Skip to main content

Financial management practices in Islamic donation-based crowdfunding (DCF) platforms in Malaysia


This study aims to explore current financial management practices covering governance and financial operation aspects in Islamic donation-based crowdfunding (DCF) in Malaysia. A series of interviews with six Islamic DCF platforms in Malaysia were conducted. For reporting purposes, this study employed a single-case study approach. The interview was conducted and completed at the end of August 2022 via an online approach through Google Meet. The findings highlight the governance background in terms of legal establishment as well as monitoring the function of Islamic DCFs in Malaysia. In addition, for financial operation, several findings related to the funding management process model, income generation, financial sustainability and financial disclosure of Islamic DCFs in Malaysia were discussed. This study is among the pioneer studies that explore financial management practices in Islamic DCF platforms in Malaysia. The study findings and recommendations are useful for Islamic DCF platforms as well as related parties like regulators, funders, potential project managers and the public in general to understand financial management practices in Islamic DCF platforms in Malaysia.


Crowdfunding is an internet-based funding method that utilizes online distributed contributions of small monetary amounts by a large pool of people within a limited timeframe [1]. In other words, crowdfunding is an online fundraising application used for specific purposes [2]. With the advancement of technology, crowdfunding not only allows the public to participate through investing, lending, obtaining rewards and donating but also through chatting, interacting and collaborating, anywhere and at any time [3].

Similar to other financial-related products or services, crowdfunding also can be divided into conventional and Islamic models. Unlike the conventional crowdfunding model, Islamic crowdfunding must adhere to and comply with shariah principles. This includes intentions of crowdfunding projects (halal) as well as being free from prohibited activities (riba,’ maysir, gharar and other haram activities) [4, 5]. Besides, Islamic donation-based crowdfunding (DCF) is normally involved with Islamic social finance funds like zakat, waqf and sadaqah in crowdfunding activities [6].

Since crowdfunding become a phenomenon around the world as an alternative source of funding, the Muslim community has been practically conducting crowdfunding activities through Islamic social finance funds. In this case, before technological advancement, Islamic countries established zakat and waqf institutions as one the mechanisms for wealth creation and distribution, especially to address socio-economic problems and well-being [7]. These institutions were collecting zakat, waqf and other Islamic social finance funds from the public and distributing them back to the Muslim society through various socio-economic activities and projects.

With technological advancement, the emergence of crowdfunding is not only for socio-economic purposes, but also used to raise capital to support innovations, entrepreneurial ideas, and ventures [1]. In this case, crowdfunding helps in providing seed capital, testing the unique ideas by the public as well as establishing engagement with consumers [8].

Despite the potential and growth of crowdfunding, several issues such as abuse of funds, breach of commitment, loss of privacy and fake campaigns are growing concerns for crowdfunding [1, 9, 10]. For instance, DCF is facing the risk of fund management’s transparency and moral obligations. Meanwhile, reward-based crowdfunding is exposed to the risk of receiving the promised product, violation of intellectual property rights and misrepresentation. On the other hand, equity-based crowdfunding is surrounded by recapitalization and realignment issues, equity pricing, unskilled investors and the potential of an economic bubble. While lending-based crowdfunding is threatened with broken promises issue.

The above ethical issues can be exposed to all crowdfunding models including Islamic crowdfunding. One way to ensure ethical concern is by ensuring good financial management practices in Islamic crowdfunding platforms. Previously, the discussion on Islamic crowdfunding was only focused on financial sustainability [11], application of shariah contracts [12,13,14], public awareness and acceptance [15, 16] as well as risk mitigation strategy [17]. However, there is limited discussions were made on financial management practices for Islamic crowdfunding platforms. Therefore, there is a need to investigate the current financial management practices in Islamic crowdfunding platforms to ensure that they are managed properly and in good practice.

Thus, this study focuses on the financial management practices of six Islamic DCFs in Malaysia. Islamic DCF is chosen as this crowdfunding model is currently becoming the trend in the Malaysian context. After this section, this study has focused on the background of DFC, Islamic DCF and its practices in Malaysia. Further, this study continues with an explanation of the methodology employed. Next, a presentation of the research findings and discussion on financial management practices in Islamic DCF in Malaysia covering governance and financial operation aspects are being covered. Finally, a summary, recommendations and implications of the findings are highlighted in the last section.

Literature review

Overview of crowdfunding

Based on the literature, there are four crowdfunding models which are: (i) donation-based crowdfunding (DCF), (ii) reward-based crowdfunding (RCF), (iii) lending-based crowdfunding (LCF), and (iv) equity-based crowdfunding (ECF) [1, 2]. Under DCF, no compensation is granted to funders. Meanwhile, under RCF, participants commit to offering funders some kind of reward, ranging from immaterial acknowledgements to the delivery of an early version of the product or service that is produced using the money raised through the crowdfunding campaign. While, under LCF, the compensation normally takes the form of interest or profit payments. Lastly, under ECF, the compensation consists of equity shares, dividends and or voting rights in the funded venture [18].

It is undeniable fact that the main reason why crowdfunding was chosen by creators or owners of the project is to raise the fund. Besides, crowdfunding is also conducted in order to seek public attention and strengthen the commitment to an idea through feedback on projects and activities [19]. While, from the funders’ perspective, crowdfunding was chosen to consume products or services as well as to gain experiences by being indirectly involved with the projects and activities. Moreover, funders are also involved with crowdfunding in order to have feelings of connectedness to a community with similar interests and ideals [20].

There are three success factors for crowdfunding which are: (i) societal (macro) perspective; (ii) organizational (meso) perspective; and (iii) individual (micro) perspective. From a societal perspective, the social obligation to help others arise within the public which turns the supportive environment into the success of crowdfunding. Besides, digital literacy and infrastructures are also significantly contributed to the success of crowdfunding. Meanwhile, from an organizational perspective, activities or projects funded as well as organizational legitimation have significantly contributed to the success of crowdfunding platforms. While, from an individual perspective, it is about the favor of funders as well as the benefits received by beneficiaries which contributed to the success of crowdfunding [3].

