MEDICAL CRIME AT ITS WORST

Crime is a topic that is often discussed among law-makers as well as members of the general public. That being said, there is an overwhelming focus on street crimes (e.g., theft, drug offences). Those crimes which occur in professional settings are not given as much attention. In this paper, one particular type of occupational crime is discussed. Medical crime is a type of occupational crime which includes a wide range of illegal activities committed within the medical profession. Some of these include fee-splitting, taking or offering kickbacks, price-fixing, fraudulent billing, and performing unnecessary operations that can cause serious harm. Minimal oversight and unsuitable punishment enable medical professionals to take advantage of their positions. As a result, medical crime is perpetuated. Due to the severity of the harm caused by these crimes and the lack of oversight in the medical profession, medical crime is arguably the most harmful type of occupational crime. 

The term “occupational crime” refers to crimes that are committed within the context of a legitimate occupation, typically with the objective of financial gain. Occupational crimes include retail, legal, academic, religious, and medical crime (Friedrichs 2010:97). The focus of this essay is on medical crime, which includes a wide range of illegal activities committed within the medical profession. Some common medical crimes are fee-splitting, taking or offering kickbacks, price-fixing, fraudulent billing, and perform- ing unnecessary operations (Friedrichs 2010: 102-103). This essay considers how medical professionals undermine the integrity of the medical profession by taking advantage of their positions and violating the trust of the public, the serious harm caused by unnecessary surgeries, and how medical crime is perpetuated due to minimal over- sight and unsuitable punishment. These three points are discussed in order to demonstrate that medical crime is the most harmful type of occupational crime. 

The College of Physicians and Surgeons of Ontario states that, “medicine is about compassion, service, altruism, and trustworthiness.” Although this sentiment may be shared in principle, the actions of some medical professionals suggest that it might fall by the wayside in practice. Medical professionals enjoy a relatively high level of respect from the general public and are not typically associated with the term “criminal.” Their high status and shield from the criminal label allow them to engage in criminal activities without being suspected and with only a slim chance of being caught. When doctors do take advantage of their position of power and violate public trust for personal gain, it undermines the integrity of the medical profession as a whole. 

Healthcare is a business, and doctors might be primarily motivated by profit. When this is the case, they may use their respect- able status to engage in fraudulent activities. Fraud involves an intentional deception that an individual makes, knowing that doing so could result in some benefit (i.e., personal financial gain). Fraud by physicians often occurs within the context of regular occupational activities, so it is not easily discovered (Friedrichs 2010: 103). Types of fraud committed by medical professionals include billing for services not rendered, up-coding, misrepresenting services, and providing un- necessary treatment. The primary victims of medical fraud are insurers, employers, and the public. Fraud results in less money available for the deserving, the potential of physical harm, and reduced coverage (Friedrichs 2010: 104). Furthermore, Price and Norris (2009) note that “when medical providers bill for services never rendered, they create a false medical history for patients that may later cause them difficulty in obtaining disability or life insurance policies” (286). It is clear that fraud is a major problem in the medical profession, as reflected in the fact that “Canadian doctors were forced to pay back nearly $25 million in improper medical insurance billings from 2010 to 2013” (The Associated Press 2015). 

To demonstrate the severity of medical fraud, I use the example of Dr. Farid Fata. Here, Dr. Farid Fata, a cancer doctor, prescribed $35 million worth of unnecessary chemotherapy to more than 500 patients, some of which did not even have cancer (Sterbenz 2015). This resulted in insurance companies paying more than $17 million (The Associated Press 2015), not to mention the physical and psychological pain inflicted on the victims and their families. Fata admit- ted that he was being greedy and that he intentionally misused his power for personal gain. However, Dr. Fata is not the only doc- tor to engage in these types of activities – he just happens to be one who was caught. When situations like this come to light, people might realize that doctors do not all have good intentions, which may cause them to be more skeptical of medical professionals in general. Therefore, when public trust is violated by one doctor, the entire medical profession suffers. 

When considering doctors who are more concerned with profit than the well-being of their patients, one can turn to power theories of crime in order to suggest an explanation for their actions. Power theories of crime argue that criminality is more pronounced among the powerful and privileged because they aspire to material success (Friedrichs 2010: 225). Medical professionals occupy powerful positions in society and often enjoy a large salary. Those who are financially motivated might take advantage of their respectable positions in order to exploit unsuspecting patients. In an effort to maximize their profits, they may resort to criminal activity knowing that the chance of being caught is low. This explains why fraud is not an uncommon occurrence among medical professionals. Therefore, the medical profession is often regarded as trustworthy and altruistic, but individuals who take ad- vantage of their power and violate public trust for their own benefit undermine its integrity. The financial, physical, and psycho- logical harm caused by these criminal actions highlight the severity of medical crime and demonstrate that it is perhaps the most harmful type of occupational crime. 

