Dubai / Emirates Business
The Dubai Financial Services Authority (DFSA) 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 (FinTech) industry within the Dubai International Financial Centre (DIFC).
The DFSA has been monitoring developments in FinTech both internationally and regionally since 2015, and has been engaged in discussions with firms looking to establish a presence in the DIFC. In some cases, these firms have been considering activities that would be regulated, such as loan-based crowdfunding.
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.
The consultation is part of the DFSA’s contribution to creating an infrastructure that fosters innovation.
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.