SME

Saudi Arabia’s small and medium enterprises (SMEs) have raised an impressive SAR 100 million year-to-date through crowdfunding, according to Mohammed Al-Quwaiz, Capital Market Authority (CMA) president at the General Authority for Small and Medium Enterprises (Monsha’at).

“I saw a number of colleagues working on some crowdfunding platforms,” Al-Quwaiz said. “This platform has become an important tool for financing companies specifically based on property rights or shares that are more compatible with the nature of entrepreneurial projects or debt instruments in a later period.”

Earlier this year, the Saudi Central Bank (SAMA) issued rules for debt-based crowdfunding, in a bid to regulate the licensing and activities of platforms that provide this type of service.

By introducing these rules, the central bank said it was looking to achieve a number of goals, including attracting a new segment of investors, companies, and SME owners to work under its supervision in a manner that ensures the efficiency of these companies by adhering to the requirements of information security, corporate governance, internal regulation, attribution, risk and compliance management, and internal auditing. It also aims to encourage the development of innovative products, and SME financing tools.

SAMA has set the minimum paid-up capital for crowd funding companies to SAR 5 million, with authorities reserving the right to raise or reduce the minimum capital according to market conditions, the bank said.

“…The draft rules for practicing debt crowdfunding activity had been published earlier to collect public opinions and interested individuals, in order to enhance the principle of transparency and participation,” the bank noted. All the essential observations and views received were taken into consideration before being finalised.”

In October, SAMA had a public consultation on updated rules for practicing debt crowdfunding activities.

“The issuance of these rules comes in continuation of SAMA's efforts to develop the financial sector and to keep abreast with developments of technology within the financing industry,” SAMA stated. “In addition, supporting and enabling financial technology, has led to the emergence of a number of fintech companies, and to the development of technology within financing activity.”

CROWDFUNDING PLATFORMS

There are a number of fintech companies licensed to engage as crowdfunding platforms under SAMA’s regulatory sandbox.

The regulatory sandbox is a process that acts as a ‘safe space’ in which financial services firms are given facilities to test new digital solutions under a set of conditions and limitations designed to protect consumers, but without being immediately required to comply with all the normal regulatory obligations resulting from engaging in that activity.

These platform provides financiers (investors) and borrowers (start-ups, SMEs) opportunities to invest and obtain financing.

Here are some of the crowdfunding platforms operating in the kingdom:

Manafa Capital, which is authorised by SAMA, aims to provide Shariah-compliant commercial transactions in all types of contracts, agreements and commercial relations. In pursuing this, an independent internal Shariah committee has been established to enhance the role of Islamic governance.

Ta3meed Financing is a purchase orders (PO) financing platform, which provides financing based on government-backed PO. It connects small and mid-market businesses seeking fast peer-to-peer financing with investors who are looking for superior returns.

Nayifat Finance Company offers SME finance, consumer finance, and credit cards. It floated 35% of its shares in an initial public offering in November on the Tadawul index, which was oversubscribed 136 times.

Lendo is a Shariah-compliant marketplace that connects SMEs needing immediate cash boost with investors looking for short-term investment opportunities. Any Saudi or resident over the age of 18, with a local bank account can invest on the platform.

Raqamyah Platform finances small- and medium-sized businesses, helping them to expand their operations, purchase equipment, increase inventories, or refurbish their premises.

Forus, another fintech licensed under SAMA’s regulatory sandbox, has developed a marketplace aimed at providing investors with diversified alternative options to invest, while SME businesses are empowered with an opportunity to grow and scale up.

Sahlah Finance Company,helps finance small and medium-sized emerging projects, bringing together investors and project owners by providing cash liquidity, helping establishments achieve their commercial goals, and create successful investment.

“This achievement inspires us to continue delivering on our commitment to transform the kingdom into a top global hub connecting Asia, Europe, and Africa, besides supporting the diversification of the national economy by facilitating the growth of non-oil exports.”