Medical crime becomes violent when doctors perform unnecessary surgeries. Ac- cording to Leape (1989), “unwarranted surgery represents a problem of staggering magnitude in terms of needless pain, suffering, and death, as well as a substantial waste of human and financial resources” (351). Considering the time, effort, cost, and risks involved with any surgery, one might not suspect that surgery would be performed unless absolutely necessary. However, unnecessary surgeries account for 15-20% of operations performed annually in the United States (Friedrichs 2010: 103). The most common forms of unnecessary surgery are the removal of tonsils, hemorrhoids, appendixes and uterus's, heart-related surgery, and cesarean sections (Friedrichs 2010: 103). A look at the latter types of surgery on this list demonstrate that doctors are willing to put their patient’s lives at risk when they perceive some personal benefit for doing so. These are complicated surgeries with many risks that involve an extensive recovery process. Performing unnecessary surgeries can result in direct costs to the victims such as paralysis, blindness, or other forms of permanent injury (Friedrichs  2010: 103). For this reason, the performance of unnecessary surgery raises many ethical questions. 

Victims of violent medical crimes also suffer psychological costs. Most individuals hold medical professionals to a higher standard of competence and perhaps morality than regular people. When an individual is victimized by a doctor, they might become confused, anxious, and suspicious of all medical professionals. As a result, victims might be less likely to seek medical help in the future because they are scared of being victimized again. Therefore, it is clear that being a victim of violent medical crime can have negative consequences lasting for the rest of one’s life. 

In order to try and explain why medical professionals perform unnecessary surgeries despite being aware of the potential consequences for patients, rational choice theory can be considered. Rational choice theory suggests that individuals make rational decisions after considering the costs and re- wards of a potential action (Friedrichs 2010: 233). A doctor could be aware of the risks involved with a surgery, as well as the chances of getting in trouble if something goes wrong. However, if they think about the potential benefits and decide that they are greater than the risks, performing the surgery might look like a good option. Friedrichs (2010) points out that unnecessary surgery is promoted by the “fee-for-service” reimbursement system and the absence of effective control mechanisms (103). 

Furthermore, medical professionals might be influenced by other doctors. Differential association theory is a learning theory suggesting that criminal behavior is learned through contact with others with a law violating orientation (Friedrichs 2010: 235). Doctors might be around other medical professionals who they see getting away with medical crimes such as the performance of un- necessary surgeries. If these other doctors are being reinforced for their behavior by obtaining some benefit without being punished, the observing doctor might decide that he or she too can get away with similar activities. When deciding whether or not to commit the crime, a doctor might engage in neutralization. Most white collar offenders are unlikely to support the behaviors of conventional offenders and they conform to most laws (Friedrichs 2010: 237). They are not typically “bad” people, so they may have to suspend their beliefs about right and wrong in order to perform a surgery that could harm their patient. 

One problem that arises with the performance of unnecessary surgeries is that they are not always easy to identify. Most people would trust the decision of a trained medical professional because few people have sufficient knowledge to suggest alternative courses of action. This problem persists in the courtroom, when judges have to decide whether or not the actions of a doctor are criminal. Judges likely do not have extensive medical knowledge and might be unable to determine whether or not an operation was necessary. It would likely be hard for a judge to come up with alternative courses of action, so they might make their decision based on their perception of the doctor’s integrity as opposed to the situation that led to the alleged unnecessary surgery. A judge might rely on a doctor’s expertise and rule that he or she was acting with good intentions and is not to blame for the consequences of the surgery. This demonstrates that people trust the decisions of medical professionals when they might be wrong, simply because they do not have the knowledge to question them. If doctors are aware of this, they might use it to their ad- vantage, knowing that no one will question their decisions and that no one will be able to prove that a better decision could have been made. Perhaps if the actions of medical professionals were more closely monitored, the frequency of medical crimes would decrease. 

Therefore, medical professionals can be the perpetrators of violent crime in the form of unnecessary surgeries, which can be dangerous and potentially life-threatening to their patients. The physical and psychological costs for the victims are serious and long-lasting. The fact that many people, including judges, accept the decisions of these doctors because there is no one to prove that they were made selfishly is an- other problem that facilitates the commission of violent medical crime. For these reasons, medical crime may very well be the most harmful type of occupational crime. 

Medical crime is perpetuated because there is a lack of oversight in the medical profession and a lack of sufficient punishment for those who do engage in criminal activities. White collar crime in general is less visible than conventional forms of crime and offenders often go undetected. This is also the case for medical crime, and when of- fenders are caught, they often get out of paying the price for their actions. 

As a result of systemic bias in the criminal justice system, offenders who are members of minority groups, those who are not well- educated, and the poor, often face harsh punishments for their crimes. On the other hand, white collar offenders, who are typically well-educated, upper-middle class and Caucasian men, are often met with leniency by the justice system. This relates to medical crime because the majority of doctors in the United States fall into the second category. In fact, of the 18,078 medical school graduates in the United States in 2014, 10,458 were White (Association of American Medical Colleges 2015). As a result of differential opportunity between social groups within society, those who are able to attend medical school often come from well-off families. Therefore, the majority of new doctors are prime examples of individuals who have a greater chance of lenient treatment by the criminal justice system. For this reason, they might be encouraged to engage in medical crime because they know that they are likely to get away with it. 

