UAE approves crowdfunding: New law, benefits, restrictions; all you need to know

UAE approves crowdfunding: New law, benefits, restrictions; all you need to know

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The UAE government on Sunday approved the use of crowdfunding to assist small and medium enterprises to access funds.

This new fundraising method will open an additional avenue for SMEs to tap funds to grow their business.

Data provided by Khalifa Fund shows that approximately 50 to 70 per cent of the SMEs' applications for funding are rejected by conventional banks. Loans to SMEs account for just four per cent of the outstanding bank credit in the UAE, well below the Mena average of 9.3 per cent. Therefore, this new government initiative is the need of the hour to support the critical sector of the economy.

Conventional banks are usually not willing to lend to SMEs due to a lack of a proven record of company operations. In a world dominated by social media, crowdfunding has a very important role to play. Mohammed Shaheen, CEO of Seven Capitals, and Vijay Valecha, chief investment officer at Century Financial, share the insights to guide small UAE investors about crowdfunding and how they can benefit from it.

What is crowdfunding?

It is a way of raising money to finance projects and businesses. It enables fundraisers to collect money from a large number of people via online platforms. A