Role of Blockchain in Enhancing Islamic Crowdfunding Mechanisms

In this study, we discussed several aspects, including the definition of the general concept of traditional crowdfunding, which aims to finance emerging small projects and innovative ideas as well as financing medium-sized projects that cannot provide sufficient guarantees for banks to obtain the necessary liquidity for their projects. These companies use crowdfunding to obtain this required liquidity for new projects through electronic platforms. In the same context, some of the challenges facing these companies when obtaining crowdfunding from these electronic platforms were discussed, with the presentation of the regulatory framework for crowdfunding in light of Islamic funding standards, which differ from traditional funding in that it is essentially non-profit as much as it targets charitable and social work as well as it regulates the collection of funds and the distribution of profits to the principles of Islamic finance. On the other hand, the general concept of blockchain, its general characteristics, and working mechanisms were discussed. Then, the reasons that may lead to the shift from traditional models in Islamic crowdfunding to the use of blockchain in enhancing Islamic crowdfunding mechanisms were discussed through exposure to the Ventera project model of crowdfunding using blockchain technology as a model as well as exposure to other models of Islamic crowdfunding, where the study suggests that it can improve their performance through the use of blockchain technology as it may bring them a number of benefits and help them overcome a number of challenges. This chapter aims to explore the impact of the application of blockchain technology in Islamic crowdfunding operations and also bridge the gap between the academic side and the applied professional side in the field of using modern technologies, such as blockchain as a safer, faster, and lower-cost alternative in Islamic finance projects, as there are only few studies that dealt with this area despite its importance. This chapter discusses the benefits of blockchain in Islamic crowdfunding with an illustration of some projects as an applied model, after identifying the challenges facing traditional Islamic crowdfunding and the advantages of developing it using blockchain applications; this study ends with presenting models of Islamic crowdfunding projects that can be developed using blockchain technology.