Citing an example used earlier, Dr. Fata, the cancer doctor, only received 45 years in prison for unnecessarily treating and harming over 500 patients – thus showing how those within the medical profession are more likely to receive a lenient sentence when compared to others (The Associated Press 2015). Furthermore, lawyers might argue that when a doctor is given a criminal label, it ruins their reputation. Arguing that a medical professional has suffered enough as a result of the humiliation that comes with being labeled a criminal might evoke sympathy in the courtroom and could lead to a lesser sentence. 

The law favors those with power and influence, which explains why medical professionals might be treated more leniently. In one case, “the court held that simple lack of care, error of judgment, or an accident is not proof of negligence on the part of a medical professional” (Pandit & Pandit 2013: 379). It is also a possibility that people, including members of the criminal justice system, do not want to think that medical professionals would engage in criminal activities. These individuals likely all visit a doctor as well, and knowing that they could be a victim of medical crime might create a sense of uneasiness. Pandit and Pandit (2013) said that: “when a legal notice is received or a consumer case alleging deficiency in service is filed against a doctor, it creates a lot of emotional disturbance as the reputation of medical professionals is built over years through sheer hard work, expertise, and skill acquired by strenuous training and investment over the years” (383). 

It might be hard for individuals to accept that their doctor, someone who they trust with their health, could be a criminal. Perhaps for this reason, they try to avoid labeling them as such in order to maintain their own peace of mind. 

The fact that doctors are able to use their respectable positions to engage in crime can be related to the routine activities theory. This theory suggests that crime is a consequence of motivated offenders, suitable victims, and the absence of guardians (Friedrichs 2010: 234). As mentioned earlier, medical professionals might be motivated by profit and will engage in illegal activities in order to obtain some benefit. This is relatively easy for them because they enjoy autonomy in their decisions and they often deal with vulnerable patients who do not ask any questions. The lack of oversight in the medical profession gives these individuals the opportunity to do essentially whatever they want. Therefore, the motivated offenders, suitable victims, and lack of a control mechanism provide the perfect opportunity for a doctor to engage in criminal activities with- out being caught. Perhaps if more controls were imposed on medical professionals and their actions were more closely monitored, the frequency of medical crimes would decrease. 

Therefore, the autonomy granted to medical professionals and the lack of sufficient punishment facilitates the commission of medical crimes and will continue to do so until more is done to regulate the behavior of doctors and hold them accountable for their actions. The fact that the conditions in the medical profession perpetuate the commission of medical crime given the detrimental physical and economic costs, demonstrates that medical crime is a serious problem and is possibly the most harmful type of occupational crime. 

In conclusion, medical crime is a serious form of occupational crime that undermines the integrity of the medical profession, can result in physical and psychological consequences for victims of unnecessary surgery, and is perpetuated by a lack of control over the decisions of medical professionals and a lack of punishment for those who are caught. After considering these aspects of medical crime, it can be concluded that medical crime is the most harmful type of occupational crime. 

Bibliography 


Association of American Medical Colleges. 2015. Enrolment, Graduates, and MD/PhD Data. Retrieved November 15, 2015 
(https://www.aamc.org/data/facts/e nrollmentgraduate/). 

Friedrichs, D. O. 2010. Trusted Criminals: White Collar Crime in Contemporary Society. Belmont, CA: Wadsworth. 

Leape, L. L. 1989. “Unnecessary Surgery.” HSR: Health Services Research 24(3): 351-405. Retrieved November 15, 2015 http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1065571/ pdf/hsresearch00085-0066.pdf). 

Pandit, M. S., Pandit, S. 2009. “Medical negligence: Criminal prosecution of medical professionals, importance of medical evidence: Some guide- lines for medical practitioners.” Journal of Urology 25(3): 379-383. Retrieved November 15, 2015 (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2779964/ ). 

Price, M., Norris, D. M. 2009. “Health Care Fraud: Physicians as White Collar Criminals?” Journal of the American Academy of Psychiatry and the Law Outline 37(3): 286-289. Retrieved November 15, 2015 http://www.jaapl.org/con tent/37/3/286.full). 



The Associated Press. 2015. “U.S. doctor sentenced to 45 years for giving pa- tients excessive or unnecessary chemo.” CTV News, July 10. Retrieved November 15, 2015 (http://www.ctvnews.ca/health/u-s- doctor-sentenced-to-45-years-for- giving-patients-excessive-or-un- necessary-chemo-1.2464545). 



The College of Physicians and Surgeons of Ontario. (n.d.). Values of the Profession. Retrieved November 15, 2015 (http://www.cpso.on.ca/policies- publications/the-practice-guide- medical-professionalism- and-col/values-of-the-profession). 

Sterbenz, C. 2015. “Cancer doctor who prescribed $35 million worth of un- necessary chemotherapy gets 45 years in prison.” Business Insider, July 10. Retrieved November 15, 2015 (http://www.businessinsider.com/michigan-oncologistfarid-fata-charged-with- fraud-sentenced-to-45- years-in-prison-2015-7). 

