Two important factors for SMEs are financing and business sustainability. Both are key ingredients for business growth and success although they often conflict one another. Financing tend be short-term focused – making the most profits over the near term, often at the expense of long-term growth in order to pay investors/creditors at the earliest. Sustainability on the other hand requires a long-term approach in working closely with various stakeholders to capture market opportunities and create a successful, ethical and responsible business.
Islamic crowdfunding has the ability to marry the two. Increased risk sharing between businesses and investors lessens the focus on growing short-term and at any costs. Islamic finance also puts emphasis on ethics and universal value, and for the collaboration of businesses with employees, clients and the community.
Crowdfunding – a better form of financing
Crowdfunding offers companies a faster and more efficient way to receive funds or capital with less hassle. Through an online crowdfunding platform, a company can raise funding from a larger and broader audience, regardless of geography. The quick turnaround helps businesses to take advantage of opportunities in the market and can offer a breathing room for SMEs facing a temporary liquidity crunch.
The involvement of the community in funding SMEs requires businesses to be transparent. With investors increasingly seeking ethical investments, crowdfunding puts some pressure on businesses raising financing to make sure its operations are run ethically and sustainably. Crowdfunding also promotes a closer tie between businesses and the community who are dependent on one another.
Islamic finance – a sustainability filter
Islamic finance offers an ideal filter to screen for sustainable businesses. Thus, the focus on preservation of human welfare, protection of the environment, and assisting the community are elements necessary for a sustainable business.
Kapital Boost – financing sustainable businesses
Kapital Boost is an Islamic-based crowdfunding platform offering alternative financing solution to SMEs looking to purchase business assets. In offering financing services, we look at a company’s sustainability apart from just near-term growth.
As an example, our platform helps small businesses raise funding for real, productive economic activities as opposed to consumptive purposes. For instance, we identified Scan-Food as a high growth company and with potential to expand its distribution network in Southeast Asia. With the funding via Kapital Boost, Scan Foods could reach a larger market. Alongside this process, they also moved towards achieving sustainable growth.
Sustainability starts with Kapital Boost. By maintaining a professional, ethical and transparent business conduct in order to build trust within the community in the long-term. In return, we can better contribute to the community by growing the SME sector.