Apart from these success factors, several other elements were also contributing to the success of crowdfunding. This includes the difficulty to raise capital especially by start-ups, the evolution of technological advancement especially in Fintech and the success of the companion crowdsourcing phenomenon [21]. In addition, crowdfunding readiness, platform trust, crowd familiarity, privacy protection, perceived security, information quality as well as website reputation were also found in contributing toward the success of crowdfunding [22].

Moreover, based on an analysis of the existing crowdfunding projects, it is found that crowdfunding mostly succeeds by narrow margins or else fails by large amounts. Besides, projects that signal a higher quality level are more likely to be funded as compared to others. Furthermore, a large number of friends on online social networks are also significantly associated with success in fundraising through crowdfunding. Next, the geographic area also plays a significant impact on the success of crowdfunding, especially for cultural-related products. Similarly, several socio-demographic attributes such as gender, race, religion and age are believed to contribute to the success of crowdfunding activities [23].

In terms of the establishment of crowdfunding platforms, it is found that national boundaries play a significant role. Besides, the existence of supportive legal environments as well as certain cultural traits is also significant in shaping the creation of crowdfunding platforms. In addition, crowdfunding platforms are also different based on crowdfunding models (DCF, RCF, LCF and ECF). Lastly, the role played by crowdfunding platform owners in promoting their platforms and projects is also significantly increasing the acceptance of the crowdfunding platform themselves [18].

Islamic crowdfunding

In general, the concept of conventional crowdfunding and Islamic crowdfunding is similar. However, Islamic crowdfunding is bound by shariah principles and must be free from prohibited activities including riba’ (interest), maysir (gambling), gharar (uncertainty) and other haram (prohibited) matters [4, 5]. Besides, transactions under Islamic crowdfunding need to apply an ‘asset-backed’ mechanism as well as a profit-loss margin in order to avoid interest which leads to shariah non-compliant [24].

In addition, like other Islamic financial institutions, it is suggested for Islamic crowdfunding platforms have shariah board or shariah advisor to advise on shariah matters and to ensure shariah compliance [4]. Moreover, as part of Islamic organizations, Islamic crowdfunding platforms are also expected to adhere to maqasid shariah and other moral values which are in congruence with the Quran and Sunnah [5].

Furthermore, in order to ensure that Islamic crowdfunding is shariah compliant, several related shariah contracts are suggested to be used in transactions. For instance, for Islamic DCF, it is suggested to utilize Islamic social finance funds like zakat, waqf and sadaqah in crowdfunding activities. Meanwhile, for RCF, it is recommended to adopt bay as-salam in order to provide returns to crowdfunding investors. On the other hand, for LCF, several sale-based contracts can be used such as murabaha (cost plus), tawarruq and/or ijarah. Lastly, for ECF, profit-sharing contracts like mudharabah and musyarakah where funders are treated as the owner of the fund while the Islamic crowdfunding platform is the one who manages the funds [5, 6, 14, 25, 26].

It is believed that Islamic crowdfunding will able to attract the emotional interest (religiosity) of donors, donations across geographic areas, as well as a new source of funding with low cost for community projects [27]. Besides, Islamic crowdfunding also can benefit especially for micro-, small- and medium-sized enterprises (MSMEs) sectors under the socio-economic development [28].

However, like conventional crowdfunding, there are also several issues and challenges pertaining to Islamic crowdfunding. First, in terms of regulation, there are limited regulations related to Islamic crowdfunding. In fact, some related crowdfunding regulations were not in favor of Islamic crowdfunding, especially for credit risk mitigation. Second, in terms of shariah, there is no specific guideline for shariah screening for crowdfunding projects and activities which can lead to shariah non-compliant risks. Third, like conventional crowdfunding, Islamic crowdfunding also is facing fraud issues especially in crowdfunding campaigns. Fourth, there is still a challenge for Islamic crowdfunding to select innovative and out-of-the-box projects as at present Islamic crowdfunding mainly uses the banking concept of financing [26]. Therefore, it can be concluded that the Islamic crowdfunding ecosystem still has a long journey to growth.

Crowdfunding and Islamic crowdfunding in Malaysia

Malaysia is the first country in Southeast Asia that has put in place a regulated framework for crowdfunding [29]. In 2015, the Securities Commission Malaysia (SC) issued the Guideline on Recognized Markets which became the main reference for the establishment of the registered ECF. In 2019, the SC revised its crowdfunding initiative by introducing the Malaysia Co-Investment Fund (MyCIF), which combines both ECF and LCF together. Currently, there are nine (9) ECF and 10 LCF platforms in Malaysia.

To date, the Malaysian government already allocated RM180 million for co-investment with private investors through both ECF and LCF platforms under MyCIF initiative. Over RM357 million have been invested through more than 16,000 crowdfunding campaigns that benefit 2280 MSMEs. Overall, more than RM1.36 billion have been co-invested from private investors [30].

For Islamic crowdfunding, at present there is no specific criteria or guideline for recognizing Islamic crowdfunding in Malaysia. However, several existing crowdfunding platforms in Malaysia claimed that they are Islamic or shariah-compliant crowdfunding. This includes Ethis Ventures Sdn Bhd, LaunchGood, PitchIN, Microleap PLT and Ata Plus Sdn Bhd [31]. Besides, Islamic crowdfunding with the DCF model in Malaysia, normally they are utilizing Islamic social finance funds such as zakat, waqf, sadaqah, hibah and qard hasan in funding various sectors such as book publishing [32], heritage sites [33], agriculture [34] and health care [35].

It is believed that Islamic crowdfunding can benefit the Islamic economy ecosystem, especially in the Malaysian context. For instance, several Eureeca SEA Sdn Bhd and Ethis Ventures Sdn Bhd were found to be ready to involve with halal MSMEs [36]. Besides, several scholars have also proposed a waqf crowdfunding model to develop waqf lands and projects in Malaysia [27, 37, 38]. In fact, the first waqf-based crowdfunding,, was officially launched in 2016 to realize a waqf-based crowdfunding initiative [39]. Lastly, Islamic crowdfunding is becoming part of Islamic finance, acting as an alternative financing instrument to facilitate the implementation of projects for Malaysian borrowers who are facing difficulties raising money through mainstream financial institutions [40].