TITIPAN BUAT DARWISH II...

Darwish yang dikasihi,

Adalah tidak adil dan agak zalim untuk Walid menyuruh tanpa memberikan panduan belajar. Jadi, dalam entri ini, Walid akan senaraikan kaedah khusus yang sesuai untuk Darwish laksanakan. Yang penting, semangat perlu berkobar-kobar.

1. BUAT NOTA GUNA AYAT SENDIRI, JANGAN IKUT AYAT BUKU

Darwish perlu membuat ulasan kembali hasil dari pembacaan teks. Tidak kisahlah, sama ada dalam bentuk karangan, peta minda, peta awan atau lain-lainnya, asalkan difahami.

2. TULIS NOTA DENGAN MENGGUNAKAN PEN WARNA WARNI

Manusia memang senang tertarik dengan objek yang cantik dan warna warni. Jadi, gunakanlah pen warna warni agar otak kita senang ingat apa yang ditulis. Secara tidak langsung, mata pun kurang mengantuk kerana tertarik dengan warna warna terang tersebut

3. CUBA TERANGKAN NOTA YANG DITULIS PADA ORANG LAIN

Ada jenis orang yang suka ulang balik apa yang dia baca secara kuat, hingga orang kiri kanan ingat ada masalah mental agaknya budak ini

 

Untuk Darwish, cuba ulang balik bacaan tersebut pada Walid atau Ummi. Ia sekaligus dapat juga kami yang tua ini beroleh pengetahuan

4. REHATKAN MINDA SELAMA 10 MINIT SELEPAS 1 JAM BELAJAR

Darwish boleh merehatkan minda dengan melakukan aktiviti yang Darwish sukai, termasuklah Whatsapp awek ke... Cuma, pastikan hanya 10 minit sahaja rehat, jangan terbalik pula.

5. ULANG BACA NOTA ATAS KATIL SEBELUM TIDUR

Sebelum tertidur, Darwish ambillah masa 10 hingga 15 minit untuk baca semula nota yang telah Darwish tulis atau lakarkan. Ulang banyak kali sampai tertidur. Bangun pagi nanti, insya Allah Darwish akan teringat semula bahan yang telah dibaca.

Darwish yang dikasihi,

Sekarang, terpulanglah pada Darwish untuk memilih ; berusaha atau membiarkan takdir menentukan arah perjalanan hidup. Walid dan Ummi membantu sekadar kemampuan kami. Doa kami selalu bersama anak-anak...

Ubahlah gaya hidup untuk mendapat perubahan yang lebih baik

TITIPAN BUAT DARWISH....

Darwish yang Walid sayangi,

Kamu seorang pelajar dan tugas utamamu adalah belajar. Namun Walid faham, terkadang belajar merupakan perkara yang sangat membosankan. Jangan biarkan hal ini terus-terusan merugikanmu. Kamu perlu belajar dengan sehabis baik agar lebih dapat bersama kelompok berprestasi tinggi. Pastinya, kamu ingin meraih apa yang kamu cita-citakan. Salah satu cara terbaik untuk menggapai cita-cita adalah belajar dengan rajin.

Kita biasa mendengar dan melihat orang-orang yang sudah berjaya berkat kegigihan mereka dalam belajar dan menuntut ilmu. Kata kuncinya adalah GIGIH, atau makna lain, ISTIQAMAH

“Pendidikan adalah senjata paling membunuh di dunia, kerana ia dapat mengubah dunia” 

Darwish yang Walid sayangi,
Dari membaca, kamu akan mendapat ilmu pengetahuan yang terus berkembang. Di zaman moden ini, belajar lebih mudah dilakukan. Kamu boleh mengakses internet dan mendapatkan pelbagai maklumat dan ilmu pengetahuan yang akan sangat berguna bagi diri sendiri mahupun orang lain.

Jika kamu ingin mendapatkan sesuatu, jadilah diri yang terus belajar agar dapat mengejar apa yang kamu inginkan selama ini. Cara untuk mengejar cita-cita adalah dengan belajar yang rajin dan tekun. Teruslah melangkah maju dengan belajar setinggi-tingginya agar kamu boleh mendapatkan masa depan gemilang.

“Orang bijak belajar ketika mereka boleh. Orang bodoh belajar ketika mereka dipaksa” 

Kamu termasuk yang mana, bijaksana atau bodoh? Ibaratnya, orang bodoh ialah orang yang tidak tahu apa-apa. Orang bodoh harus terus belajar agar image bodoh dapat hilang kerana telah berubah menjadi orang pandai. Kemudian, orang bijak ialah orang yang sudah tahu beberapa hal, namun dia tetap ingin belajar untuk mengembangkan apa yang sudah ia ketahui.

