CMA gives nod for MSMEs’ crowd funding
Micro, small and Medium enterprises (MSMEs) can now tap affordable capital to expand operations after the regulator gazetted the Capital Markets Investment-Based Crowdfunding Regulations of 2022.
After the Capital Markets Authority (CMA) gazettement, this now paves the way for Micro, Small and Medium Enterprises (MSMEs) that employ approximately 15 million Kenyans to raise funds for business growth and innovation.
However, all existing investment-based crowdfunding platforms in Kenya must comply with the regulations within one year of the commencement date of the regulations.
Crowdfunding is the collection of funds from the population (crowd) through a technological platform and comprises three parties; the issuer (fundraiser, a legal entity) and the investor (donor of funds) and the crowdfunding technology platform operator who facilitates interaction between issuers and investors.
In the investment-based crowdfunding model issuers who raise money from the crowd will offer investors with either shares or a debt instrument and the investor (crowd) will give money to the issuer with an expectation for a financial return on investment, thus fitting within the context of offering securities to the public.
“These regulations are instrumental in providing access to affordable and alternative finance to this sector that is unable to raise capital through existing securities issuances,” said CMA boss Wyckliffe Shamiah.
CMA crowdfunding started in 2015 to create a conducive environment for uptake notably with the authorisation of Lelapa Fund to operate an equity-based crowdfunding platform and a CMA Regulatory Sandbox.