Venture capital in Malaysia vis-a-vis islamic venture capital

Abstract

This study examines and analyses venture capital as a whole in an attempt to critically unveil the situation in Malaysia with special reference to Islamic modes of venture capital. It discusses the feasibility of such Islamic modes of venture capital especially in Malaysian context. It also focuses on the brief outline of the whole venture capital industry domestically, if not globally.

The method used for this study is comparative, critical and analytical. It is comparative for it compares the western mode of venture capital with an Islamic mode of equity financing. Yet, it is critical in that it studies the shortcomings in current practice in Malaysia and thus suggests the proposed reforms to give way to true Islamic modes of venture capital. On the other hand, it is analytical because it also highlights the relevant laws and practices in other countries which are relevant to it.

Venture capital is still very much at its infancy in Malaysia or even the global financial system. However, a thorough study of Islamic law of transactions (Mu'amalat) will prove that venture capital is not an alien to Islamic trade and financing. The issue remains as to its feasibility in contemporary banking and financial system. Indeed, Shari'ah, being the revelation of Allah Almighty, is relevant for all generations at all times and places. Thus, Islamic modes of venture capital are feasible, relevant, and, indeed, are better and fairer options provided that certain reforms being done to the current legislation and practices.

In view of the rapid progress of Islamic financial system both at domestic and global levels, the advent of Islamic modes of venture capital, which are contemporary and yet 'halal' (permissible), is but an exigency.