia principles. SCF is more suitable for MSMEs looking for long-term investors and the potential for dividends and capital gains. In contrast, P2P Lending is more appropriate for short-term financing needs with a quick and flexible process. Both models require a supportive ecosystem and good financial literacy to thrive and offer optimal benefits to MSMEs and investors.
In facing various economic challenges, innovations such as SCF and P2P Lending play a crucial role in supporting MSME growth and the national economy as a whole. By continuously improving financial literacy and providing supportive regulations, these financing models can become strong pillars in the sharia financial ecosystem in Indonesia.
Also Read:What are the differences between Securities Crowdfunding (SCF) and Stock Exchanges?
References:
Ahmad, I., & Rahwidhiyasa, P. (2022). *Modul Securities Crowdfunding (SCF) Syariah untuk Penerbit/UMKM*. Komite Nasional Ekonomi dan Keuangan Syariah (KNEKS).
Komite Nasional Ekonomi dan Keuangan Syariah (KNEKS). (2021). *Securities Crowdfunding Syariah*. Retrieved from https://www.kneks.go.id
Otoritas Jasa Keuangan (OJK). (2020). *Peraturan Otoritas Jasa Keuangan No. 57/POJK.04/2020 tentang Penawaran Efek Melalui Layanan Urun Dana Berbasis Teknologi Informasi (Securities Crowdfunding)*. Retrieved from https://www.ojk.go.id
Otoritas Jasa Keuangan (OJK). (2021). *Peraturan Otoritas Jasa Keuangan No. 16/POJK.04/2021 tentang Perubahan Atas Peraturan Otoritas Jasa Keuangan No. 57/POJK.04/2020*. Retrieved from https://www.ojk.go.id