Volume V: Economy, Politics, and Environmental Governance

Empowering MSMEs through Blockchain-Based Shariah-Compliant Financing in the Multipolar Economic Era: The Potential of Initial Coin Offerings

  • Muhammad Ismail Universiti Malaya, Kuala Lumpur, Malaysia
  • Suffian Haqiem Bin Norazelan Universiti Malaya, Kuala Lumpur, Malaysia
  • Muhammad Taqiuddin Bin Mohamad Universiti Malaya, Kuala Lumpur, Malaysia

Keywords

Blockchain, Shariah-Compliant Financing, Initial Coin Offerings, MSMEs, Multipolar Economy.

Abstract

This study examines the potential of blockchain-based Shariah-compliant financing as an alternative mechanism for empowering micro, small and medium enterprises (MSMEs) in the evolving multipolar economic era, with particular attention to Initial Coin Offerings (ICOs), as an alternative mechanism. As global economic power becomes increasingly dispersed and economic uncertainties intensify, MSMEs face greater challenges in accessing financing that is flexible, inclusive and compliant with Shariah principles. In response, this study explores how blockchain technology, particularly through token-based fundraising mechanisms, can support a more transparent and resilient financing ecosystem capable of strengthening MSME competitiveness and sustainability within the Malaysian context. The study adopts a qualitative approach through normative-juridical analysis, supported by an extensive review of academic literature, legal frameworks, regulatory guidelines, policy documents and Shariah resolutions. It also incorporates fiqh adaptation (takyif fiqhi) and a comparative analysis of selected international blockchain-based financing practices to evaluate their suitability within the Islamic finance ecosystem. The analysis indicates that blockchain technology offers significant potential to improve financing accessibility, enhance transparency, facilitate efficient transactions and reduce excessive reliance on conventional financial intermediaries. However, the use of ICOs for MSME financing requires careful Shariah structuring, strong governance, investor protection and regulatory oversight to avoid elements of uncertainty, speculation and non-compliance. When developed in accordance with Shariah principles, blockchain-based financing can provide a more ethical, inclusive and sustainable alternative to conventional financing mechanisms while supporting the resilience of MSMEs amid the challenges of a multipolar economy. This study contributes to the discourse on Islamic finance, financial technology and public policy by proposing a conceptual foundation for blockchain-enabled Shariah-compliant financing. The proposed framework provides practical guidance for policymakers, financial institutions and regulatory authorities in developing a more resilient and inclusive digital financing ecosystem for MSMEs.

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