Crowdfunding in Saudi Arabia: Practices and Perceptions

Abstract

Crowdfunding represents an alternative financing method characterised by its communitarian ethos and reliance on digital technologies. While extensively developed in the United States and Europe, crowdfunding in emerging economies, including Saudi Arabia, remains under-researched. This study critically examines how institutional factors shape crowdfunding in Saudi Arabia and explores its growth potential. Using a mixed-methods design, data were collected through a questionnaire survey (n=152) and semi-structured interviews with key stakeholders. The findings reveal that coercive pressures from regulatory bodies such as the Saudi Central Bank (SAMA) and Capital Market Authority (CMA) strongly influence platform operations, particularly promoting debt-based models over equity crowdfunding. Normative pressures, especially Sharia compliance, play a major role in building trust among users. Mimetic behaviours were also observed as new platforms imitate the strategies of established ones to achieve legitimacy. Debt crowdfunding, offering more predictable returns and Sharia-aligned contracts, has flourished, while equity crowdfunding faces difficulties due to regulatory caps, low liquidity, and investor conservatism. Despite relatively low public awareness and financial literacy, the sector shows strong growth potential. Policy initiatives to improve education, create secondary markets, and refine regulations could support crowdfunding's broader adoption. Institutional theory offers a comprehensive framework to interpret how regulatory, cultural, and competitive forces shape the sector’s evolution. As Saudi Arabia pursues Vision 2030 goals, crowdfunding is positioned to contribute to SME financing and entrepreneurship if institutional challenges are carefully addressed.