The Relevance of Conventional and Islamic Crowdfunding as Financing Instruments for SMEs

Abstract

Small and Medium Enterprises (SMEs) are the backbone of economy in most of the countries across the globe. SMEs support towards the economic growth and development has influenced country’s GDP. Despite that, the sector still faces numbers of main constraints including lack of access to credit from formal financial institution. Nevertheless, with the advancement of financial technology, crowdfunding has emerged as an alternative platform that enables SMEs to seek fund for their business. This paper provides an overview to examine the relevance of conventional crowdfunding and Islamic crowdfunding as a financing instrument for SMEs and determine the appropriate model in crowdfunding that best suits to finance SMEs. This research applied the qualitative approach by reviewing the latest key literature in crowdfunding. Hence, the results show that the best model to be adopt as a financing tools among SMEs is equity-based crowdfunding either for conventional or Islamic crowdfunding platform.