“Belajar umpama mendayung ke hulu; Jika tidak maju, maka akan terhanyut ke bawah” 

Darwish yang Walid sayangi,

Tidak ada kata menyerah dalam belajar. Ketika kamu gagal, ulangi membaiki kegagalan itu sampai berjaya. Biar berapa kali kamu gagal, kamu tetap harus bangkit untuk mengulanginya kembali. Cari tahu setiap hal yang membuatmu gagal sehingga dapat cuba lebih baik lagi. Dengan terus mencuba, kamu akan tahu apa kekuranganmu sehingga boleh memperbaiki dan seterusnya datang kembali untuk mencubanya. Percayalah, kejayaan akan datang padamu meskipun perlukan perjuangan yang sangat melelahkan.

“Orang-orang yang berhenti belajar akan menjadi pemilik masa lalu. Orang-orang yang masih terus belajar, akan menjadi pemilik masa depan”

Darwish yang Walid sayangi,

Adakah kamu Ingin berteleku dengan masa lalu atau ingin memiliki masa depan yang cemerlang? Ya, keputuasan ada pada dirimu sendiri. Tentunya, tanpa masa depan cemerlang, kamu tidak boleh menikmati hidup ini. Masa depan cemerlang dikaitkan dengan memiliki pekerjaan bagus dengan gaji yang setimpal. Kamu tidak akan mampu mendapatkannya jika kamu tidak pernah belajar. Kamu perlukan ilmu pengetahuan untuk mendapatkan semua itu. Maka dari itu, marilah terus semangat belajar agar mendapatkan masa depan cemerlang.

”Ilmu itu diperolehi dari lidah yang gemar bertanya dan akal yang suka berfikir”.

Darwish yang Walid sayangi,

Kamu harus terus bertanya mengenai pelbagai perkara agar mendapatkan ilmu pengetahuan yang luar biasa. Maksud bertanya ini dapat ditakrifkan “mencari”. Tidak kiralah dari mana pun, sama ada dari guru atau pun buku. Apa pun media yang kamu gunakan, kamu akan mendapat ilmu pengetahuan jika dirimu aktif bukan hanya berdiam diri.

“Sesuatu yang membuat saya bertahan meneruskan tugasan semalaman adalah kerana yang saya kerjakan ini menjadi pembeza yang membezakan saya dengan orang malas”

Ilmu pengetahuan bukan datang dari keturunan. Walau secerdas mana otak seseorang, jika orang itu tidak pernah belajar, orang itu tidak akan tahu apa-apa. Untuk menjadi pintar, kamu harus terus belajar dan belajar. Bahkan, seseorang dengan otak sederhana mampu mengetahui berbagai hal dan menjadi pintar setelah dia rajin belajar.

“Agama tanpa ilmu adalah buta. Ilmu tanpa agama adalah lumpuh.” 



“Belajar disaat orang lain tidur; bekerja sementara yang lain bermalas malasan; mempersiapkan disaat orang lain bermain; dan bermimpi sementara lainnya sedang berharap.” 

Darwish yang Walid sayangi,

Manfaatkan setiap waktu sebaik-baiknya. Jangan sampai waktumu berlalu tanpa belajar apa -apa. Setiap hari, kamu harus memiliki jadual waktu belajar. Bahkan, di sela-sela waktu senggangmu, gunakanlah untuk belajar.

“Belajarlah hal-hal kecil setiap hari, tapi istiqamah setiap hari. Lakukan peningkatan kecil setiap hari, hal tersebut akan menjadi sangat banyak beberapa tahun yang akan datang”

Belajar yang efektif dilakukan setiap hari meski pun sedikit demi sedikit. Dari jumlah yang sedikit ini, lama kelamaan akan menjadi banyak jika dilakukan secara konsisten setiap harinya.

“Tujuan pendidikan bukan hanya pengetahuannya, akan tetapi juga tingkah laku dan perbuatannya.” 

Orang berpendidikan akan tercermin dari tingkah laku dan perbuatan. Kebanyakan orang yang berjaya dalam menuntut ilmu akan memiliki sopan santun dan tingkah laku yang baik selain memiliki ilmu pengetahuan yang sangat luas.

“Pedang akan berkarat apabila tidak diasah, manusia yang tidak belajar akan tertinggal.” 

Semestinya manusia perlu terus belajar agar tidak tertinggal dengan zaman. Apalagi pelajar yang wajib belajar, Walid dan Umi yang sudah berumur pun perlu terus belajar agar mampu mengikuti perkembangan zaman.

“Ilmu adalah pelaburan berharga untuk masa depan.” 

Darwish yang Walid sayangi,

Masa depan cemerlang dapat dicapai dengan menuntut ilmu dengan rajin. Selagi masih ada kesempatan, gunakan waktumu untuk menuntut ilmu setinggi-tingginya.

