Adoption of Financial Technology in Islamic Crowd-Funding: Predicting Small and Medium-Sized Enterprises' Intention to Use the Investment Account Platform

Adoption of Financial Technology in Islamic Crowd-Funding: Predicting Small and Medium-Sized Enterprises' Intention to Use the Investment Account Platform

Maizaitulaidawati Md Husin (Universiti Teknologi Malaysia, Malaysia), Razali Haron (IIUM Institute of Islamic Banking and Finance, Malaysia) and Shahab Aziz (Universiti Teknologi Malaysia, Malaysia)
DOI: 10.4018/978-1-7998-0039-2.ch002


The purpose of this chapter is to examine the factors that influence small and medium-sized enterprises' (SMEs) intentions to use the investment account platform (IAP) based on technology acceptance model (TAM). The central hypothesis for this chapter was that SMEs' intentions to use IAP were a result of perceived usefulness and perceived ease of use. This chapter also suggested that perceived ease of use and intention was mediated by perceived usefulness of the IAP. Using primary data collection method, 163 questionnaires were collected from SMEs in Kuala Lumpur, Malaysia using the purposive sampling technique. The data were analysed using SPSS and SmartPLS. The chapter found that perceived ease of use had significant influences on SMEs intention to use the IAP while perceived ease of use significantly affected perceived usefulness and the relationship between perceived ease of use and intention was mediated by perceived usefulness of the IAP. The results of this chapter suggested strategies to promote the platform as a fund seeking platform for SMEs.
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Financial technology (Fintech) is a combination of an innovative business model and technology solution in facilitating daily financial services. Fintech is a complex ecosystem that covers a large scope of techniques from data security to financial service deliveries (Gai, Qiu, & Sun, 2017; PwC, 2016). The emergence of Fintech has brought about tremendous development in the digital economy, especially in China, India, the United Kingdom, Brazil, and Australia (EY, 2017). The common products of Fintech that include e-wallet, crypto-currency, Peer-to-Peer (P2P) financing, crowd-funding, and Insurtech have become major financial alternatives for consumers and businesses (Capgemini, LinkedIn, & Efma, 2018; Jin, Seong, & Khin, 2019). As of May 2018, global investment in Fintech companies had hit US$57.9 billion, and this number is expected to increase annually (KPMG, 2018).

In the context of Islamic finance, Fintech is believed to offer various advantages to the industry namely increased efficiency, reduced costs and a wider range of products (Bakar & Rosbi, 2018; PwC, 2016). Fintech can also attract more customers and help the Islamic finance industry become more competitive against its conventional counterpart (Reuters, 2018). According to EY (2017) and PwC (2016), out of the four financial sectors that are likely to be the most disrupted by Fintech over the next five years are consumer banking, fund and transfer payments, investment and wealth management, and also small and medium-sized enterprises’ (SMEs) financing.

In Malaysia, the Islamic crowdfunding platforms known as Investment Account Platform (IAP) has been initiated with an aim to provide investors the opportunity to invest and share the profits from Shariah-compliant investment activities (Mohamed Asmy & Hassanudin, 2017). In addition, with the elements of crowd-funding and microfinancing, the introduction of the IAP enables SMEs to get their capital in a shorter time with more simple terms and conditions, and also with shorter loan periods (Reuters, 2014; SME, 2016a). However, despite various advantages the IAP may offer, almost 60 per cent of SMEs are not aware of the availability of Islamic business financing facilities and are also still adopting conventional financing (Zahid, 2018). According to SME (2016), there is an estimated financing gap of RM21.8 billion that can potentially be met by alternative financing, including the IAP. The gap could exist due to little understanding and awareness among the SMEs on the development of Fintech (Ghazali & Yasuoka, 2018). Therefore, before further efforts are taken to promote and expand the use of the IAP platform as an alternative financing for SMEs, it is essential to explore and identify what may actually drive the SMEs’ intention to use the platform. Utilising the technology acceptance model, the central hypothesis for this paper is that the SMEs’ intention to use the IAP is a result of perceived usefulness towards participation in the IAP. In this paper, subjective norm, experience, and voluntariness are integrated into the model.

The remainder of this chapter is organized as follows: literature review and hypothesis development were presented in the next section. Thereafter, the theoretical framework is presented. Subsequently, methodology section is presented which provide details of the procedure, sample, and measures of the empirical study, followed by the study's results. This paper concludes with a discussion of the implications of the findings and by offering directions for further research.

Key Terms in this Chapter

Fintech: The new technology and innovation that aims to compete with traditional financial methods in the delivery of financial services.

Small and Medium Enterprises: Businesses whose personnel numbers and profits fall below certain limits.

Crowd-Funding: The practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet.

Adoption: Readiness to perform a given behavior.

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