The Nigerian Securities and Exchange Commission plans to regulate crowdfunding to reduce risks for investors and financiers seeking to back small businesses and startups.
“Crowdfunding helps deepen the market by providing an alternative investment opportunity,” said acting SEC Director-General Mary Uduk. The new regulations are also aimed at stamping out “fraudsters” and will be released later this year.
Interest rates of as much as 31% deter small businesses and startups from using banks, and other avenues such as a stock-market listing or debt issuance come with too many costs and regulatory requirements.
Still, potential investors also shun the country's existing crowdfunding websites, which include Naijafund and Fundanenterprise, thanks to a lack of regulation.Farmcrowdy, which provides agricultural inputs and training, has supported 25,000 farmers since its inception in 2016, according to its website.
Operators will need to meet the requirements to be able to continue, according to Emomotimi Agama, head of registration and market infrastructure department at the SEC.
Read about the SEC's plans to help develop the derivatives market
To contact the reporter on this story: Emele Onu in Lagos at eonu1@bloomberg.net
To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Hilton Shone
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