Venture Capital, Alternative Sources of Funds For Muslim Entrepreneurs

Islamic banking finance economy

by islamicbankingfinanceeconomy.blogspot.com

Venture Capital, Alternative Sources of Funds For Muslim Entrepreneurs

Venture capital is a new concept in the Islamic system that has been used in the field of finance. Investment in a business where the owners bear the risk of the possibility of bankruptcy is known as venture capital.The high level of return on capital that is cultivated is the main thing for someone to take risks. However, each of employers and the borrower has a risk profile, which it will determine how much credit should be issued. Typically, shareholders position itself as opposed to possible risk factors to be faced.With a basic philosophy that money is not created, the money simply passed from one hand to the other, venture capital became a popular source of financing in the world today. Funding channels from the source to the need to become more efficient.Starting from the United States mid-70s, venture capital is now used in the Islamic world. Now, the venture capital firm offers a variety of interesting things in accordance with the financing instruments, which is of course adapted to the model of financing in Islam.In the West, the financing by borrowing more popular, all the risks covered by insurance or other instruments to ensure the return of the capital invested. However, financing is based on capital is very different. Here, the owners of capital should be able to accept the fact that the capital invested may vanish if the borrower bankruptcy. This field, in which the Islamic world still face difficulties to bring in capital to open a new venture capital business. The actors in the private sector is still far behind in the Muslim world when compared to a lot of business opportunities and potential.If the development of the venture capital business in the United States grew convincingly, in the Muslim world was virtually non-existent. The last report showed an increase of 150 percent in venture capital investments during 1999 with a value of $ US 56 billion, which in 1990 was only worth $ US 3 billion. This development continues to increase, in the first quarter of 2000, has invested venture capital investment of $ US 20 billion. However, the strength of the US economy is the main driving factor that guarantees investors the return of capital they have invested. The Islamic world today is not a potential competitor West, not least in the field of venture capital.Providing credit to the public not only a matter of glory, but also the spirit of venture capital. Islamic venture capital firms need to design systems and procedures in accordance with the individual needs of Muslims. Venture capital funds are an effective tool to help the Muslims build their business, not just limited to the country but also anywhere in the world.If you see the trend of venture capital investment in the world, the majority of the funds were distributed in e-commerce, Internet companies, the spread of technology, etc., which the Islamic world in this field is very missed. On the other hand, Islamic countries have great potential in infrastructure development. The private sector Islamic countries, is the backbone of development, and unfortunately still not as strong and as powerful as it is in developed countries and the industrial economy.One way to overcome this problem is by providing credit through the institutions at the local level who are able to evaluate the course of regular business. Audit system, good financial accountability and feasibility of a new certification system is indispensable for securing venture capital fund that has been implanted.The development of the venture capital business very quickly over the last two years, and is the culmination of the development in the past two decades, should provide motivation for Islamic countries to establish a system that allows the private sector play a major role. The development of specialized businesses, strengthening capital markets and also government regulations that guarantee the initial stages of a project may be the right answer to overcome the problem of the private sector.