Kenya’s Capital Markets Authority (CMA) said on Tuesday that it has developed rules to enable micro, small and medium enterprises (MSMEs) to raise capital through crowdfunding.
Wycliffe Shamiah, the Chief Executive Officer of CMA, said the new rules pave the way for Kenya’s MSMEs, which employ some 15 million people in the workforce, to raise affordable funds for business growth and innovation.
“Noting the key role that MSMEs, start-ups and businesses have in spurring economic development and promoting innovations, these regulations are instrumental in providing access to affordable and alternative financing to this sector that is unable to raise funds through existing securities issuance,” Shamiah said in a statement issued in Nairobi, the capital of Kenya.
He added that the business would now be able to raise funds from the public in exchange for capital markets instruments.
Crowdfunding is the collection of funds from the public using internet-enabled technology platforms, according to the CMA.
It involves the issuer (fundraiser), investor (donor of funds) and the crowdfunding technology platform, which facilitates the transaction.
The crowdfunding firms will be required to have a paid-up capital of at least five million shillings ($41,237) and a liquid capital of a minimum of 82,453 dollars or eight per cent of its liabilities, said the CMA.
According to the World Bank, Kenya has some 7.4 million MSMEs, which hold the key to job creation and greater productivity, but normally lack access to credit to expand operations and raise their productivity.
The businesses are considered the engine of Kenya’s growth.