This chapter presents the revival of waqf in both its forms – immovable and movable – to demonstrate the potential of waqf in order to integrate it with contemporary fintech innovations like crowdfunding and blockchain. With reference to blockchain technology, which is a decentralised public ledger, it has been used for different applications, from security, shipping, to commercial transactions. WaqfCoin, using modern technology, which integrates crowdfunding and blockchain, will promote charitable endowment. In Malaysia using one of the ten stipulations which is istibdal, an old waqf school was converted into a college known as Al-Mashoor Maahad in Penang. There has been huge support for different schemes through online waqf donation based on the waqf shares model. The practice of creating waqf shares in Muslim-majority as well as Muslim-minority countries provides successful cases in raising funds to meet the different needs of various communities.
This chapter provides an insight into the potential usage of fintech in the banking landscape and issues faced by bankers and regulators in regulating the usage of fintech and cryptocurrency, and what the potential areas are where the technology can be misused. It considers how the regulation of technology usage in the financial services landscape is important to avoiding financial crime. The chapter also provides case studies from countries such as Australia, the United States, the United Kingdom and Japan, who are taking a lead in regulating fintech and digital currency usage. It examines an example from Malaysia to demonstrate how a central bank is taking the lead by issuing a fintech regulatory sandbox. Fintech powered by blockchain technology has huge importance for the financial services industry and can come in handy to solve problems such as delays, cost, duplication and reconciliation. Fintech describes financial services using innovative or disruptive technology to enhance customer’s experience.
Purpose The gradual implementation of blockchain technology in peer-to-peer (P2P) lending platforms facilitates safer, transparent and quick access to funds without having to deal with the more complex and costly processes of banks. Beyond that, the purpose of this paper is to examine trust-enhancing heuristics that show a need for blockchain to assist in monitoring and bad loan recovery. Design/methodology/approach This study examines 909 lending decisions by 303 finance students on a mock P2P site. Each participant was asked to make three lending decisions. The loan applications were identical with the exception of a female or male photo (vs an icon) and reports of having raised half the loan in either 2 or 11 days (vs 7). Findings Investors who have experienced financial trauma are more likely to herd and lend higher amounts to loan applicants that are highly trusted by other lenders. This effect is more pronounced for male investors lending to highly trusted female loan applicants. Practical implications Blockchain can compensate for behavioral biases and improve monitoring by helping track digital money transactions and assisting in bad loan recovery efforts. Originality/value This study is the first behavioral experiment to examine herding in P2P lending. The findings complement and corroborate those by Gonzalez and Komarova (2014, 2015) and emphasize the need for blockchain to assist beyond trusted records and safe transfers of funds.
Abstract This study considers cultural crowdfunding as a heterogeneous system that allows money and attention to flow from backers to founders of cultural projects in diverse cultural sectors and focuses on the nature of the standards governing it. It analyzes Kickstarter’s corporate blog since the platform’s launch and finds indications that social media practices are increasingly naturalized as integral to crowdfunding and that social media architectures are increasingly adopted by the crowdfunding platform. This, I argue, has a potential exclusionary effect. At the same time, the analysis finds evidence that Kickstarter is striving to develop an independent capacity to set aesthetic standards, which might moderate that effect and help constitute crowdfunding as an alternative decentralized arena for the funding of culture.
Focus on a concrete project, share the results, contain the risk. These are some of the precepts of Islamic finance. But they are also the cornerstones of crowdfunding. This is why this form of financing is cutting out its space. With an extra pillar: no interests. The resources are still limited, but the Muslim crowdfunding ecosystem is diversifying: from the most basic reward based on social lending, with an eye to the Fintech. FinTech refers to technofinance or financial technology, that is to say, the supply of services and financial products provided through the most modern technologies made available to ICT. The services provided by FinTech are essentially those of traditional finance: therefore, from simple transactions to payments, to brokering and risk management, typical and exclusive of this sector are the activities linked to electronic currencies such as for example, the Bitcoin.
Transferring money and gaining access to credit across international borders, is still complicated, time consuming and expensive. Existing money transfer systems suffer furthermore from long lines, exchange rate losses, counter-party risks, bureaucracy and extensive paperwork. An estimate two billion adults are unbanked and with no, or limited access to financial services. Providing workable financial services to this population is often tagged as a key step towards eliminating world poverty and bootstrapping local economies. The Everex application focuses on easing the financial inclusion problem by applying blockchain technology for cross-border remittance, online payment, currency exchange and micro lending, without the volatility issues of existing, non-stablecoin cryptocurrencies. Finally, the Everex wallet facilitates a fiat-to-cryptocurrency gateway that eases access to cryptocurrencies, thereby enabling our users to instantly buy and sell tokens without having to visit an exchange. This paper fills the gap in the state of the art by presenting a blockchain-based capital transfer system that aims to lower financial inclusion barriers and provide financial services to the unbanked. We present the advantages of the system, outline the requirements and goals, as well as the architecture of the Everex financial ecosystem.