Financial management practice in crowdfunding

Based on the literature, the most concern with crowdfunding platforms is their ability to assure financial sustainability [41]. Apart from that, financial return is also becoming another concern as crowdfunding is seen as a financial instrument, especially for LCF and ECF [42]. Besides, risks for crowdfunding investment also becoming another concern especially for LCF as it facilitates loan originations outside the traditional banking model [43].

It was notified that crowdfunding becoming an alternative option especially for MSMEs and start-ups to raise their capital. This is because these organizations are not yet bankable, either due to the absence of transparent financial management or lack of managerial and financial capability [44]. Moreover, crowdfunding platforms are also able to reduce the rigors of regulatory compliance with financial management authorities. For instance, funders are allowed to interact with project managers without lawyers and bulky verification documents. Besides, funders are also able to lend to borrowers without financial intermediaries [45].

Moreover, crowdfunding funders tend to pay little attention to financial information contained in campaigns such as projections of costs and revenues or potential returns as it is difficult to evaluate [46]. In this situation, crowdfunding funders tend to look at the project owners more than the financial disclosure as they put their trust in the project owners more than promised returns [47].

On the other hand, the probability of financial fraud in the current crowdfunding platforms has deterred some fundraisers not to use crowdfunding as an alternative to raising capital. Besides, the lack of capabilities to be accountable to a crowd of different funders also prevents some fundraisers from using crowdfunding [48]. Moreover, unlike ECF and LCF models, the absence of regulation for both DCF and RCF brings the potential for fraud and malpractice. For this, regulating both DCF and RCF by governance mechanism with reporting requirements is needed in order to keep track of the fund and to provide timely information [49].

In addition, financial reporting is also able to support raising capital [50]. For this, project owners must provide adequate financial information like future plans and financial statements to enhance the funders’ trust in them [51]. This is especially when monetary returns are involved like in ECF and LCF [52].

For Islamic crowdfunding, several discussions related to financial management practices were made. [40] proposed a shariah governance framework for Islamic crowdfunding. Based on the existing shariah governance framework for Islamic financial institutions, they proposed for Islamic crowdfunding platforms to have similar shariah functions including shariah review, shariah audit and shariah management. Besides, hiring shariah advisors also will increase the trust of funders and the public [53].

In terms of risk mitigation especially for Islamic LCF, several risk mitigation processes were implemented. This includes shariah screening process on project owners’ background and the project itself in terms of legality, financial capacity, compliance with the shariah and so on. Besides, there is a need to have a guaranteed system for borrowers and also a mechanism to ensure the project must exist as part of shariah reputational risk mitigation. Moreover, to prevent IT risk, it is suggested for Islamic crowdfunding platforms always check the platform system, conduct maintenance testing and use strong firewalls for data security [17].

Next, in terms of performance, it was found that Islamic DCF will be able to promote better utilization of Islamic charity donation funds such as zakat, waqf and sadaqah [6]. Besides, there is a study by [24] found that MSMEs who received funding through Islamic crowdfunding namely Kapital Boost have better financial performance than before they received the funding.

However, [54] analysis of Ethis, one of the well-known Islamic crowdfunding in the world, it was found that from four shariah-compliance parameters (aqad, maqasid shariah, financial reporting and legal documentation) set by [55], Ethis still not fulfilling financial reporting parameter. In this case, the financial reporting parameter is needed as it serves to eliminate uncertainty (gharar) and fraud in financial contracts through factual reporting of the said transaction. Thus, there is a need for Islamic crowdfunding to disclose adequate financial information in order to comply with shariah-compliant as well as to answer accountability toward their stakeholders.

Research methodology

This study aims to explore current financial management practices in Islamic donation-based crowdfunding (DCF) in Malaysia. This includes the existing governance, financial operation and accountability. For the data collection, it can be gathered in several ways such as by interviews, observation or analysis of documents. Sometimes, all three methods can be used together to gather information. However, this study uses the interview method as it is the best approach to gain information regarding current financial management practices in selected Islamic DCFs. This is because interviewing people who are directly involved with the financial management practice is the best method for identifying the details of the real activities happened [56].

In terms of data population and sampling, at present there is an absent of any listings that can serve as sampling frames for Islamic DCFs in Malaysia. Therefore, data were collected through a series of interview sessions with six Islamic DCF platforms in Malaysia known as Islamic DCF A, Islamic DCF B, Islamic DCF C, Islamic DCF D, Islamic DCF E and Islamic DCF F. These six selected Islamic DCF platforms were chosen based on their similar characteristics which are:

  1. 1.

    Legally registered either as a company under the Companies Commission of Malaysia (CCM) or as a non-profit organization (NPO) under the Registry of Society (ROS);

  2. 2.

    Located in Malaysia and operated by Muslims;

  3. 3.

    Adopting the DCF model for its crowdfunding activities;

  4. 4.

    Involve with Islamic social finance funds like zakat, waqf, sadaqah, hibah and infaq;

  5. 5.

    Projects and activities conducted are free from prohibited activities (riba,’ maysir, gharar and other haram activities).

This study employs the case study method in order to explore current financial management practices by six selected Islamic DCF platforms. This is because the case study method is able to explore a specific system practiced in an organization [57]. Specifically, this study adopted an exploratory case study approach for the data collection process and a single-case study approach in reporting the findings.

For the data collection process, a series of interviews focused on financial management practices were conducted to the representative of each selected Islamic DCF platform and lasted around 1–2 h for each session. The interview was focused on two aspects, which are: (i) governance practices; and (ii) financial operation practices. The series of interview sessions were conducted and completed at the end of August 2022 via an online approach through Google Meet. All the findings were analyzed and combined into a single case study writing.


This section will explain the profile and governance mechanism of all six selected Islamic DCFs in Malaysia. In terms of legal establishment, Islamic DCF A is a Malaysian DCF platform founded and created in 2015. At first, Islamic DCF A was registered as an enterprise and later in 2020 it was upgraded into a private limited company (Sendirian Berhad) under the Companies Commission of Malaysia (CCM), which is bound by the Companies Act 2016. Meanwhile, Islamic DCF B is a Malaysian DCF platform founded and created in 2015. In 2017, Islamic DCF B is recognized as one of the social enterprises by the Malaysian Global Innovation and Creativity Centre (MaGIC). Later on, it was acquired by one of Asia’s biggest DCF platforms in 2019.

