The Muamalat Newsletter Vol.1 2023

FEM Newsletter | June 2023 46 in the platform, depending on their objectives. They can be on the side of project owners or contributors (Choi & Zennyo, 2019). If they choose to be a project owner, they need to clarify a few things, including the project’s objectives, duration, targeted amount, and how the fund will be utilised. Meanwhile, on the contributor’s side, an individual subscribes to a given platform and chooses the projects he/she wants to support. Generally, there are four different crowdfunding models: donation-based crowdfunding, reward-based crowdfunding, equity-based crowdfunding, and peer-to-peer crowdfunding or debt-based crowdfunding (Belleflamme et al., 2015). Researchers have also categorised these four types of crowdfunding into two major categories, which are 1) community-based crowdfunding, comprised of donation and reward- based crowdfunding, and 2) investment-based crowdfunding which encompasses equity-based crowdfunding and peer-to- peer crowdfunding (Adhikary et al., 2018). The first category refers to the activities to sustain the community’s well-being without seeking a financial return. The second category is focused on investment opportunities. The current research will focus on community-based crowdfunding. Table 1.1 provides a simple explanation, particularly on this matter. Model Contribution Return Category Donation-based Full Donation Intangible benefits Community based Reward-based Donation and Pre-Purchase Gift and intangible benefits Lending-based Loan Return with interest rate; and with no interest rate Investment based Equity-based Investment Return of investment Table 1.1 The categorisation of crowdfunding Source: Adhikary et al. (2018); Collins & Pierrakis (2012) Crowdfunding Scene in Malaysia Crowdfunding activity has long been practiced in Malaysia, especially among the Malay community. For instance, the khairat system is a prevailing donation crowdfunding activity known for the welfare of a deceased to cover the funeral cost. Other than that, the kutu system, a form of mutual lending arrangement among its participants, is another example of social-based crowdfunding activities (Abdullah, 2016). This kind of monetary collection activity is not alien even before the emergence of the digital world. Technological advancement benefitted this activity by enabling participants to reach a large crowd. The current digitalizedcrowdfunding practice in Malaysia started in 2012 with the introduction of PitchIN, a crowdfunding platform to facilitate this activity. Since the implementation of donation and reward-based crowdfunding is less stringent, the first three years were spent focusing on social activities. Later, the Securities Commission of Malaysia introduced the Equity Crowdfunding regulatory framework in2015, andonly then the investment crowdfunding allowed to commence. Since the inception of the regulatory framework in 2015, the size of the crowdfunding market has grown tremendously. As seen in Figure 1, the total fund raised 0 5 10 15 20 25 2016 2017 2018 2019 2020 Million (RM) Figure 1