UAE Authorities Plan SMB Crowdfunding Framework
United Arab Emirates (UAE) regulators are setting out to establish a framework to guide the small business (SMB) crowdfunding market, news reports on Sunday (Aug. 6) said.
The Dubai International Financial Center (DIFC) and its regulator, the Dubai International Financial Services Authority (DFSA) are reportedly looking to regulate the SMB alternative finance space as the UAE market grows and matures.
“We are the first in the GCC region to formalize a tailored regime for loan and investment crowdfunding platforms, which represent an increasingly important source of financing for the SME sector,” said DFSA Chief Executive Ian Johnston in a statement. Reports noted that regulators are aiming to promote innovation and a broadening of small business investment activity.
Equity crowdfunding is expected to provide $93 billion to small- and medium-sized enterprises by 2020, reports added. In the UAE, SMBs stand to gain significantly from that trend, as these businesses make up an estimated 85 percent of all UAE companies. In Dubai, that number is even higher, at nearly 95 percent of all businesses, reports added.
Meanwhile, research from the Khalifa Fund for Enterprise Development found that as many as 70 percent of small business loan applications in the UAE are rejected by traditional banks, despite efforts from the national government and the Central Bank of the UAE to promote SMB financing. Total bank loans to small- and medium-sized businesses accounted for less than 5 percent of all loans, reports said.
“By creating a clear set of rules for operators, we hope to encourage the sustainable development of this industry, and [this] is part of our contribution to the UAE government strategy to develop the SME sector,” added Johnston.