EQUITY CROWDFUNDING IN SHARIAH COMPLIANT NATION : AN OUTLOOK IN THE MIDDLE EAST

ABSTRACT

As per the conference paper presented at Harvard Islamic Finance Forum, At Boston, USA in April 2014, ‘Crowdfunding as an alternative to financing Micro Entrepreneurs, Small Enterprises, and startups exhibits the rationale of promoting the core values of Islamic finance and thereby achieving its targets of socio-economic development in regions of Shariah compliance.’ With the given potential of Entrepreneurial Supply in such regions and its limitations, the ability of redefining the crowd as a pool including small and large investors with limited capital as well as different types of development institutions and corporations will enrich the access to capital market without compromising on the basic ethics of Islamic finance. This paper intends to study the scope of Equity Crowdfunding as an alternative source of financing small and newly established ventures that have limited access to institutionalized financial sources. Also, the progress made in the Shariah compliant Middle Eastern nations of the world that are digging into Equity crowdfunding and providing bigger platforms to the young entrepreneurs to pitch their ideas in order to make their projects financially feasible, has been scrutinized.

INTRODUCTION

Crowdfunding is a financing alternative to conventional financing methods that involves funding a project with relatively smaller contributions from a large group of individuals often the common public, rather than seeking substantial sums from a small number of Institutional investors. The fund raising and transactions involved are typically conducted online through special crowdfunding websites, often in conjunction with the most popular social networking websites. Depending on the 98 Uruba Andaleeb and Dr. A.K Mishra project, campaign contributors may be making donations, investing to earn a fair future return on investment (ROI), or prepaying for a product or service.

According to the core ethics of Islam, all forms of Interest (Riba) based transactions including securities offering fixed interest incomes such as Debt instruments are prohibited and thus fall outside the purview of Islamic Finance. Since it defeats the basic principle of avoiding all forms of transactions involving Riba, these transactions and instruments do not receive the approval of the Shariah Board which is a mandate before raising finance in most of the Islamic countries. In case of a Shariah compliant Islamic financial instrument, which is most commonly approved by the Shariah Board, any return must be directly relatable to an asset and risk-taking in a joint enterprise (such as partnerships). A debt security is replaced with an asset-tied security, direct financing of an existing and real asset, accompanied by different forms of partnerships especially equity financing.

An evaluation of Crowdfunding, as a means of alternative financing in most of the Middle Eastern countries having a fully functional and developed Islamic finance platform, suggests that the preference of debt over equity in Islamic Finance is indeed a green signal for Crowdfunding Investments. The basic nature of capital raised through crowdfunding absolutely fits the propagations of Islamic Finance.

Financing SMEs: Crowdfunding and other Shariah compliant fund-raising alternatives

According to the data published by World Bank on its website in September 2015, there is a large credit gap existing between the funds required by SMEs and the funds available from various financial institutions. The situation is even worse in case of MSMEs. The number of MSMEs in the Middle Eastern and North African countries including unserved & underserved MSMEs is around 10 million. The credit gap in Middle Eastern countries exclusively accounts for around 50%, thus facing constant threats to their survival and growth.

On the other side, the other major challenge that the Middle East is facing is Youth unemployment. According to recent surveys by the World Bank, youth unemployment in the region is around 21%, one of the highest in the world. However, the region is full of entrepreneurial talent and has had a rich heritage of burgeoning startup ventures and SMEs. Despite this, there is lack of availability of sufficient funds to invest in young businesses, due to some of the following reasons:

1. Difficulties in obtaining bank financing besides bearing the burden of debt repayment in the initial stages of development in the form of profit sharing (Shariah Compliant banks in middle eastern countries run on the principles of Islamic Banking, therefore, they do not charge interest on the amounts lent. Most common practice is to share the rewards of the business as their return on investment). Equity Crowdfunding in Shariah Compliant Nations: an outlook in the middle-east 99

2. Obtaining a bank loan in such countries is not only time consuming and cumbersome resulting into involvement of a lot of paperwork, but for small firms and startup units, it also means unreasonably high rates and a high chance of being rejected as there are huge risks involved.

3. There is a general trend of risk aversion in the region among all investors, whether it be the retail investors, or the institutional investors, this is especially the case after the Global Financial Crisis of 2008.

4. Also, many investors look for collaterals before funding in a high risk project, and for obvious reasons, it is indeed very difficult for the SMEs to provide them the same.

Benefits of Crowdfunding for Investors

Crowdfunding investing offers a cooperative, transparent and economical way to invest in Shariah-compliant equity financing. Since it requires the entrepreneur to pitch the business idea on the social networking sites, such information comes handy to the investors thereby enabling them to evaluate the potentials of the business soliciting funds, to arrive at decisions regarding which businesses to invest in and the quantum of investments to be made. Not only are the investors able to invest a subtle amount to reduce the overall risk of losing huge amounts of their savings, but they are also able to earn higher returns on their investment, besides having a fair share in the stake of the SMEs that they are investing in. These returns are, in most cases, substantially higher than the other Shariah compliant Investments. The investors are also able to invest into a number of profitable ventures by diversifying the portfolio of their investment and thereby hedge against high risks of failure of Startups without compromising on the principles of Islamic Financing.

