Dubai has introduced regulations for crowdfunding. It is the first member state of the GCC to oversee the access to alternative forms of financial aid of small businesses and startups.
The Dubai Financial Services Authority (DFSA) said in a statement that the new framework would regulate loan and investment crowdfunding. It would also provide governance for the fintech industry as well as protection of its customers.
Small and medium size enterprises are an important part of the United Arab Emirates’ economy. They make up nearly 85% of all business in the country. Therefore, they contribute more than half of the country’s GDP and give permanent jobs to half of the local population. Despite their constantly growing popularity, the small businesses in the UAE got their bank loans applications rejected, a recent study by Khalifa Fund showed. Next to that, the UAE bank loans to SMEs accounted only 4% of the outstanding bank credit.
A recent report by PwC found out that 97 campaigns were successfully funded in the Gulf Region in 2015 and 2016. 73 of them were male-led and 24 – female-led, concluded the study. In 2015 and 2016, the seed crowdfunding campaigns generated a total of USD 3.25 million in financing in the Middle East.
Ian Johnston, Chief Executive at the DFSA commented:
By creating a clear set of rules for operators, we hope to encourage the sustainable development of this industry and is part of our contribution to the UAE Government strategy to develop the SME sector.
Before Dubai, the United States and Great Britain also have established regulations for crowdfunding to support their SME’s.