Crowd-funding in E Africa is not regulated
Crowd-funding in E Africa is not regulated – report Jan. 31, 2017, 2:00 am By STAR REPORTER @thestarkenya Most SMEs depend on crowd sourcing as the best strategy to harness funds and grow their potential.
East Africa is emerging as a hub for crowd-funding but lacks specific regulations and policies governing the practice in the region, a new report indicates. The study was carried out by the Financial Sector Deepening Africa in partnership with the Cambridge Centre for Alternative Finance and Anjarwalla and Khanna. The survey says the funding channel requires “careful and considerate attention from financial regulators in East Africa” to harness its potential to grow the economy. Crowd-funding is a way of raising cash by asking a large number of people to each give a small amount of money to fund a project or business venture. “The East African crowd-funding market is nascent but shows signs of growth. Creating the right rules and structures to ensure this growth is carefully managed, and produces positive development gains for East Africans is a key task,” FSD Africa regional strategies coordinator Joe Huxley said. The report was compiled to assess the existing regulations and policies for crowdfunding in the region. An estimated $430 million (Sh44.7 billion) was given to SMEs, individual consumers and various organisations via online crowd-funding channels in developing and emerging markets in 2015, the report states. In Africa alone, over $250 million(Sh26 billion) was raised via various alternative finance channels in the period 2013-15, with East Africa being the largest alternative finance regional market across Africa in the same period. The report titled, “Crowdfunding in East Africa: Regulation and Policy for Market Development” highlights key priority regulatory and policy areas that are essential for market development in Kenya, Uganda, Rwanda and Tanzania while drawing on insights and experiences from the UK, USA, Malaysia, New Zealand and India. Some of the key findings include; non-financial return-based crowdfunding models dominate market activity in East Africa while financial return-based loan and equity models are only in the very earliest stages. Debt- and equity-based models dominate total global activity, and account for the majority of market activity in more established markets, while donation- and rewards account for a small percentage of total market activity.