Crowdfunding to give key fillip to start-ups, SMEs

The Cabinet’s approval to run crowdfunding platforms to collect funds for unique company ideas is set to provide the UAE’s entrepreneurial and startup environment a considerable boost.

The proactive move launched by the government on Monday under the regulatory framework of the Securities and Commodities Authority would have a far-reaching positive influence on the UAE’s economic environment, which is dominated primarily by SMEs. According to the new initiative, operators from both the public and commercial sectors can crowdfund projects as long as they obtain the appropriate licenses from the relevant authorities.

The proactive move launched by the government on Monday under the regulatory framework of the Securities and Commodities Authority would have a far-reaching positive influence on the UAE’s economic environment, which is dominated primarily by SMEs. According to the new initiative, operators from both the public and commercial sectors can crowdfund projects as long as they obtain the appropriate licences from the relevant authorities.

“The amazing aspect of this new way of raising funds is that it mainly takes place online. The rapid technological advancements of the world have enabled investors to contribute small amounts to business ventures. Therefore, crowdfunding is very suitable for entrepreneurs with innovative business ideas that might not be receptive to large institutional investors or banks,” Arun Leslie John, chief market analyst, Century Financial, said.

According to John, such legislative changes would assist the UAE in becoming more business-friendly. This is evidenced by the country’s growing standing in several business indexes. The UAE is placed 16th in the World Bank’s 2021 ‘Ease of Doing Business’ report. In Kearney’s 2021 Foreign Direct Investment (FDI) Confidence Index, the UAE placed 15th internationally, up from 19th in 2020.

“This improves the economic return for the government and the country. Obviously, the government will be able to monetize a part of the assets, and it can use this revenue for capital expenditure purposes. Also, in the future, if they need capital for expansion, they can readily approach the stock markets rather than the banks. Going public also improves the company’s profile, thereby increasing employee value and morale,” said John.