Islamic crowdfunding as a financing alternative for Malaysian youth entrepreneurs and the perceived acceptance

Abstract

Access to financing is a critical challenge faced by entrepreneurs, especially youth entrepreneurs in Malaysia. Youth entrepreneurs are the next growth engine for the nation; hence effective measures need to be taken to overcome this issue by finding several alternative financing sources. Crowdfunding is a fast-growing and innovative model that has attracted considerable attention among academicians, leading it to become essential research topics globally. Hence, the current study proposes a specific Islamic crowdfunding model tailored to youth entrepreneurs’ needs as high-risk borrowers. Mainly, the current research objectives are: (i) to examine the challenges experienced by Malaysian youth entrepreneurs to access financial institutions’ financial assistance (ii) to identify the Malaysian youth entrepreneurs’ perception of the Islamic crowdfunding existence and its model suitability, (iii) to assess the factors affecting Malaysian youth entrepreneurs’ acceptance of the Islamic crowdfunding model, and (iv) to design an Islamic crowdfunding youth-focused model for Malaysian youth entrepreneurs and evaluate its suitability as the alternative financing mechanism. The current study adopted a sequential explanatory mixed-method approach conducted in two phases, qualitative and quantitative. The quantitative phase involved data collection using questionnaires to achieve the first, second, and third objectives. Meanwhile, in the qualitative phase, data were obtained through experts’ interviews to achieve the fourth objective. The descriptive analysis employed the Statistical Package for the Social Sciences (SPSS) to achieve the first and second objectives. Simultaneously, Structural Equation Modeling (SEM) was adopted to achieve the third objective. Finally, the study conducted a thematic analysis to meet the fourth objective. The respondents for the quantitative phase were selected from three prominent organisations, namely Majlis Amanah Rakyat (MARA), Malaysian Global Innovation and Creativity Centre (MAGIC), and Perbadanan Usahawan Nasional Berhad (PUNB). In this case, 260 questionnaires were useful for data analysis. On the other hand, six experts, including academicians, industry players, policymakers, and shariah experts, participated in the interviews to obtain more in-depth information. Descriptive findings showed that track record, long loan processing time, and business plan were the most cited challenges youth entrepreneurs experienced with the financial institutions financing. In contrast, youth entrepreneurs were discouraged from applying the financial institutions financing due to the financing rate. Youth entrepreneurs viewed Islamic crowdfunding as a possible alternative financing mechanism, and the results indicated strong preferences for Islamic Donation-Based Crowdfunding. In assessing youth entrepreneurs’ intention towards Islamic crowdfunding acceptance, following the Extended Theory of Acceptance Model (TAM), it was hypothesised that Perceived Usefulness (PU), Perceived Ease of Use (PEOU), Self-Efficacy (SE), Islamic Platform (IP), and Financial Accessibility (FA) significantly impact youth entrepreneurs’ intention to use Islamic crowdfunding. The Community Based Crowdfunding Model for Youth Entrepreneurs (CBC4YE), using the quantitative approach findings, was conceptually designed to assist youth entrepreneurs in having better access to financing. Subsequently, experts further validated the CBC4YE model. The interview results noted that the experts have a favourable opinion that the CBC4YE model is appropriate in providing youth entrepreneurs with better access to financing. A serious commitment between the government, private sector, and youth entrepreneurs is crucial. It is to ensure the CBC4YE model can be implemented to achieve the target to improve youth entrepreneurs financing problems, leading to job creation and reduced unemployment rates.