Crowdfunding in Islamic Finance and Microfinance: A case study of Egypt

The changing political scene in North Africa is resulting in a much greater interest in Islamic finance and what it has to offer. The modern practice of Islamic finance started in Egypt with the Mit Ghamr experiment of 1963. This project had a strong focus on development and provided micro-savings and micro-loans before microfinance was conceptualized as such in the 1970s. Nowadays, Egypt has the potential to develop a new homegrown model focused on development that could avoid cosmetic “Islamic” finance. Profit and loss sharing formulas can make both Islamic finance and Islamic microfinance real alternatives to both conventional finance and microfinance, and ones that can address new niches of population and promote entrepreneurship and SMEs. It is estimated that by 2020, the North African region needs to create 75 million jobs. In this context, the promotion of entrepreneurship and micro-entrepreneurship might be the only effective vehicle for economic development. Crowdfunding is the collective effort of individuals who network and pool their money to support a wide variety of activities, including startup company funding. Two internet-based platforms, Shekra and Yomken, have recently been established in Egypt as the first Islamic finance and Islamic microfinance crowdfunding platforms of the region, respectively. These examples, inspired by the Mit Ghamr project, show interesting innovations within both industries. Interestingly, while being Shariah-compliant, neither of them uses the label “Islamic”, showing a distinctive ideological trend that emphasizes quality service, partnership, risk-sharing, and social impact. The latter are ingredients that allow both Islamic finance and Islamic microfinance to think beyond the boxes of their conventional counterparts.