Islamic DCF C is a Malaysian DCF platform founded and created in 2020. All Islamic DCF A, Islamic DCF B and Islamic DCF C are established as a private limited company (Sendirian Berhad) under the Companies Commission of Malaysia (CCM), which is bound by the Companies Act 2016. While Islamic DCF D is a Malaysian DCF platform created by an Islamic university in 2020. As Islamic DCF D is fully owned by an Islamic university that is fully owned and funded by the Malaysian Government, Islamic DCF D is bound by the Universities and Universities Colleges Act 1971.

On the other hand, Islamic DCF E is a Malaysian DCF platform created by a social club in 2020. As Islamic DCF E is fully owned by a social club who are registered under the Registry of Society (ROS), Islamic DCF E is bound by the Societies Act 1966. Lastly, Islamic DCF F is a Malaysian DCF platform created by a Malaysian foundation in 2021. This foundation is established in 2018 under the Department of Law (BHEUU), Prime Minister’s Department of Malaysia, which is bound by the Foundation Act 1952.

In terms of the purpose or objectives of the establishment, Islamic DCF A is to promote the practice of contributing to the community whether for themselves, organizations, or for anyone who needs help. Islamic DCF B started as a web platform for students, especially the ones in need, to crowdfund their scholarships for higher education. At present, Islamic DCF B's focus is on medical, educational and humanitarian needs and emergencies.

Meanwhile, the objective of Islamic DCF C aims to help NPOs to receive donations transparently, easily and systematically without any elements of breach of trust and exploitation. While, Islamic DCF D’s objective is to facilitate the channelling of donations, especially for the university welfare and education projects/programs.

On the other hand, the Islamic DCF E aims to help book writers raise funds systematically, creatively and transparently in an effort to publish their works. As a community-based project, it started from the outcome of a related crowdfunding research project. Later on, this research concept has been realized into a real platform known as Islamic DCF E. In addition, Islamic DCF E has also applied the RCF model apart from the DCF model. In this case, the funders contribute their money to the book project, and after the book is successfully printed the authors will gift part of their book to the funder. The remaining books will be sold, donated to certain institutions or given as gifts by the writers. Lastly, Islamic DCF F aims to help NPOs and communities that have good ideas and projects for helping the community but do not have a platform to raise funds, or do not know how to publicize the campaign to the public.

In terms of crowdfunding project or program categorization, Islamic DCF A divides its crowdfunding projects into six categories which are marriage, charity, education, natural disaster, Islamic institutions and health. Meanwhile, Islamic DCF B projects are focused on health, education and humanitarian needs and emergencies. Islamic DCF C platform divides its crowdfunding projects into 12 categories which are worship houses, charity organizations, tahfiz education, health, child, natural disaster, animal, disability people, repair, education, business assistance and social activities.

While, crowdfunding projects under the Islamic DCF D platform can be divided into waqf, infaq and endowment. On the other hand, Islamic DCF E is focused solely on the book publication. Lastly, Islamic DCF F divides its crowdfunding projects into four which are education, welfare, health and Islamic preaching (da’wah).

In terms of governance function, Islamic DCF A, Islamic DCF B and Islamic DCF C are monitored by the Board of Directors. In addition, a few director members of Islamic DCF C have shariah backgrounds which help them to ensure their operations are in line is shariah-compliant. This is also to increase the trust of funders and the public as stated by [53].

Meanwhile, Islamic DCF D has a specific committee on zakat, waqf and endowment that monitor the operation of Islamic DCF D. For Islamic DCF E, the management of Islamic DCF E is operated by the Club Committee of Islamic DCF E which is elected from the annual general meeting. This also means that there is no monitoring function in Islamic DCF E as there is no board existing in Islamic DCF E.

Lastly, as the Islamic DCF F platform is owned by a foundation, all operation of Islamic DCF F is operated by that foundation. In this case, two officers from the foundation are assigned to manage the Islamic DCF F platform. All decision made by Islamic DCF F is monitored by the Trustee Board of the foundation. Besides, Islamic DCF F also has its own shariah advisor who oversees shariah matters. Having a proper monitoring function is important as Islamic DCFs generally raise funding from individuals, small and often ‘unsophisticated’ donors who may lack the knowledge, incentives and power to conduct due diligence and monitor project owners [58].

The summary of the governance practices of these Islamic DCFs is shown in Table 1.

Table 1 Summary of governance practices in Islamic DCFs


This section will discuss the financial operation of all six selected Islamic DCFs in Malaysia. In terms of fund management, Islamic DCF A, Islamic DCF C and Islamic DCF D act as an intermediary between project owners and donors in fundraising. It started when the project owner requested these Islamic DCFs to campaign for their projects and donors will fund the project through these Islamic DCFs’ platforms. Then, these Islamic DCFs will transfer the fund collected to the project owner.

However, the fund management process will end once the project owner received the fund raised from donors. They act as a technology enabler, and the responsibility to ensure crowdfunding projects are executed is not within their scope. The flow of fund management by Islamic DCF A, Islamic DCF C and Islamic DCF D is shown in Fig. 1.

Fig. 1
figure 1

Flow of fund by Islamic DCF A, Islamic DCF C and Islamic DCF D. Note: The sequence of the activity started from 1 to 4; fund flow involved between activity 2 to 4

Meanwhile, Islamic DCF B acts as a fund manager. Similarly, it started when the project owner who also as the beneficiaries requests to raise funds via the platform. Then, donors will donate to the project. However, instead of disbursing the fund to the project owner/beneficiaries, Islamic DCF B will transfer the fund directly to the third parties which these project owners/beneficiaries will eventually pay for the projects. For example, if the project is proposed by the student to help in paying his/her education fee, once they successfully raise the fund, Islamic DCF B will transfer the fund directly to the university or college where the student is studying. In the case of medical projects, the third party will be either a hospital or a clinic where the project owners/beneficiaries get their treatment. Figure 2 illustrates the flow of fund management by Islamic DCF B.

