Crowdfunding platforms to create jobs in Oman, spur economy

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Besides creating more jobs, crowdfunding products will enhance economic development and financial inclusion.

Muscat: Oman’s first crowdfunding platform, which is likely to be licenced by the end of this year, will spur the economy forward and lead to the creation of more jobs.

The Capital Market Authority (CMA) has approved the legislation required to set up crowdfunding platforms in the country, the body’s Board of Directors said.

“These platforms are innovative financing instruments and financial techs enabling entrepreneurs, micro, and small and medium enterprises (SMEs) to get more appropriate financing mechanisms,” the CMA said in a statement.

The board emphasised the importance of launching such products as financing options for SMEs in Oman to enhance economic development, creation of jobs and financial inclusion.

It is worth noting that crowdfunding platform regulations are in their final stages of preparation.

“The CMA will take into consideration, in setting out the rules, that they will not be transformed into lending institutions in the conventional sense and will post them for consultation and feedback from the public,” the statement said.

CMA’s endeavours to launch and regulate crowdfunding platforms in Oman come from the government’s efforts to provide financing facilities for SMEs and micro projects. It will also help in overcoming one of the key challenges facing the projects.

This include among others, the banking sector’s reluctance to fund such projects due to related risks and lack of proper guarantees to convince the banks to grant funding facilities beside the impact of the global financial crisis and the COVID-19 pandemic on the banking sector and the liquidity crunch.

An official from the Capital Market Authority explained how crowdfunding would help small businesses, as well as the licensing changes the organisation undertook to bring such platforms into the country.

“These type of financing options will be of great benefit to SMEs, as well as micro-enterprises,” he said.

“Crowdfunding will not need guarantees, as is often the case with the banking sector. Owners of companies of this nature often face challenges in securing finances, since banks often ask for guarantees, and are unwilling to risk committing funds to them.”

Crowdfunding will be open to all SMEs that are registered with the Ministry of Commerce, Industry, and Investment Promotion (MoCIIP).

Once the platform is up, companies only need to register on it to be able to attract investors.
Financiers can provide three types of crowdfunding: the first is one who takes an active participating stake in the project, the second is one who loans money to the SME, and the third type involves those who choose to act as benefactors.

Conditions for these criteria will be displayed at the time of people choosing to commit their funds.
There are four types of crowdfunding platforms available: those that work on donations, are rewards-based, equity-based, or offer peer-to-peer funding services.

“Often, investors in such situations are shareholders, co-financiers, or those who provide loans to such projects,” said the CMA official. “Crowdfunding platforms need to be either in compliance with Islamic Sharia, or can be traditional in nature.”

Explaining the concept behind crowdfunding, he added: “this is a method in which small amounts of money are raised from large numbers of people or legal entities to finance certain businesses or projects.

These may also be used for individual use, or for other needs. What is involved here is the use of internet-based platforms that link the users of funds to their financiers. In doing so, they bypass traditional financial intermediaries.”

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