Halal equity crowdfunding options
Stocks and real estate
Salaam all!
Crowdfunding is the practice of mobilizing funds across a number of users that the internet has amplified particularly over the past few years. I can't trace it to when it first started but it's been part of my upbringing, seeing play out at weddings, other special events, or just friends who want to join up their money power.
As you know, communal projects are deeply engrained in Islamic principles. We’ve all contributed to or at least have heard of some of the free platforms such as GoFundMe (GFM) that enable raising funds via donations. But as the description implies, GFM is a philanthropic platform and not crowdfunding to make a profit via direct financing or to gain equity/ownership.
Direct financing can be via debt or equity. While debt crowdfunding seeks to finance projects via loans, equity crowdfunding is for the purpose of attaining some form of equity capital with the contribution. For Sharia’-compliance reasons, only asset-based loans can return a profit.
Equity crowdfunding usually refers to pooling funds for small businesses, startups to hold equity in these investments and be able to cash out once that business is sold or becomes public by becoming listed on a stock exchange. All investments are risky, but due to the level of survival uncertainty involved in startups, equity crowdfunding has added riskiness.
To further narrow today’s blog, I will just talk about equity crowdfunding platforms with the goal of giving investors a return on their investments via the two main asset classes that are real estate and stocks. That is:
Property crowdfunding and
Stock/fund crowdfunding
In the conventional (not necessarily Islamic), there are options such as Allyinvest’s Managed Portfolios, with which you can get started with as little as $100 to have a portfolio of funds tied to the Stock Market. You also have Fundrise for real estate starting with as little as $500-$1,000. Acorns is another, relatively speaking, new mover who has popularized rounding up the change from your purchases to invest into funds. Unfortunately, despite these companies having fundamentally halal business models, their portfolios may or may not be so (refer to this previous blog post). As people who want to abide by our spiritual and ethical principles of Islamic investing, these options are not ideal. So, are there any “halal-stamped” options out there to get started into the real estate and stock market investment classes?
The answer is yes!
Real Estate
Yielders – UK-based, property crowdfunding platform – offers individuals the ability to invest into portions of a property, yielding rental income and capital gains on a proportion of the final sale.
Ethis Ventures - With Ethis Crowd, real-estate developments can be financed through the platform using crowdfunded e-wakālah – an agency contract – or crowdfunded istisnā‘ – a contract to construct an asset. Investors put down a minimum investment or more and are guaranteed a return (%) once the investment exits.
Manzil - Manzil Halal Mortgages use a Murabaha (credit sale) model, whereby Manzil (The Financier) takes possession of the property first and then will resell it back to you for an agreed upon profit.
Stock Market
Wahed Invest - The world’s first Sharī‘ah-compliant robo-adviser. Wahed Invest is the US’s first Halal online investment platform, allowing savers from all income brackets to easily invest in a globally diversified portfolio of ethically responsible stocks, Islamic bonds and gold.
Manzil - Manzil is making waves in Canada. The company offers Manzil Halal Portfolios, which are Canada's only diversified Halal portfolio offering.
All of the companies listed here are AAOIFI-approved and I'm personally so proud of these ventures and wish them increased Barakah in their businesses. I hope you've enjoyed reading as much as I've enjoyed sharing.
Baaraka'Allah upon us all.