Fig. 2
figure 2

Flow of fund by Islamic DCF B. Note: The sequence of the activity started from 1 to 4; fund flow involved between activity 2 and 3

Next, as Islamic DCF E’s purpose is to help the book writers raise funds to publish their books, the project owner normally will be the one who will be benefited from crowdfunding activities. In this case, it started when the book writer as the project owner requested the Islamic DCF E to campaign for their projects. Then, donors will fund the project through the Islamic DCF E platform. Next, Islamic DCF E will transfer the fund collected to the project owner who also acts as the beneficiary. The flow of fund management by Islamic DCF E is shown in Fig. 3.

Fig. 3
figure 3

Flow of fund by Islamic DCF E. Note: The sequence of the activity started from 1 to 3; fund flow involved between activity 2 and 3

On the other hand, Islamic DCF F has a similar fund management process to Islamic DCF A, Islamic DCF C and Islamic DCF D. However, instead of limiting by only transferring the fund collected to the project owner, Islamic DCF F will also monitor the execution of crowdfunding projects by the project owner to ensure the beneficiaries will benefit from the fund raised. The flow of fund management of Islamic DCF F is shown in Fig. 4.

Fig. 4
figure 4

Flow of fund by Islamic DCF F. Note: The sequence of the activity started from 1 to 5; fund flow involved between activity 2 to 4

In terms of income generation, all six Islamic DCFs stated that they impose a charge on funds collected to cover the operation costs. For instance, Islamic DCF A informed that they impose 5.5% as a services fee from the fund received plus RM1 for payment gateway (Toyyibpay) cost per transaction. In addition, Islamic DCF A also stated that the disbursement is free for the first time. However, subsequent disbursement will be charged RM1 for each transaction. Meanwhile, for Islamic DCF B, it stated on its platform to charge an additional 5% of the donation amount as a services fee plus RM1 per FPX transaction (internet banking) or 5% for MasterCard/Visa.

Next, Islamic DCF C imposes a 5% or RM2 (which is higher) charge for each fund transaction received. In this case, donors who donate RM40 and below will be charged RM2, while donors who donate more than RM40 will be charged 5% as a service fee. Islamic DCF D charges 5% on each fund transaction received from donors. However, any online transaction cost like FPX or MasterCard/Visa will be covered by its parent which is an Islamic university.

While, Islamic DCF E stated in their terms and conditions that they reserve the right to charge 10% administrative fees from the total fund collected, applicable to every campaign launched. However, it has been informed that they currently charge about 5% to the project owner on the total fund collected. Lastly, Islamic DCF F informed that they charge 6% of the total fund collected.

In terms of involvement with Islamic social finance, all six Islamic DCFs are involved with sadaqah or infaq funds. Moreover, there is also the involvement of zakat and waqf funds by these Islamic DCFs except for Islamic DCF E. For this, several asnaf programs and waqf projects are being launched on the platform. In addition, Islamic DCF B has a collaboration with an entity that has the amil authority from several state Islamic religious councils in Malaysia. In this situation, Islamic DCF B provides a platform for the entity to collect zakat funds and as an agent, Islamic DCF B will gain some commission. Thus, this supports previous findings that Islamic DCFs are normally involved with Islamic social finance funds [6, 59].

In terms of financial sustainability, all Islamic DCFs agreed that the services fee imposed on the fund collected is able to cover their operation cost. Meanwhile, Islamic DCF B received commissions from collaboration with other parties. Besides, there are also donations made directly to Islamic DCFs to be used to support their operation. On the other hand, Islamic DCF C informed that they also promote other activities like aqiqah and qurban services through the platform which they can earn some income to cover their operation cost. In fact, they are also planning to provide umrah services in the near future which also will increase the revenue. This finding expands on previous findings on sustainability in DCFs which are more focused on project sustainability rather than platform sustainability [42].

In terms of operational costs, it has been informed that the staff salary and platform maintenance expenses are the main costs for all Islamic DCFs. For other administrative costs, normally Islamic DCFs do not incur many costs. For marketing costs, it is dependent on the project owners to promote their projects to raise the fund. Some of them will use influencers, artists or public figures with some payment, while others may also use social media advertising packages like Facebook Ads and Google Ads to promote their projects. These costs are normally borne by the project owners and are not associated with Islamic DCFs. This finding supports previous findings that crowdfunding platforms generally only have a small cost to be borne [60].

In terms of financial disclosure, annual financial reports of Islamic DCFs are not being disclosed on their website. For crowdfunding projects, the details of the project cost will be disclosed upon the information given by the project owners. For donation transparency, almost all Islamic DCFs have disclosed the recipient of donation based on each project launched on a real-time basis. Normally, project owners will be able to view fund disbursement transactions for their projects. Moreover, donors who are registered with the Islamic DCF C platform will also be able to view their financial transaction history made with the platform. Lastly, regarding the shariah contract used, almost all Islamic DCFs do not have a specific shariah contract to be used in their operation. However, Islamic DCF A and Islamic DCF F mentioned using ujrah contract, while Islamic DCF B mentioning on using wakalah contract. Therefore, more disclosures by Islamic DCFs are required especially on financial-related information to enhance the trust of the donors [51]. Besides, appointment of shariah advisor and disclosure of shariah contract used is also encouraged as it will ensure Islamic DCFs’ are operating according to shariah [61, 62].

The summary of the financial operation practices of these Islamic DCFs is highlighted in Table 2.

Table 2 Summary of financial operation practices in Islamic DCFs


The aim of this paper is to explore current financial management practices in Islamic DCF in Malaysia. This including on governance as well as financial operation practices. First, under governance practices, it is found that all Islamic DCFs are legally registered either under the foundation, private limited company or social club. Each of them has different legal binding based on their legal establishment. Moreover, each Islamic DCF has a monitoring function either by the board of trustees or the board of directors except for Islamic DCF E as there is no board exists. In fact, several Islamic DCFs have board members with shariah backgrounds to manage shariah matters.

