The United Arab Emirates’ cabinet authorised crowdfunding by both public and private sectors, state news agency WAM reported.
“Crowdfunding is one of the best tools to support the financing of innovative business ideas… and it will open a door for young people and entrepreneurs,” said Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister of the UAE and Ruler of Dubai.
Small and medium enterprises (SMEs) and start-ups make up a large segment of the UAE economy, but access to funding remains a primary challenge. According to a UAE government website that cited data from the Khalifa Fund, approximately 50-70 percent of SME applications for funding are rejected by conventional banks. Loans to SMEs account for just 4 percent of the outstanding bank credit in the UAE, below the MENA average of 9.3 percent.
SMEs contribute nearly 60 percent to the UAE’s gross domestic product. In Dubai, SMEs account for nearly 95 percent of all companies, employing 42 percent of the workforce, according to a government website.
The Securities and Commodities Authority (SCA) will be responsible for the regulation governing the activities of crowdfunding platform operators.
The strategy covers all technical aspects associated with the regulation of crowdfunding platform operators. This includes definitions; scope of application; operator licensing requirements; operator obligations towards SCA and investors; financing applicant obligations; and the rights of the investor, the operator, and the financing applicant. The strategy also addresses supervision, inspections, and penalties.
Popular existing international crowdfunding platforms include GoFundMe, Indiegogo, SeedInvest Technology, Mightycause, StartEngine, and Patreon. In the UAE, Beehive and Eureeca already exist, and the Dubai Government has launched DubaiNext.
