Equity-Based Crowdfunding Can Be a New Financing Instrument for the Participation Banking Ecosystem
Keywords:
Shariah governance, Alternative finance, Islamic finance, Participation banking, Equity-Based crowdfunding, CrowdfundingAbstract
The bank-centered structure of entrepreneurial finance imposes significant constraints on early-stage ventures due to collateral requirements, repayment pressure, and heightened risk perceptions. Growing interest in alternative financing mechanisms, accelerated by digitalization, has enabled crowdfunding to emerge as a globally widespread alternative. Among crowdfunding types, equity-based crowdfunding (EBC) has gained prominence by granting investors ownership rights and emphasizing risk-return sharing. Participation banking, grounded in profit-and-loss sharing principles, demonstrates strong conceptual and operational compatibility with this structure. Designed within a phenomenological qualitative framework, this study conducted semi-structured interviews with 12 participants: participation bank managers (n=6), crowdfunding platform managers (n=3), and entrepreneurs/academics/finance experts (n=3). Thematic analysis findings reveal that equity-based crowdfunding aligns structurally with participation banking principles and that institutional involvement of participation banks would significantly enhance investor confidence and access to finance. The study evaluates Turkey's regulatory framework under Communiqué III-35/A.2, identifies existing limitations, and proposes an integration model within the participation banking ecosystem.
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