"Central": It is possible to borrow up to 10 million dirhams during one year

Application of "crowdfunding based on loans" at the end of November

“Crowdfunding” is the process of collecting money from people through an internet-based platform.

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The Central Bank has informed banks, financing companies and financial institutions in the country of the date for the application of the loan-based crowdfunding activities system, which it issued, to be the end of this November, after it was published in the Official Gazette.

'Crowdfunding'

“Crowdfunding” is the process of collecting funds from several people, through an Internet-based platform, social media site, or any other similar means, for the purposes of crowdfunding activities.

Crowd funding is suitable for people with good ideas, but the absence of funding hinders their implementation. The role of “crowd funding” or “crowd funding” is highlighted, as the person presents his idea to companies and online platforms dedicated for this purpose to request funding, so the enthusiasts of the idea contribute to financing it, either With a donation, or in exchange for certain benefits such as gifts, or a share of the project.

According to the crowdfunding system issued by the Central Bank, it is possible to borrow up to 10 million dirhams during one year.

Licensed activities

The Central Bank informed financial institutions of the implementation date, according to a circular it sent yesterday, and Emirates Today obtained a copy of it, in which it said: “The Central Bank is pleased to announce the issuance of the (loan-based crowdfunding activities system), which establishes a new framework for its activities. Loan-based crowdfunding in the UAE », pointing out that this system applies to crowdfunding platforms, wherever they are hosted, that engage in crowdfunding activities in the UAE.

The Central Bank continued in its circular: “All loan-based crowdfunding activities practiced in the UAE must be licensed by the Central Bank,” pointing out that there are two categories of licensing classified based on the size of lending. Money for each category, in addition to corporate governance, risk management and internal controls requirements for a company that conducts loan-based crowdfunding activities.

It also contains specific requirements on doing business, to provide protection to those involved in loan-based crowdfunding activities.

The "Central" indicated that the system was published in the Official Gazette, finally, and becomes effective one month after the date of its publication, attaching a copy of the Official Gazette showing that the system was published on October 28, which means that it will enter into force at the end of this November.

Licensing and monitoring

The system for this type of loan aims to establish a framework for licensing, regulation and monitoring of loan-based crowdfunding platforms, and to define the standards that the Central Bank expects these platforms to adhere to, in order to protect the financial system from the risks posed by such platforms, and to protect the interests of consumers in the country. UAE.

Platform Categories

The system classified crowdfunding platforms into several categories, according to the size of the lending they provide, and the first category included those in which the value of the cumulative loans facilitated during the year amounted to five million dirhams or more, while the second category included those in which the cumulative loans during the year were less than Five million dirhams.

According to the Central Bank, this system applies to loan-based crowdfunding companies, wherever their platforms are hosted, through which they carry out loan-based crowdfunding activities in the UAE, with the exception of free zones.

Conditions are met

The company is involved in loan-based crowdfunding activities in the UAE.

If you meet one of the following conditions:

If the company is incorporated in the UAE, or the crowdfunding platform is hosted in the UAE.

■ If the crowdfunding platform uses the address of a company registered in the UAE for its correspondence.

■ If it offers crowdfunding activities to UAE-based customers.

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