Reducing Over-indebtedness through Shariah Compliant Crowdbuying

Abstract

Households’ over-indebtedness has various social and economic consequences. With an increasing number of over-indebted households and rising individual bankruptcies, especially in the post-COVID-19 pandemic era, the efficiency of the solutions available to target this issue is becoming questionable. The purpose of this study is to propose an innovative Shariah-compliant mechanism based on crowd-buying, aiming at alleviating households’ over-indebtedness. The present study adopts a qualitative research design based on an extensive review of the existing literature and a case study of the Real Estate Crowdbuying (REC) model. The study also presents a Shariah assessment of the REC model. The study found that the REC model has five contradictions with the guidelines of Shariah and proposes an enhanced version based on Shariah compliant contracts. As per the authors’ knowledge, this is the first study that provides a Shariah assessment to the REC model and proposes an enhanced Shariah-compliant version. The main limitation of this research is the limited focus on the Shariah compliance of the model. Further studies might explore the regulatory challenges of the application of this model in Malaysia and other Muslim countries. The proposition made by this paper contributes to broadening the range of Shariah-compliant instruments aiming at alleviating households’ over-indebtedness and curbing individual bankruptcy rates.

Keywords

• households
• over-indebtedness
• real estate crowdbuying
• shariah compliance