Risk mitigation between investment account platform and equity crowdfunding

Abstract

This paper aimed to study Investment account platform in comparison to equity crowdfunding in the risk mitigation side. Equity finance holds a big interest because it has a substantial amount of risk in moral hazard and market risk. This paper aims to focus at the moral hazard side. The approach of this paper will be based on document analysis and organization comparison based on the premise that risk mitigation in equity finance is different from risk mitigation in credit finance. Holding that assumption, the paper finds that Investment Account platform despite the remarkable achievement in terms of mitigating risk still need more development to substantiate it form credit financing that is used in the banking sector. In these regard, this paper suggest to incorporate a committee in Rating Agency Malaysia that is specialized in investment analysis so that the assessment of start-ups become more relevant rather than having the credit assurance like collateral and credit record. The significance of this paper comes from the pioneering examination of IAP as the first paper to do so and from its recommendations to develop risk mitigation in Islamic equity finance that will allow more institutions to embark on this type of finance to further enhance the value proposition of Islamic finance as opposed to conventional finance.