DFSA proposes framework for loan-based crowdfunding to support SME financing

DUBAI, 31st January, 2017 (WAM) — The Dubai Financial Services Authority, DFSA, today launched a consultation on its proposed framework for regulating loan-based crowdfunding platforms.

The consultation is the first in a series of papers which set out the DFSA’s approach to the regulation of crowdfunding platforms and the financial technology, or FinTech, industry within the Dubai International Financial Centre, DIFC.

Crowdfunding is a way in which individuals, organisations and businesses, including business start-ups, can raise money through online portals, or crowdfunding platforms, to finance or re-finance their activities and enterprises. Specifically, loan-based crowdfunding has become a valuable source of financing for the SME sector in several jurisdictions. Well-regulated crowdfunding can contribute to the development of this important sector for Dubai and the UAE economy.

Ian Johnston, Chief Executive at the DFSA, said, “Crowdfunding offers an additional avenue for the SME sector to access financing. Establishing a clearly defined regulatory framework, that takes into account the specific needs of loan-based crowdfunding operators, supports the sustainable development of this important funding source for SMEs.”

The consultation is part of the DFSA’s contribution to creating an infrastructure that fosters innovation. It aligns with the UAE’s National Innovation Strategy, promoted by His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai, to create an innovation-friendly ecosystem.