Md. Nazmus Saadat, Syed Abdul Halim Syed Abdul Rahman, Rasheed Mohammad Nassr, Megat F. Zuhiri
Blockchain was only used as a foundation of cryptocurrency initially, but today, we can see the rise of this new emerging technology being implemented in many industries. In the future, most technologies around the world are expected to use blockchain as an efficient way to make online transactions. One of the areas that blockchain technologies can be applied is crowdfunding platforms. The most common problem with current crowdfunding scene in Malaysia (and around the world) is that the campaigns are not regulated and some of the crowd-funding campaign turned out to be fraud. Besides, the completion of some projects also was significantly delayed. This project aims to solve these problems by applying Ethereum smart contracts to the crowdfunding site to that the contracts will be fully automatically executed, thus preventing frauds and ensuring that the projects can be delivered within duration given.
Felix Hartmann, Gloria Grottolo, Xiaofeng Wang, Maria Ilaria Lunesu
Blockchain-based crowdfunding is an emerging economic phenomenon and a state-of-the-art strategy to finance ventures. It bears similarity to conventional crowdfunding, but has its own unique characteristics. Therefore the success factors that affect the outcome of traditional crowdfunding may have a different impact on blockchain-based crowdfunding. Despite that the number of blockchain-based crowdfunding campaigns has increased drastically in the past few years, there is a lack of good understanding of what the success factors are for them in comparison to the ones for conventional crowdfunding. Such understanding is crucial for companies to design their blockchain-based fundraising initiatives properly and facilitate potential investors to seek main signals and drivers of outstanding projects. Furthermore it could help regulators and market participants to understand how the existing regulatory framework applies to blockchain-based crowdfunding. Due to specific characteristics of blockchain-based crowdfunding, regulatory frameworks may require potential re-interpretation of requirements to allow an effective application of regulations. To fill this knowledge gaps, we have reviewed a set of relevant literature on success factors for conventional and blockchain-based crowdfunding. The result of this literature review sheds light on the directions for future research and development. The contribution of our work is a better understanding of the distinctions and similarities of blockchain-based crowdfunding compared to traditional crowdfunding.
This research study shows the perspective of Islamic banking on Shariah compliant FinTech (financial technology) model. As startup firms providing and compete in the global market regarding financial services including e.g, online investment, Peer to peer equity crowdfunding, online payments (E-Wallets), philanthropic crowdfunding platforms, RegTech, Distributed ledgers technologies, crypto currency and many other threats of Distributed ledgers and digital currencies technological advancements. By keeping mentioned technological advancement, it is observed throughout the Islamic world by Shariah Experts and technology industry experts regarding Islamic FinTech ecosystem implementation. Primary data was collected through self administrative instrument with some previous research studies. Targeted population for this research contains Islamic and window Islamic banking staff, 150 respondents were approached with in the Karachi city. Testing shows positive results of independent to dependent variable of Shariah compliance relationship regarding FinTechmodel in Islamic banking according to Shariah-principles. Almost in the vicinity of Islamic banking and finance with FinTech implementation researches are under process in many universities or institutions throughout the world. Some researches shows positive results of FinTech aspects on Islamic banking services. Chosen independent variables have strong correlation with the dependent variable. Debated areas of FinTech and Islamic banking services have significant results produced under this research.
