How to Attract Investors in Crowdfunding

Crowdfunding has become a popular alternative method of raising capital for projects and businesses. In recent years, Islamic Securities Crowdfunding (SCF) has emerged as an attractive option for entrepreneurs and investors who prioritise sharia principles in doing business. However, attracting investors’ attention to Islamic SCF requires the right strategy and a deep understanding of what their concerns are. This article will provide some advice on how to attract investors’ attention to Islamic SCF.

Understand the Needs and Preferences of Islamic Investors

The first thing that needs to be done is to have a good understanding of the needs and preferences of investors seeking Islamic funding. Islamic investors are usually concerned with compliance with Shariah principles such as the avoidance of usury, gharar (uncertainty) and maysir (speculation). Therefore, the projects or businesses you offer through the Islamic SCF platform should clearly demonstrate that they are fully compliant with these rules.

For example, you need to ensure that the funding structure and profit sharing in your project is transparent and fair, with no impermissible elements in Shariah. The drafting of clear legal documents and agreements, as well as the engagement of competent Shariah advisors, will go a long way in reassuring investors that their investments are within the correct Shariah corridors.

Display a Strong Track Record

Investors tend to be more interested in projects or ventures that have a solid track record and proven success. Therefore, it is important to showcase the positive performance history of your venture, both in terms of profitability and sharia compliance.

If your venture is a new venture, then showcase the background of a competent management team, experience in the relevant industry, and clear market potential. Investors will feel more confident to invest if they believe that the team behind the project has sufficient capability to run the venture successfully.

Communicate Social and Spiritual Values

Islamic SCF is not just about gaining financial returns, but also about making a positive social and spiritual impact. Many Islamic investors are interested in projects that are not only profitable, but also beneficial to society and aligned with Islamic values.

Therefore, be sure to highlight how your project will make a positive contribution to society, whether it is through job creation, community development, or environmental conservation efforts. Investors who feel that they can play a part in something bigger than just financial gain will be more likely to invest.

Also Read : Creative Economy Financing through Crowdfunding

Offer Transparency and Accountability

Transparency and accountability are key in attracting investors, especially in the context of Islamic SCF. Investors want to ensure that their funds are utilised efficiently and in accordance with what has been promised. Therefore, it is important to provide detailed periodic reports on the use of funds, project progress and results achieved.

Islamic SCF platforms should also provide easy access for investors to monitor their investments. This can be done through an online portal that allows investors to view financial reports, project updates, and direct communication with the management team. By offering transparency, you not only build trust, but also demonstrate a commitment to Shariah principles.

Build Networks and Community Engagement

A strong network and community involvement is another aspect that should not be overlooked. Islamic investors are often active in their communities and look for investment opportunities that are backed by a solid network and good reputation. Therefore, it is important to build strong relationships with Islamic communities, both online and offline.

Attending sharia economy-related events, engaging in social media discussions, and working with sharia influencers or respected public figures can help strengthen your credibility and attract the attention of potential investors.

Create a Competitive Offer

Finally, make sure that the offering you create is competitive compared to other investment alternatives. This could mean providing an attractive rate of return, a fair profit-sharing structure, or flexible investment terms. However, make sure that all of these remain within the corridors of Shariah and do not contain any prohibited elements of riba or uncertainty.

Investors will be more attracted to Islamic SCFs if they feel that they are getting good value for the risk they are taking. Therefore, continually evaluate your offerings and ensure that they meet market expectations.

Also Read: Competitive Nature and Crowdfunding 

Conclusion

Attracting investors to Islamic SCF requires a holistic and integrated approach, combining a deep understanding of Shariah principles, effective communication, transparency and social value addition. By paying attention to these aspects, you can increase the attractiveness of your project in the eyes of investors and help ensure your fundraising success.

With a commitment to conducting business in accordance with Islamic values and providing clear and transparent opportunities, you will find it easier to gain the support of investors who want to participate in a Shariah-compliant economy.

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Wallāhu aʿlam.
Barakallāhu fīkum.

Devin Halim Wijaya, B.B.A, M.Sc

Independent Sharia Consultant
Instagram: @devinhalimwijaya
Linkedin: @devinhalim

References

• Abdullah, M. (2017). Principles of Islamic finance: Prohibition of riba, gharar, and maysir. Journal of Islamic Economics and Finance, 3(1), 1-14.
• Iqbal, Z., & Mirakhor, A. (2013). Economic development and Islamic finance. The World Bank.
• Kayed, R. N., & Hassan, M. K. (2011). The global financial crisis and Islamic finance. Thunderbird International Business Review, 53(5), 551-564.
• Obaidullah, M., & Khan, T. (2008). Islamic microfinance development: Challenges and initiatives. Islamic Research and Training Institute.
• Usmani, M. T. (2002). An Introduction to Islamic Finance. Kluwer Law International.
• You can add these references to the end of the article to strengthen your argument and provide a stronger theoretical basis for the topic.