Equity Crowdfunding (ECF)
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Shariah-Compliant Equity Crowdfunding (ECF)
Shariah Compliant ECF is an ECF that complies with the shariah law. Which means, this campaign will be free from any forms on Rinba (usury), Maisir (Gambling) and Gharar (ambiguity). On top of that, the funds raised must be used productively and interest-based income is considered exploitation and prohibited. Unethical industries and commodities, such as arms, gambling, and alcohol, are also off-limits.
pitchIN is one of the approved equity crowdfunding platform operator that has fulfilled the SC’s guidelines for offering shariah compliant equity on its platform. Despite it being shariah compliant, it is not only limited to Muslims. It is available and accessible to anyone regardless of faith and religion.
Key features of Shariah-compliant ECF deals
- Endorsement of Shariah-compliance of the Issuer and deal prior to the Shariah Crowdfunding Exercise: Both Issuers and their deals are certified as shariah-compliant prior to the commencement of their shariah compliant equity crowdfunding exercises.
- Separate Islamic trust account: All investments made by investors will be placed in an Islamic trust account which is separate from funds raised for Conventional deals. No commingling of funds will occur.
- Continuous monitoring of Shariah-compliance status: Issuers are required to maintain their Shariah-compliant status throughout the company lifetime or at least for as long as the Investors are still holding legal and/or beneficial ownership of shares in the Issuer. To maintain the status, Issuers must abide by the requirements and benchmarks specified by pitchIN. pitchIN will continuously monitor the status of the Issuers on a regular basis on behalf of the Investors.
- Exit for Investors in the event of non-compliance: Investors are able to get peace of mind due to the exit options provided by the Issuers as part of the Islamic deal. The exit options are exercisable by the Investors in the event that the Issuer is reclassified from “Shariah-compliant” to “Shariah non-compliant” by pitchIN and the Shariah Adviser.
How are Shariah-compliant investments different from conventional investments?
Shariah compliance is driven by the aim of maximizing benefit and minimizing harm to both individuals and society, with a strong focus on protecting religion, life, intellect, family, and wealth. This approach promotes investments in responsible activities that bring benefits to society. In contrast, conventional finance prioritizes profit maximization and may not have the same ethical, environmental, or social considerations. The key difference is that Shariah compliance is based on the teachings of the Quran and the life of Prophet Muhammad (peace be upon him). Read on the core differences of shariah-compliant investments and conventional investments.