Robyn Owen, Ciarán Mac an Bhaird, Javed Hussain, Tiago Botelho
More than a decade after the Global Financial Crisis (GFC) of 2007-08, entrepreneurial finance has exhibited enormous changes, notably in the rise of alternative non-bank financing (Owen et al, 2018; Cumming and Johan, 2017; Kraemer-Eis et al, 2017; Bruton et al, 2015; Moenninghoff and Wieandt, 2013). This has been most acutely experienced in the provision and delivery of early stage and innovative business finance – the focus of this special issue. The ensuing innovations in entrepreneurial finance have taken place in developed and developing economies, presenting considerable challenges to policymakers (Mason, 2018). \n \n \nThe problems associated with early stage innovation finance leading to funding gaps are long recognised (MacMillan, 1931), notably due to information asymmetries, lack of collateral, lack of market traction, large amounts of patient capital required, and high proportions of failure rates (North et al, 2013; Lee et al, 2015). These have been exacerbated through post GFC credit rationing (Cowling et al 2012; Lee et al 2015) and re-positioning of established forms of debt and equity risk finance to later stage investment (Baldock and Mason, 2015). Given the rationale for encouraging innovative SME start-up and growth as a driver for economic recovery and growth (Nesta, 2009; Lerner, 2010), policymakers across the globe have sought to encourage new forms of early stage finance for innovative SMEs (Wilson and Silver, 2013). Whilst there have been a host of journal special issues examining specific new forms of entrepreneurial finance (Bonini et al, 2019); Cumming and Groh, 2018; Bruton et al, 2015; Harrison, and Baldock, 2015) such as crowdfunding, peer to peer (P2P) and more latterly blockchain tokenization (O’Dair, 2017) and the reasons for the emergence and roles of new players in the entrepreneurial finance market (Block et al, 2017), such as crowd funding platforms, accelerators, angel networks, seed venture capital (VCs), asset based financiers, challenger banks and new forms of early stage public investment feeder markets (Baldock, 2015), considerably less has been written about the public policy challenges this presents. \n \n \nThe focus of this Special Issue is a contemporary examination of the new forms of entrepreneurial finance evolving for innovative early stage SMEs which are often pre or early trading and do not have sufficient track record to attract more traditional bank debt and venture capital risk finance. As Lerner (2010) and Mazzucato and Penna (2016) recognize, the creation of a flourishing and sustainable early stage innovation finance market in any economy (developed or developing) requires favorable institutional and regulatory frameworks, suggesting the need for holistic policy approaches to stimulate both the demand and supply-sides of the entrepreneurial finance market or ecosystem (Hwang and Horowitt, 2012; Brown and Mason, 2014). \n \n \nStrategic Change has been at the forefront of publishing cutting-edge contemporary research examining these changes, notably featuring new forms of crowdfunding and blockchain finance and emerging market developments in China and India. It is therefore a natural home for the dissemination of the pioneering research papers presented in this issue. These were drawn from an initial call for papers at the annual Institute for Small Business and Entrepreneurship (ISBE) conference in Belfast, November, 2017 and one day conference held by the ISBE Entrepreneurial Finance Special Interest Group at Birmingham City University in March, 2018. This resulted in the eight peer reviewed papers presented. The special issue editorial team are particularly grateful to the Strategic Change Chief Editor Professor Carlo Milana and the anonymous expert peer reviewers for their guidance in the development of these papers.
Blockchain and smart contracts are forming new systems to record and manage businesses with less need for intermediaries. The new systems are expected to offer high level of governance with lower cost as compared to the traditional technologies. While there is a continuous effort to apply this innovative technology in several businesses, Islamic finance in general—and Islamic social finance in particular—are facing few challenges that could be solved by such innovations. Islamic social finance institutions such as waqf are facing some challenges in enhancing its governance structure to ensure Shariah compliance as well as economic efficiency. This chapter explains how blockchain and smart contract technologies can help these institutions for better governance, lower transaction cost, more transparency, and higher trust, hence enhancing the business flexibility and market accessibility. It also presents some related cases that are currently under development as an evidence for the practicality of these technologies in the Islamic social finance arena.
We incorporate skewness and kurtosis into an optimization process for a unique student-managed fund. Unlike the vast majority of such funds, which hold only equity, our fund includes REITs, cryptocurrency, and peer-to-peer loans. Adding these unusual asset classes allows our students to explore portfolio management concepts more generalizable than just picking stocks. While most of our assets cannot be recommended based solely on traditional mean-variance analysis, they nonetheless offer beneficial contributions. Using polynomial goal programming to incorporate higher moments in our optimization, we find that asset classes dominated in mean-variance space can make meaningful contributions to the full risk-return profile of the portfolio. In particular, we find that including cryptocurrency and peer-to-peer loans can increase the skewness and decrease the kurtosis of our portfolio.
Auwal Adam Sa’ad, Khaliq Ahmad, Abdulmajid Obaid Hasan Saleh
Peer-to-peer financial services are increasingly becoming significant game changers in the financial sector across the globe. Initially, few structures were developed to help cater to the attention of the Islamic financial industry players involved in peer-to-peer dealings. The new trend of the technological evolution in the banking and financial sector has proved to be the next challenge in this sector. However, the survival of Islamic fintech will heavily rely on the existing established trust within the sector. The potential collaborations between the established Islamic banks, fintech players and start-ups will certainly unleash the potentials of today’s technologies in the
Islamic finance industry. Being in their early stages, Malaysia and its counterparts from the GCC states have the potentials to becoming leaders in the Islamic fintech industry and may work together to develop a necessary framework for Islamic fintech advancement. Peer-to-peer arrangement connects crowdfunding investors with entrepreneurs through more transparency, speed dealings and almost free from complications in the documentation. In view of the fact that mushārakah is becoming more practical under the concept
of Islamic peer-to-peer deals, this paper attempts to develop a new peer-to-peer financing which is underlain by the Mushārakah Smart Contract Model. The paper proposes a mushārakah model using Mushārakah Smart Contract in which the investors would be crediting their investments for mushārakah purposes with virtual lenders for specific Sharīʽah compliant businesses and share in the profit, based on an agreed dividend under the mushārakah principles. It also highlights the potential structures, cyber risks, and devices to mitigate them by using mushārakah standards and measures within the Sharīʽah principles.