Meanwhile, under financial operation practices, there are at least four models for the fund management process in Islamic DCFs. For the first model, Islamic DCF act as the technology enabler when it started from the project owners’ request and ends with the fund transferred to them through the Islamic DCF platform. For the second model, Islamic DCF will act as an intermediary. It is similar to the first model; however, Islamic DCF will monitor the execution of crowdfunding projects through beneficiaries. On the other hand, the third model emphasizes Islamic DCF’s role as a fund manager. In this case, instead of transferring the fund collected to the project owners who also act as beneficiaries, Islamic DCF will directly transfer the fund to the third party which indirectly completes the objectives of crowdfunding projects on behalf of beneficiaries. Finally, for the fourth model, Islamic DCF will act as a technology enabler; however, unlike model one, the project owner also acts as the beneficiary.

In terms of income generation, all Islamic DCFs impose certain service fees on the fund collected. Besides, all Islamic DCFs are involved with Islamic social finance like zakat, waqf, sadaqah and infaq. While, for financial sustainability, service fees are likely able to cover operational costs. In addition, several Islamic DCFs collaborate with other parties and receive commissions and donations to cover their operation cost. In fact, there are also initiatives to offer other services through the Islamic DCF platform for income generation purposes. The operational costs, staff salary and platform maintenance expenses are the main costs for all Islamic DCFs. While, on financial disclosure, it can be concluded there is limited financial information especially on Islamic DCFs except for crowdfunding project costs. Lastly, several shariah contracts also were found to be used such as ujrah and wakalah by Islamic DCFs.

Practical implications

Based on the findings, several implications and recommendations are proposed. For related Malaysian authorities like the Securities Commission Malaysia (SC) or Bank Negara Malaysia (BNM), it is recommended to develop a specific standard, framework or guideline for Islamic DCFs by the authority. This includes how to ensure shariah-compliant status by Islamic DCFs. Besides, these authorities also need to develop a shariah governance framework that lists the roles and responsibilities of all related parties including the board, the shariah committee or advisor and the management of Islamic DCF. Moreover, there is a need to have a specific criterion in recognizing Islamic DCFs. In addition, a proper shariah screening methodology for crowdfunding projects is also needed to ensure crowdfunding projects are in line with shariah principles.

For Islamic DCFs, it is recommended for them to disclose more financial information regarding themselves including annual financial reports, organizational and governance background of the platform, shariah contract used as well as cost details for every project launched. Besides, apart from the information on donations received based on a real-time basis, it is also encouraged for Islamic DCFs to provide other related crowdfunding project information including the beneficiaries’ details and the impact of the project.

Limitations of the study

While limitations of the study also need to be recognized. This includes the scope of the study which is limited to the Islamic DCF model. Hence, future studies are recommended to extend to other Islamic crowdfunding such as LCF and ECF under the SC, as well as RCF.

Availability of data and materials

Not applicable.



Department of Law, Prime Minister’s Department of Malaysia


Companies Commission Malaysia


Donation-based crowdfunding


Equity-based crowdfunding


Lending-based crowdfunding


Malaysian Global Innovation and Creativity Centre


Micro-, small- and medium-sized enterprises


Malaysia Co-Investment Fund


Reward-based crowdfunding


Registry of Society


Securities Commission Malaysia


  1. Hossain M, Oparaocha GO (2017) Crowdfunding: motives, definitions, typology and ethical challenges. Entrep Res J 7(2):20150045.

    Article  Google Scholar 

  2. Rijanto A (2018) Donation-based crowdfunding as corporate social responsibility activities and financing. J Gen Manag 43(2):79–88.

    Article  Google Scholar 

  3. Salido-Andres N, Rey-Garcia M, Alvarez-Gonzalez LI, Vazquez-Casielles R (2021) Mapping the field of donation-based crowdfunding for charitable causes: systematic review and conceptual framework. VOLUNTAS Int J Volunt Nonprofit Organ 32(2):288–302.

    Article  Google Scholar 

  4. Achsien IH, Purnamasari DL (2016) Islamic crowd-funding as the next financial innovation in Islamic finance: potential and anticipated regulation in Indonesia. Eur J Islam Finance 5:1–11.

    Article  Google Scholar 

  5. Faudzi MSM, Bakar JA, Ahmad S (2021) The relevance of conventional and Islamic crowdfunding as financing instruments for SMEs. J Islam Finance 10(1):59–64

    Google Scholar 

  6. Sulaeman S (2020) A conceptual and empirical study on the development of the Islamic donation-based crowdfunding platform model for micro small and medium-sized enterprises (MSMEs) in times of Covid-19 pandemic in Indonesia. Asian J Islam Manag 2(2):107–122.

    Article  Google Scholar 

  7. Kamaruddin MIH, Masruki R, Hanefah MM (2018) Waqf management practices: case study in a Malaysian Waqf Institution. World J Soc Sci 8(3):1–12

    Google Scholar 

  8. Younkin P, Kashkooli K (2016) What problems does crowdfunding solve? Calif Manag Rev 58(2):20–43.

    Article  Google Scholar 

  9. Shneor R, Torjesen S (2020) Ethical considerations in crowdfunding. In: Shneor R, Zhao L, Flaten BT (eds) Advances in crowdfunding research and practice. Palgrave Macmillan, Cham, pp 161–182.

    Chapter  Google Scholar 

  10. Snyder J, Crooks VA, Mathers A, Chow-White P (2017) Appealing to the crowd: ethical justifications in Canadian medical crowdfunding campaigns. J Med Ethics 43(6):364–367.

    Article  Google Scholar 

  11. Husin MM, Haron R (2020) Financial sustainability of SMEs through Islamic crowdfunding. In: Rafay A (ed) Handbook of research on theory and practice of global Islamic finance. IGI Global, Pennsylvania, pp 321–337.

    Chapter  Google Scholar 

  12. Aderemi AMR, Ishak MSI (2023) Qard Hasan as a feasible Islamic financial instrument for crowdfunding: its potential and possible application for financing micro-enterprises in Malaysia. Qual Res Financ Mark 15(1):58–76.

