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SME’s reel from lack of legislation on crowdfunding in securities market

Adesola Afolabi

Adesola Afolabi is  Businessamlive Reporter.
You can contact her on adesola.afolabi@businessamlive.com with stories and commentary.

August 13, 2018836 views0 comments

Small businesses in the country are reeling from a lack of legislation on crowdfunding at the Nigerian capital market, which would have bettered their position in accessing funds for development and expansion.

Crowdfunding, an emerging financing method for small and medium scale entrepreneurs as well as creators of innovative ideas, is fast gaining ground around the world but it is yet to be fully appreciated in the Nigerian market.

Specifically, Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding is a form of crowdsourcing and alternative finance.

According to the Nigeria’s Securities and Exchange Commission (SEC) there are currently no laws to support crowdfunding in Nigeria’s securities market.

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Mary Uduk the SEC’s acting DG, revealed that even though the SEC is desirous to having crowdfunding, legislation guiding the initiative remains a big challenge.

“The CAMA which is the primary regulation for all companies in Nigeria does not have provision for crowdfunding and even if that were the case, ISA also does not support it,” she said.

Stating that there are crowdfunding in other areas that have nothing to do with the capital market such as health, Uduk explained that the “Investments and Securities Act (ISA) 2007 is currently being reviewed to reflect a provision which we have put in place to make crowdfunding possible, therefore once ISA is approved we will have crowdfunding.”

Crowdfunding, which is a key initiative of the capital market master plan is a great way to raise funds for personal causes and find supporters online globally. It serves as a platform to provide a simple and hassle-free way to raise funds.

It is the practice of funding a venture or project by receiving small amounts of money from donators and investors

Poised to fully benefit once the legislation is finalized is the NASD, one of the securities exchange in the country currently in the process of offering innovative solutions and serve as a trading platform for private equity.

According to researchers crowdfunding as a financing innovation for SMEs and creative ideas are attracting massive attention in the developed world.

If Nigeria can appreciate the concept entirely, she can as well benefit from its potentials as a country. What is needed is to understand how the concept works and the respective roles of stakeholders, especially government regarding rules and regulation and further providing the enabling technological infrastructure required for its smooth operations.

“As a country, should this process be managed efficiently, it is likely that the country can leapfrog to the comity of nations considered to be facilitating entrepreneurial finance for SMEs to drive the economy,” says Wisdom Soreh a researcher with Bayelsa State College of Arts and Science.

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