Abstract Reinvestment in declining or poor areas is necessary to attract new middle-class residents, reduce concentrated poverty, and improve housing conditions for the poor. Private-sector housing and commercial real estate developers consistently argue that, without assistance from the public sector, projects are not economically feasible. However, fiscal and political constraints make local governments hesitant to provide direct subsidies to developers. Tax increment financing (TIF) is often offered as a politically attractive solution to this complicated development scenario. The expedited nature of TIF allows communities to fund projects and generate development investment through a highly decentralized process, potentially avoiding public involvement. This fiscalization of the development process raises key questions. Are the communities most in need of redevelopment benefiting from TIF, or do they compete for development? How does TIF’s “creative” financing strategy influence political fragmentation? This chapter illustrates these challenges and explores ways the tool can be used to promote inclusionary development practices and support creative affordable-housing strategies.
The objective of the study was to examine financing rural industrialization and employment creation practices and possibilities in Ethiopia. In this context, rural industrialization refers to encouraging small to large industries to be established in rural areas. As rural industrialization is a new concept at a policy level let alone to the practice on the ground in Ethiopia, a full-fledged data regarding the rural industrialization and the rural financing practice is inadequate. However, attempts were made to see at least the trends in agricultural commercialization, off farm practices, the government’s policy, the financial institutions practices, and above all how other countries approached rural industrialization and financing such industries. Hence, relevant data were collected from CSA, NBE, DHS, World Bank, and Ethiopian Investment Commission and the collected data were analyzed using descriptive statistics. The major finding of the study indicates rural industrialization process is at conception stage and financing the rural strategy is still poorly developed despite the immense economic and social implications. Hence, a combination of centralized financing rural industrialization through commercial banks and a decentralized financing rural industrialization through microfinance institutions is recommended for the country to get better depth and breadth of rural industrialization.
This paper explores whether and how technological innovation, in conjunction with policy measures, can improve the process of correspondent banking cross-border payments. The paper builds on the empirical validation of existing shortcomings in this area of business by using a questionnaire and industry expert focus group sessions. Having identified the key areas of concern (e.g. cost, transparency, speed), several new network models for cross-border payments are assessed, in terms of their ability to address existing problems. Among the possible models, we also explore the use of innovative technologies such as distributed ledger technology (DLT). As a final step, we evaluate the different models and complement our findings with policy recommendations, in particular with a view to further streamlining Anti-Money-Laundering (AML) and Counter-Terrorist-Financing (CTF) as well as conduct of business rules in payments and supporting information sharing on suspicious transactions between institutions globally.
Abstract Based on a systematic review of influential publications among 402 papers published between 2010 and 2018, this paper identifies gaps in Economics and Finance research regarding two applications of FinTech: crowdfunding and blockchain. Analysing these records shows that (i) current research on FinTech is fragmented with limited theoretical grounding; (ii) crowdfunding and blockchain can be regarded as two innovations that may disrupt traditional financial intermediation but in different ways; (iii) crowdfunding platforms substitute for traditional financial intermediaries and serve as a new intermediary, without eliminating the need for intermediation; (iv) similar to crowdfunding, blockchain also creates new intermediaries; and (v) the trust element inherent in blockchain enables blockchain to eliminate the need for intermediaries in some financial areas but not all.
The authors’ first challenge is to decipher the complexity of Islamic banking despite the enigmatic aspects of the sector. A second focal point is the agent’s agenda; in the Islamic banking industry, contributors mandate intermediaries (agents) to transfer their contributions to socio-economic causes according to the Shariah; in principle, Islamic financial institutions must create value for their stakeholders by offering Shariah-compliant products and services. An underlying assumption of the agency theory is that agents attempt to maximize their personal welfare and compensation, but such behaviour may not always be in the best interests of other stakeholders. One objective of the article is to identify tools monitoring whether agents act in the best interests of stakeholders and consider if smart contracts are usable for all financial dealings between agents and stakeholders. A qualitative research framework was adopted because of the constraints of the enigmatic, secretive Islamic banking culture. A case study of the debacle of an award winning Islamic bank and the analysis of the 2017 International Monetary Fund Report on Islamic banking shed new light on the sector.