Oman has potential to become a leading crowdfunding hub
ALTERNATIVE FUNDING: New legislation regulating crowdfunding platform activities to be issued soon
Published: 01:11 PM,Nov 01,2021 | EDITED : 12:11 PM,Nov 02,2021
Crowdfunding platforms will shortly become a reality in the Sultanate of Oman with the Capital Market Authority (CMA) preparing to roll out legislation that aims to, among other things, position the Sultanate of Oman as a leading player in the crowdfunding space in the region.
According to a high-level official, new legislation regulating crowdfunding platform activities in the country is targeted to be issued as early as this month, effectively opening up a promising new and alternative funding platform for small businesses and entrepreneurs who find it difficult to secure financial support from banks.
Kemal Rizadi Arbi (pictured), Advisor (Capital Markets and Islamic Finance), CMA, said Sultanate of Oman’s crowdfunding regulation is set to be quite distinct from corresponding laws in force elsewhere in the Gulf region.
“There are key flexibilities built into the Sultanate of Oman regulation for the benefit of the market players. That’s because we are trying to compete with other markets in the GCC although many of them already have a head-start over us. Our regulation is comparable with some of the best in the world, if not better. We are trying to create a global hub for crowdfunding platforms in Oman.”
The official made the comments during a panel discussion held as part of “IFN Oman Forum 2021”, a daylong conference on Islamic Finance organised by RedMoney Events recently in partnership with the CMA.
The panelists, representing local and international Islamic banks, crowdfunding platform operators and a financial services training institution, shared their thoughts on the theme - “Islamic Fintech and Crowdfunding Platforms in Oman”.
The Oman model, for example, allows a foreign investor to invest in a local company through the crowdfunding platform. Furthermore, besides enabling local SMEs to raise funds via crowdfunding, the channel can also be used to generate funding for projects outside of Sultanate of Oman as well, he said, adding that Omani companies operating abroad can also harness this avenue to locally raise funds for their overseas business.
Earlier, Kemal pointed out that the imminent rollout of the crowdfunding legislation follows a successful round of public consultations on the draft guidelines issued by the Authority in September.
The draft regulation were well-received by stakeholders and market players, effectively paving the way for the regulation on crowdfunding to be issued very soon, he explained.
“The draft regulation received positive feedback, and we expect to roll out the legislation hopefully by November,” said Kemal.
“Crowdfunding provides an opportunity for microbusinesses, SMEs, startups and growth companies to tap an alternative source of finance, either because banks are perhaps not willing to provide or they are not big enough to go directly to the stock exchange to raise funds. We are trying to address these gaps in funding for such companies through the crowdfunding initiative.”
Importantly, crowdfunding and Islamic fintech complement each other because crowdfunding is driven by fintech, the official pointed out.
“We are strongly supporting fintech, especially crowdfunding platforms, because it promotes financial inclusion and will enable alternative funding activities for the benefit of SMEs and small entrepreneurs. Additionally, improving financial inclusion is a key component of Islamic finance. Besides, fintech has the potential to create a diversity of financial products and services, diversifying the economy and in turn attracting foreign investors into the Omani market. All of these objectives align with Oman’s Vision 2040 goals.” A number of local and international crowdfunding platform players have shown great interest to establish and operate in the Sultanate of Oman.
Licensed crowdfunding platform operators can offer crowdfunding services via any of the following four prescribed channels: (i) Donation Crowdfunding (raising funds without expectation of any return), (ii) Reward Crowdfunding (funding in return for products in the early version of a product or special version or service on commencement of operation or production, (iii) Equity Crowdfunding (providing funding in return of getting shares in the company), and (iv) Peer to Peer Crowdfunding (providing funding in consideration of issuing conventional or Islamic investment notes backed by invoice financing).
According to a high-level official, new legislation regulating crowdfunding platform activities in the country is targeted to be issued as early as this month, effectively opening up a promising new and alternative funding platform for small businesses and entrepreneurs who find it difficult to secure financial support from banks.
Kemal Rizadi Arbi (pictured), Advisor (Capital Markets and Islamic Finance), CMA, said Sultanate of Oman’s crowdfunding regulation is set to be quite distinct from corresponding laws in force elsewhere in the Gulf region.
“There are key flexibilities built into the Sultanate of Oman regulation for the benefit of the market players. That’s because we are trying to compete with other markets in the GCC although many of them already have a head-start over us. Our regulation is comparable with some of the best in the world, if not better. We are trying to create a global hub for crowdfunding platforms in Oman.”
The official made the comments during a panel discussion held as part of “IFN Oman Forum 2021”, a daylong conference on Islamic Finance organised by RedMoney Events recently in partnership with the CMA.
The panelists, representing local and international Islamic banks, crowdfunding platform operators and a financial services training institution, shared their thoughts on the theme - “Islamic Fintech and Crowdfunding Platforms in Oman”.
The Oman model, for example, allows a foreign investor to invest in a local company through the crowdfunding platform. Furthermore, besides enabling local SMEs to raise funds via crowdfunding, the channel can also be used to generate funding for projects outside of Sultanate of Oman as well, he said, adding that Omani companies operating abroad can also harness this avenue to locally raise funds for their overseas business.
Earlier, Kemal pointed out that the imminent rollout of the crowdfunding legislation follows a successful round of public consultations on the draft guidelines issued by the Authority in September.
The draft regulation were well-received by stakeholders and market players, effectively paving the way for the regulation on crowdfunding to be issued very soon, he explained.
“The draft regulation received positive feedback, and we expect to roll out the legislation hopefully by November,” said Kemal.
“Crowdfunding provides an opportunity for microbusinesses, SMEs, startups and growth companies to tap an alternative source of finance, either because banks are perhaps not willing to provide or they are not big enough to go directly to the stock exchange to raise funds. We are trying to address these gaps in funding for such companies through the crowdfunding initiative.”
Importantly, crowdfunding and Islamic fintech complement each other because crowdfunding is driven by fintech, the official pointed out.
“We are strongly supporting fintech, especially crowdfunding platforms, because it promotes financial inclusion and will enable alternative funding activities for the benefit of SMEs and small entrepreneurs. Additionally, improving financial inclusion is a key component of Islamic finance. Besides, fintech has the potential to create a diversity of financial products and services, diversifying the economy and in turn attracting foreign investors into the Omani market. All of these objectives align with Oman’s Vision 2040 goals.” A number of local and international crowdfunding platform players have shown great interest to establish and operate in the Sultanate of Oman.
Licensed crowdfunding platform operators can offer crowdfunding services via any of the following four prescribed channels: (i) Donation Crowdfunding (raising funds without expectation of any return), (ii) Reward Crowdfunding (funding in return for products in the early version of a product or special version or service on commencement of operation or production, (iii) Equity Crowdfunding (providing funding in return of getting shares in the company), and (iv) Peer to Peer Crowdfunding (providing funding in consideration of issuing conventional or Islamic investment notes backed by invoice financing).