    Article  Google Scholar 

  13. Ishak MSI, Kamaruddin MH, Aderemi AMR (2021) Mudharabah based crowdfunding as an alternative source of funding book publications in Malaysia. J Islam Mark 13(9):1973–1987.

    Article  Google Scholar 

  14. Ishak MSI, Rahman MH (2021) Equity-based Islamic crowdfunding in Malaysia: a potential application for Mudharabah. Qual Res Financ Mark 13(2):183–198.

    Article  Google Scholar 

  15. Razak DA, Zulmi SR, Dawami Q (2021) Customers’ perception on Islamic crowdfunding as a possible financial solution for the pandemic Covid 19 crisis in Malaysia. J Islam Finance 10:92–100

    Google Scholar 

  16. Salim M, Kassim S, Thaker MAMT (2021) Factors influencing the acceptance of Islamic crowdfunding in Malaysia: a study of youth entrepreneurs. Pak J Commer Soc Sci 15(3):443–475

    Google Scholar 

  17. Zatadini N, Marjany N, Syamsuri S (2019) Risk mitigation strategy in Islamic crowdfunding institution (case study at Islamic crowdfunding institution in Indonesia). J Int Conf Proc 2(3):170–175

    Article  Google Scholar 

  18. Dushnitsky G, Guerini M, Piva E, Rossi-Lamastra C (2016) Crowdfunding in Europe: determinants of platform creation across countries. Calif Manag Rev 58(2):44–71.

    Article  Google Scholar 

  19. Belleflamme P, Lambert T, Schwienbacher A (2013) Individual crowdfunding practices. Ventur Cap 15(4):313–333.

    Article  Google Scholar 

  20. Gerber EM, Hui JS, Kuo PY (2012) Crowdfunding: why people are motivated to post and fund projects on crowdfunding platforms. In: Proceedings of the international workshop on design, influence, and social technologies: techniques, impacts and ethics, Evanston, Illinois, USA

  21. Agrawal A, Catalini C, Goldfarb A (2014) Some simple economics of crowdfunding. Innov Policy Econ 14(1):63–97.

    Article  Google Scholar 

  22. Zhang Y, Tan CD, Sun J, Yang Z (2020) Why do people patronize donation-based crowdfunding platforms? An activity perspective of critical success factors. Comput Hum Behav 112:106470.

    Article  Google Scholar 

  23. Mollick E (2014) The dynamics of crowdfunding: an exploratory study. J Bus Ventur 29(1):1–16.

    Article  Google Scholar 

  24. Hendratmi A, Sukmaningrum PS, Hadi MN, Ratnasari RT (2019) The role of Islamic crowdfunding mechanisms in business and business development. J Bus Econ Rev 4(1):10–23

    Article  Google Scholar 

  25. Ibrahim SA, Roslen SNM, Salleh NM, Theam TS, Lai KY (2018) Islamic micro financing: crowd-funding as a drive to improve financial inclusion in Malaysia. Int J Eng Technol 7(429):18–20.

    Article  Google Scholar 

  26. Saiti B, Musito MH, Yucel E (2018) Islamic crowdfunding: fundamentals, developments and challenges. Islam Q 62(3):469–484

    Google Scholar 

  27. Suhaili NA, Palil MR (2016) Crowdfunding: a collaborative Waqf based internet platform. Int J Bus Econ Law 11(5):41–46

    Google Scholar 

  28. Marzban S, Asutay M, Boseli A (2014) Shariah-compliant crowd funding: an efficient framework for entrepreneurship development in Islamic countries. In: 11th Harvard Islamic finance forum 2014, April 25–27. Harvard University, Cambridge

  29. Wahjono SI, Marina A, Widayat (2015) Islamic crowdfunding: alternative funding solution. In: 1st World Islamic social science congress 2015, 1–2 December, Putrajaya, Malaysia, pp 30–38

  30. SC (2021) SC annual report 2021. Securities Commission Malaysia (SC), Kuala Lumpur. Accessed from

  31. Ethis (2021) Islamic crowdfunding platforms in Malaysia. Accessed from

  32. Kamaruddin MH, Ishak MSI (2020) Islamic crowdfunding platform as an alternative book fundraising in Malaysia. Int J Islam Econ Finance Res 3(2):11–25

    Google Scholar 

  33. Ishak MSI, Kamaruddin MH (2020) Heritage conservation through public donation in Malaysia: a potential for Islamic crowdfunding. J Manag Theory Pract 2(3):10–16

    Google Scholar 

  34. Azganin H, Kassim S, Saad AA (2021) Islamic P2P crowdfunding (IP2PC) platform for the development of paddy industry in Malaysia: an operational perspective. J Islam Finance 10(1):65–75

    Google Scholar 

  35. Lutfi MA, Ismail MA (2016) Sadaqah-based crowdfunding model for microfinancing and health care. J Muamalat Islam Finance Res 13(2):31–51

    Google Scholar 

  36. Abdullah S, Oseni UA (2017) Towards a Shari’ah compliant equity-based crowdfunding for the halal industry in Malaysia. Int J Bus Soc 18(S1):223–240

    Google Scholar 

  37. Azganin H, Kassim S, Sa’ad AA (2021) Proposed Waqf crowdfunding models for small farmers and the required parameters for their application. Islam Econ Stud 29(1):2–17.

    Article  Google Scholar 

  38. Thaker MAMT, Pitchay AA (2018) Developing Waqf land through crowdfunding-Waqf model (CWM): the case of Malaysia. J Islam Account Bus Res 9(3):448–456.

    Article  Google Scholar 

  39. Alma’amun S, Shafiai MHM, Shahimi S, Adnan MSA (2018) Waqf-based crowdfunding: a case study of Int J Islam Econ Finance Res 1(1):12–19

    Google Scholar 

  40. Ramli HS, Ishak MSI (2022) Equity-crowdfunding in Malaysia: the needs for a comprehensive Shariah Governance. J Manag Theory Pract 3(1):48–55.

    Article  Google Scholar 

  41. Jelincic DA, Sveb M (2021) Financial sustainability of cultural heritage: a review of crowdfunding in Europe. J Risk Financ Manag 14(3):101.

