Critical Shariah Assessment of P2P Digital Platforms and Investment Notes in Malaysia

Abstract

The rapid expansion of digital financial platforms has accelerated the use of Peer to Peer (P2P) financing as an alternative mechanism for investment and funding. Within Islamic finance, Islamic P2P platforms and Islamic investment notes have emerged as Shariah compliant instruments aimed at promoting ethical capital mobilisation, financial inclusion, and micro, small, and medium enterprise (MSME) financing without reliance on interest based lending. Despite increasing regulatory recognition and market adoption, concerns persist regarding their Shariah legitimacy, particularly with respect to contractual substance, risk sharing authenticity, governance adequacy, and post disbursement utilisation of funds. This study undertakes a qualitative doctrinal Shariah assessment grounded in fiqh al muʿāmalāt and maqāṣid Shariah. Using Islamic P2P platforms approved by the Securities Commission Malaysia as a case study, the analysis examines Mushārakah, Muḍārabah, Wakālah, and Commodity Murābaḥah (Tawarruq) structures. The study identifies critical implementation level Shariah risks, including deceptive disclosure, negligent default, and non Shariah use of proceeds. It argues that regulatory approval alone is insufficient to ensure Shariah compliance in substance and proposes a contract centric, lifecycle based Shariah governance framework for Islamic digital platform