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Dubai Issued the First Regulations for Crowd Funding Platforms

Written by: Bridgewest

Dubai-enables-first-crowd-funding-regulations-in-the-UAEThe fintech sector has slowly made its way in the Dubai economy and the number of startups has soared in the last several years thanks to the new developments which enables to operate in emerging industries in the emirate. One of the most common issues of startups is funding which is why the Dubai Financial Services Authority (DFSA) has just introduced new regulations through which small and medium-sized enterprises (SMEs) and startup can raise money through crowd funding. Our company registration agents in Dubai can offer information on the legislation related to the financial technology sector.

What do the new Dubai crowd funding regulations imply?

Before entering into specifics, it should be noted that the UAE through the Emirate of Dubai was the first Gulf Cooperation Council country to enable a law through which small businesses can access money in other ways than bank loans.

The new law which was presented at the beginning of 2017 and was passed later provides for two types of crowd funding platforms which can be established in Dubai: loan or equity-based. Crowd funding companies are required to be transparent when it comes to the amount raised by the SMEs, to include tailored safeguarding clauses, business cessation plans and the possibility of transferring the obligations between the lenders.

Our Dubai company formation consultants can help those interested in opening a crowd funding company in the UAE.

Dubai SMEs had difficulties in raising money until now

One of the main reasons for these new regulations was the large number of Dubai small businesses applying for commercial loans with UAE banks and being rejected.

In the past few years, the SMEs sector began to represent close to 60% of the UAE’s Gross Domestic Product and one of the serious employers in the country, accounting for 60% to 65% of the country’s workforce. In Dubai, the number of small and medium companies is now 95% and contributes with 40% of the emirate’s annual revenue.

With such important roles played by these companies, it was necessary for the government to allow SMEs to access money one way or another, especially when considering crowd funding all over the world is expected to reach close to 400 billion USD by 2020 all over the world.

If you want to start a business in the fintech industry in Dubai, please feel free to contact our local company incorporation advisors.

 

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