    Article  Google Scholar 

  42. Martinez-Climent C, Zorio-Grima A, Ribeiro-Soriano D (2018) Financial return crowdfunding: literature review and bibliometric analysis. Int Entrep Manag J 14(3):527–553.

    Article  Google Scholar 

  43. Nisar TM, Prabhakar G, Torchia M (2020) Crowdfunding innovations in emerging economies: risk and credit control in peer-to-peer lending network platforms. Strateg Change 29(3):355–361.

    Article  Google Scholar 

  44. Ibrahim N (2012) The model of crowdfunding to support small and micro businesses in Indonesia through a web-based platform. Procedia Econ Finance 4:390–397.

    Article  Google Scholar 

  45. Hildebrand T, Puri M, Rocholl J (2017) Adverse incentives in crowdfunding. Manag Sci 63(3):587–608.

    Article  Google Scholar 

  46. Shafi K (2021) Investors’ evaluation criteria in equity crowdfunding. Small Bus Econ 56(1):3–37.

    Article  Google Scholar 

  47. Moysidou K, Hausberg JP (2020) in crowdfunding we trust: a trust-building model in lending crowdfunding. J Small Bus Manag 58(3):511–543.

    Article  Google Scholar 

  48. Bagheri A, Chitsazan H, Koolaji S (2020) Deterrents of tourism business crowdfunding: aversion decision and aversion behavior. Int J Hosp Manag 88:102517.

    Article  Google Scholar 

  49. Zhao Y, Harris P, Lam W (2019) Crowdfunding industry—history, development, policies, and potential issues. J Public Aff 19(1):e1921.

    Article  Google Scholar 

  50. Donovan J (2021) Financial reporting and entrepreneurial finance: evidence from equity crowdfunding. Manag Sci 67(11):7214–7237.

    Article  Google Scholar 

  51. Alharbey M, Van Hemmen S (2021) Investor intention in equity crowdfunding. Does trust matter? J Risk Financ Manag 14(2):53.

    Article  Google Scholar 

  52. Ferreira V, Papaoikonomou E, Terceno A (2022) Unpeel the layers of trust! A comparative analysis of crowdfunding platforms and what they do to generate trust. Bus Horiz 65(1):7–19.

    Article  Google Scholar 

  53. Nor SM, Hashim NA (2020) Trust motivates funders to participate in Shari’ah crowdfunding. Geografia 16(2):228–238.

    Article  Google Scholar 

  54. Yuningsih A, Muhammad R (2020) Shariah compliance analysis of Islamic crowdfunding: case study of IQTISHODUNA J Ekon Islam 9(1):75–90.

    Article  Google Scholar 

  55. Rosly SA (2010) Shariah parameters reconsidered. Int J Islam Middle East Finance Manag 3(2):132–146.

    Article  Google Scholar 

  56. Hanefah MM, Kamaruddin MIH, Shafii Z, Salleh S, Zakaria N (2020) Internal control, risk and Sharīʿah non-compliant income in Islamic financial institutions. ISRA Int J Islam Finance 12(3):401–417.

    Article  Google Scholar 

  57. Yin RK (2018) Case study research and applications: design and methods, 6th edn. Sage Publications, Thousand Oaks, USA

    Google Scholar 

  58. Cumming DJ, Vanacker T, Zahra SA (2021) Equity crowdfunding and governance: toward an integrative model and research agenda. Acad Manag Perspect 35(1):69–95.

    Article  Google Scholar 

  59. Sulaeman, Ghozali AM (2023) An integrated cash Waqf and Islamic crowdfunding model (I-CWCM) for SMEs: policy implications for the post-Covid-19 pandemic. Rev Islam Soc Finance Entrep 2(2).

  60. Lu Y, Chang R, Lim S (2018) Crowdfunding for solar photovoltaics development: a review and forecast. Renew Sustain Energy Rev 93:439–450.

    Article  Google Scholar 

  61. Ramli HS, Abdullah MF, Alam MK (2023) Islamic crowdfunding practices in Malaysia: a case study on Nusa Kapital. Asian J Account Res 8(2):145–156.

    Article  Google Scholar 

  62. Salaheddine A, Rami AA (2023) The advantages and challenges of Islamic crowdfunding as an alternative funding source. J Econ Manag 7(1):1–21

    Google Scholar 

Download references


This research was funded by the Ministry of Higher Education (MOHE) under the Fundamental Research Grant Scheme (FRGS) entitled Developing Shariah Framework for Donation-Based Crowdfunding: Towards Safeguarding Rights of Funders and Beneficiaries (USIM/FRGS/FEM/KPT/51121).


This research was funded by the Ministry of Higher Education (MOHE) under the Fundamental Research Grant Scheme (FRGS) entitled Developing Shariah Framework for Donation-Based Crowdfunding: Towards Safeguarding Rights of Funders and Beneficiaries (USIM/FRGS/FEM/KPT/51121).

Author information

Authors and Affiliations



MIHK was a major contributor in writing the manuscript. NAM performed the concept of the manuscript. RMR and WNFWMN involved in the data collection processes. AFK involved in the data analysis process. All authors read and approved the final manuscript.

Corresponding author

Correspondence to Muhammad Iqmal Hisham Kamaruddin.

Ethics declarations

Ethics approval and consent to participate

Not applicable.

Consent for publication

Not applicable.

Competing interests

The authors declare that they have no competing interests.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Open Access This article is licensed under a Creative Commons Attribution 4.0 International License, which permits use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons licence, and indicate if changes were made. The images or other third party material in this article are included in the article's Creative Commons licence, unless indicated otherwise in a credit line to the material. If material is not included in the article's Creative Commons licence and your intended use is not permitted by statutory regulation or exceeds the permitted use, you will need to obtain permission directly from the copyright holder. To view a copy of this licence, visit

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Kamaruddin, M.I.H., Muhamed, N.A., Radzi, R.M. et al. Financial management practices in Islamic donation-based crowdfunding (DCF) platforms in Malaysia. Futur Bus J 9, 32 (2023).

Download citation

  • Received:

  • Accepted:

  • Published:

  • DOI: