An empowerment model of Islamic crowdfunding based charity to optimize microfinancing for SMEs

Crowdfunding has emerged as an important alternative financing mechanism for Small and Medium Enterprises (SMEs) in Malaysia. However, many early-stage micro entrepreneurs remain financially excluded from conventional banking systems due to stringent collateral requirements, limited credit histories and institutional lending constraints. This financing gap continues to hinder the development and sustainability of grassroots enterprises. In a Muslim majority context, Islamic crowdfunding presents a viable Shariah compliant mechanism that mobilizes community based financial resources to support entrepreneurial development. This study theoretically examines charity based Islamic crowdfunding models as a strategy to optimize microfinancing for early-stage entrepreneurs who lack access to formal financial services. Using a qualitative approach, the research analyzes the integration of Shariah compliant contracts within digital crowdfunding platforms to assess their functional role in supporting Malaysian micro entrepreneurship. The findings suggest that the synergistic application of hibah, qard al-hasan, cash waqf and murabahah contracts enhances monetary circulation and provides SMEs with accessible asset backed liquidity. In addition, digital Islamic crowdfunding platforms overcome geographical limitations and facilitate the mobilization of social wealth for grassroots economic development. The study ultimately proposes a conceptual empowerment model that supports the transition of micro entrepreneurs from financial dependency to economic resilience. By leveraging Shariah compliant financial instruments, the proposed model contributes to strengthening financial inclusion and establishing a sustainable com4munity driven ecosystem for marginalized businesses outside the formal banking sector.