Benefits of Crowdfunding for Entrepreneurs

There are no hassles of obtaining a sanction from Banks for having funds credited to the account of the Entrepreneur, thus crowdfunding saves a lot of time, effort and money. Also, the fund raising campaign is simple and realistic as the Entrepreneur pitches the product idea on the Crowdfunding website and all the interested investors contribute their share of investments. As long as the business activity is considered ‘Halal’ (permissible), obtaining fund by this mode is easily approved by the Shariah Board. Thus, the funds can be raised from Muslim dominant regions as well as other parts of the world, thereby providing a larger investor base to the Entrepreneur. Besides, when an idea is introduced all around the globe via the Internet, it does not take longer for it to go viral among the investors, provided the right strategies follow at each step of Crowdfunding. The entrepreneur might also gain the benefits of Market surveys just by pitching the product development idea over the internet and soliciting the response of its target market. It enables them to innovate and customize the product further from all valuable feedbacks received from its target audience. It also saves them huge sum of money to be spent on market researches before the product launch and also shields them from product failure in the market. Thus, even 100 Uruba Andaleeb and Dr. A.K Mishra before the product is released in the market, the potential market and the buyers are duly recognized. However, given the size and scale of operations of Islamic Banks in regions of Middle East, the prominent ones being located in Saudi Arabia, Kuwait, Dubai, the share of lending to SMEs of the total lending of these banks is relatively very small. Despite the fact that SMEs are globally recognized as economic growth boosters, and key contributors to the National GDPs, especially in these regions, SMEs are facing huge credit gap and a fund crisis. One of the core ethics of Islamic Finance, being accessibility of funds to all Shariah compliant businesses, irrespective of the size of the organization, is ruled out in these Shariah compliant nations. Thus, Crowdfunding has been able to diligently solve the problems of asset financing and expansion of capital base of the business due to the very nature of the entire process of fund raiser activity. Crowdfunding Investing has made noticeable leaps in filling the credit gap existing in the Middle Eastern Countries’ economies pertaining to investments in SMEs. It also broadens the scope of Islamic Financial services available to SMEs in these regions as well as other parts of the world.

INFERENCES

From time immemorial, Islamic commercial law has strongly favored equity instruments of raising finance over debt financing. Given the nature of Crowdfunding and its success rate across the globe, it is inarguable that it is apt for Muslim-majority countries that as Shariah compliant as well. In such nations, Crowdfunding investing and Islamic financial services are undoubtedly compatible, besides being mutually reinforcing. Both of these concepts have similar objectives and foundations in Finance. Some of the landmarks achieved by a few dominant crowdfunding platforms in the region include the Indiegogo, Zoomal & Eureeca. A study of the most popular Shariah compliant Crowdfunding regime brings us to the following sets of conclusions: Crowdfunding & Islamic banking Despite the region having quite popular and some of the biggest Islamic Banks that function on the Shariah principles of avoiding all forms of Riba (Interest), there continues to be a major credit gap between the quantum of funds required by the newly established ventures and the actual amount of funds made available. After the Financial Crisis of 2008 and the global meltdown, the banks have become risk averse and are not much willing to invest in innovative business ideas that may be profitable, but weigh heavy on the risk-scale. Even if the businesses that are able to obtain bank financing, the entire procedure of having the funds transferred to them is cumbersome and involves too much of paperwork and collaterals to be furnished. On the other hand, crowdfunding is pretty simpler approach to finance the business ideas. However, it is yet to become as popular as it is in other Shariah compliant nations such as Malaysia, offering one of the largest crowdfunding platforms.

Equity Crowdfunding in Shariah Compliant Nations: an outlook in the middle-east 101 Startups and SMEs

It can also be deduced from the unemployment rate in the region, that the problem can mostly be tackled with providing financial support to young entrepreneurship projects, startups and SMEs. The major hurdle for a newly established business or project is to arrange finance. In its unavailability and access, even the most innovative projects that could have been turned into extremely profitable and large businesses, die at its nascent stage.

In order to help the young Arabs develop into fine entrepreneurs and create further jobs in the Middle Eastern region, it is required that sufficient startup funds be made available to anyone who has a promising business model and product idea. This can easily be taken care of by opening more crowdfunding platforms in the region.

Regulatory Framework In 2012, JOBS (Jumpstart Our Business Startups) Act, was signed into law by the US President. The Act required the SEC (Securities and Exchange Commission) to adopt rules and formulate laws that will allow and provide for crowdfunding in the country. It not only led to opening up of big and small crowdfunding platforms, but also resulted in creation of job opportunities in the country besides bringing an inflow of required capital or finance to the startups and SMEs.

However, an insight into the Middle Eastern countries governed mostly by the Shariah laws for regulating their finances, shows the absence of proper laws and regulations that would provide for financing through Crowdfunding, let alone incentivizing the entire regime. In a recent study conducted, it was found that although USA was the first country to have immensely successful crowdfunding platforms such as Indiegogo and Kick starter, however the growth rate of Crowdfunding platforms in the UK became higher than USA.

