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.

• 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.
  

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.

Shariah Screening is a mandatory process to be undertaken by all Issuers who are interested to offer Islamic deals. The Shariah screening methodology used by pitchIN has been adopted from the Shariah Screening Assessment Toolkit for Unlisted Micro, Small and Medium Enterprises (toolkit) released by the Securities Commission of Malaysia.

The Shariah Screening will focus on the following levels of screening:

The Issuer’s revenue or profit before tax (PBT) that are generated from the following business or activity must not exceed the 5% benchmark. If exceeded, the Issuer will not be eligible for offering an Islamic deal.

i. Conventional banking and lending

ii. Conventional insurance

iii. Gambling

iv. Liquor and liquor-related activities

v. Pork and pork-related activities

vi. Non-halal food and beverages

vii. Shariah Non-Compliant entertainment

viii. Tobacco and tobacco-related activities

ix. Interest income from conventional accounts and instruments (including interest income awarded arising from a court judgement or arbitrator and dividends from Shariah Non-Compliant investment)

x. Other activities deemed non-compliant according to Shariah principles as determined by the Shariah Advisor

Additionally, the Issuer’s revenue or profit before tax (PBT) that are generated from the following business or activity must not exceed the 20% benchmark. If exceeded, the Issuer will not be eligible for offering an Islamic deal.

i. Share trading

ii. Stockbroking business

iii. Rental received from Shariah Non-Compliant activities

iv. Other activities deemed non-compliant according to Shariah principles as determined by the Shariah Advisor

The riba’ and riba’-based elements in the Issuer’s balance sheet must not exceed the specified benchmarks. If exceeded, the Issuer will not be eligible for offering an Islamic deal.

1. Cash over total assets must not exceed 33% - Applicable to cash placed in conventional accounts and instruments. Cash placed in Shariah-compliant accounts and instruments is excluded from the calculation.
2. Debt over total assets must not exceed 49% - Applicable to cash placed in conventional accounts and instruments. Cash placed in Shariah-compliant accounts and instruments is excluded from the calculation.