One of the reasons being the tax benefits provided to the investors investing in startups and SMEs using the Crowdfunding portals. They had the liberty to deduct the amount of such investments from their total income. Although, some of these middle eastern countries are included in the list of Tax Havens (such as Bahrain), even then, these incentives whether in the form of deductible investments or other tax benefits for investors might boost the level of investments in the country. Also, existence of laws and regulations in place and an awareness of the same shall help the economies to allow startups to open and flourish. This would not only contribute to the GDPs of Shariah compliant nations, but would also help them curb unemployment in the region by creation of job opportunities and providing funds to young entrepreneurial talent. In some of the regions such as the UAE and Oman, there is ambiguity regarding whether the fund raised through Equity Crowdfunding would result into issue of Capital and would be governed by the Securities and Contracts Laws of these nations. A specified act or a law providing clear guidelines addressing such issues and governing Crowdfunding Investing would be truly a great step.

Uruba Andaleeb and Dr. A.K Mishra the Arab Markets and Crowdfunding ecosystem

Many studies by organizations such as World Bank have revealed that Crowdfunding has got untapped potentials in the markets of Shariah compliant nations particularly in the countries of Middle East. It reaches out to reduce the credit gap in the region despite having some of the largest Islamic banks. Although, there has been an upsurge regarding debates and discussions over Crowdfunding and its potentials to expand the scope of finance for Startups and SMEs facing funding crisis, however the growth and progress has been relatively slow paced in comparison to various developed economies of the world.

But over the years, the Middle East’s under developed markets are now aware of a powerful financing tool that would enable the promising businesses and entrepreneurial talent to become some of the most successful business projects. It is up to the regional governments to take actions to accelerate Crowdfunding into their capital markets to be able to reap most benefits out of its early development and surge.

REFERENCES

[1] https://www.pwc.com/gx/en/financial-services/islamic-financeprogramme/assets/shariah-compliant-funds.pdf

[2] “Handbook of Islamic Banking” (2007) by Kabir Hassan and Mervyn K.Lewis

[3] https://www.islamicbanker.com/publications/entrepreneurial-ecosystems-oicmarkets

[4] http://www.crowdfundinsider.com/

[5] http://Blogsworldbank.org

[6] http://www.wamda.com/2015/03/crowdfunding-catapult-innovation-middleeast

[7] “Analysis of financing sources for startup

DIFFERENCE BETWEEN BACHELOR AND MASTER THESIS

Bachelor and Master thesis must satisfy the same criteria to a large extent. However, there is a difference in level with regard to both the content and the conduct of the research. Furthermore, the size of the theses also differs.

Knowledge

Bachelor thesis in Economics and Business must demonstrate that the student possesses substantial knowledge of (business) economics. In addition, bachelor thesis in Fiscal Economics show that the student possesses knowledge of the structure of tax legislation and tax systems. Bachelor thesis in Economics and Operations Research demonstrate that the student has thorough knowledge of economics and management science and is capable of using specialized methods and techniques.

Bachelor thesis must show that students can reflect and interpret the most important concepts within the field of study.

Master thesis must also demonstrate that the student has knowledge of a specialist subject within the field of study. Master students' knowledge must go further than that of Bachelor students, and Master theses must demonstrate in-depth and systematic knowledge of the field of study.

Insight

Bachelor students in Economics and Business are capable of analyzing and explaining phenomena and problems in government and business economics by using scientific concepts, theories and research methods. They are able to analyse, explain and assess existing policies and current affairs. Bachelor students in Fiscal Economics are able to apply legislation and jurisprudence to phenomena and problems in fiscal economics. Bachelor students in Economics and Operations Research are capable of analyzing and explaining phenomena and problems in government and business economics by using the theories and research methods of economics and management science.

Master students are capable of systematically analyzing and explaining more complex economic problems, as well as analyzing and explaining current problems from a variety of different perspectives.

Research skills

Bachelor students are capable of:

• formulating a main question and objective based on scientific concepts and theories.

• selecting research techniques that are appropriate to the main question.

• selecting suitable methods for data collection and processing.

• conducting literature study.

• drawing conclusions based on the results of their own research, and reflecting upon relevant social, scientific or ethical issues.

In addition to this, Master students are capable of:

• formulating a main question based on current scientific or societal developments. This main question must have never been answered before or it must be approached from a new perspective. The Master thesis must be of clear added value.

• using the latest research techniques and literature with a critical eye.

• reflecting on their own research with a critical eye. In doing so, Master students must take into account the basic principles and the limitations of the chosen methodology.

• establishing realistic recommendations and showing creativity and insight with regard to social and scientific standards and values.

Communication

Bachelor thesis must demonstrate that the student is capable of producing a university-level written report.

Master thesis must display that the student is capable of interpreting complex research and complex results both in writing (thesis) and verbally (thesis defense) in a way that is understandable to a wide audience.

Independence

Bachelor students carry out their research under the guidance of an ESE lecturer. Bachelor students can reflect on their own academic activities with a critical eye and can adjust their own conduct if necessary.

Master students are capable of conducting the research completely independently and displaying that they are capable of independent participation in scientific discussions.