{"id":86472,"date":"2024-05-23T00:00:00","date_gmt":"2024-05-23T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/ksa\/2024\/05\/23\/sama-wants-to-to-see-more-crowdfunding-of-debt\/"},"modified":"2024-05-23T00:00:00","modified_gmt":"2024-05-23T00:00:00","slug":"sama-wants-to-to-see-more-crowdfunding-of-debt","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/ksa\/2024\/05\/23\/sama-wants-to-to-see-more-crowdfunding-of-debt\/","title":{"rendered":"Sama wants to to see more crowdfunding of debt"},"content":{"rendered":"

The Saudi Central Bank (Sama) has made public a series of <\/strong>proposed amendments (pdf)<\/a><\/strong> to rules on debt crowdfunding<\/strong>.<\/strong> The amendments, which come as more companies are eyeing the sector, have been put up on the government\u2019s survey platform Istitlaa for public consultation until Thursday, 20 June. <\/p>\n

A refresher on how debt crowdfunding works: <\/strong>Rather than borrowing from a bank, a company (generally a smaller firm) that turns to a crowd-lending platform looks to borrow from a a larger number of smaller lenders. The approach was made popular by crowdfunding apps that helped attractive startups raise equity from individual investors who may not have made the cut (from a regulatory point of view or their ability to write a big enough cheque) to participate in a traditional equity round. Crowdfunding for debt has done less to capture the imagination than equity crowdfunding, which came of age at the peak of the VC \/ startup hype.<\/p>\n

Some requirements remained the same:<\/strong> Debt crowdfunding companies seeking licenses from Sama will still need to have a minimum capital of SAR 5 bn, the amendments showed. Sama will have a say in amending the capital requirement depending on market conditions or the firm\u2019s business model or its activities.<\/p>\n

With a key addition:<\/strong> Debt crowdfunding companies should obtain a written non-objection by Sama before it decides to dispose shares held by major shareholders or ones held by indirect owners if it affects 5% or more of total shares and voting rights.<\/p>\n

And some omissions: <\/strong>Sama omitted a previously set condition to revoke licenses for the companies if they don\u2019t kickstart operations within six months of obtaining the license. It also removed a condition where it can revoke companies\u2019 license if they suspend activities for three consecutive months or six months apart without a written non-objection by Sama. Sama also removed a condition for the termination of licenses if they are not renewed upon expiry or if a liquidator was hired to liquidate the firm.<\/p>\n

Some can get more funding than others:<\/strong> Real estate projects looking to tap crowdlending will be exempted from a maximum funding cap of SAR 7.5 mn that Sama had set for SMEs from debt crowdfunding companies. <\/p>\n

Peer-to-peer lending firms could also take part: <\/strong>Debt crowdfunding companies will also be allowed to pour in some of its funds into companies looking to raise capital on the condition that the provided financing does not exceed its capital and reserves by ten-fold. Their funds should only account for 5% to 25% of total raised capital for companies seeking funds. They should also obtain a written non-objection from Sama.<\/p>\n

Debt crowdfunding is gaining momentum in Saudi:<\/strong> Sama has been granting more licenses for fintech firms to operate as debt crowdfunding platforms in recent months. Earlier in May, fintech company Hala<\/a> obtained its crowdlending license<\/a> from Sama, bringing the number of licensed debt crowdfunding firms to 11.<\/p>\n","protected":false},"excerpt":{"rendered":"

Debt crowdfunding has yet to capture the imagination of retail investors the way equity crowdfunding did<\/p>\n","protected":false},"author":1,"featured_media":86473,"comment_status":"","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"newspack_ads_suppress_ads":false,"newspack_popups_has_disabled_popups":false,"newspack_sponsor_sponsorship_scope":"","newspack_sponsor_native_byline_display":"inherit","newspack_sponsor_native_category_display":"inherit","newspack_sponsor_underwriter_style":"inherit","newspack_sponsor_underwriter_placement":"inherit","ep_exclude_from_search":false,"_primary_brand":0,"newspack_featured_image_position":"","newspack_post_subtitle":"","newspack_article_summary_title":"Overview:","newspack_article_summary":"","newspack_hide_updated_date":false,"newspack_show_updated_date":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[2644],"tags":[10,344,1493],"brand":[],"newspack_spnsrs_tax":[],"class_list":["post-86472","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-regulation-watch","tag-enterpriseam-ksa","tag-regulation-watch","tag-saudi-central-bank-sama","wpautop","entry"],"acf":{"mongo_id":"da4bea1b-d0a2-4eea-9d9b-d134dbae97de","order":"6","is_powered_by":false,"story_type":"1","photo_url":"https:\/\/ent.news\/2024\/5\/1879.jpg","photo_position":"above","homepage_title":"","full_issue_title":"Sama wants to to see more crowdfunding of debt","related_issue":[86461],"teaser":"Debt crowdfunding has yet to capture the imagination of retail investors the way equity crowdfunding did","voice_url":"https:\/\/s3.us-east-1.amazonaws.com\/ent.news\/audio\/2024\/5\/.ee4d5dad-9178-4bbc-8792-d3a8e7c75477.mp3"},"yoast_head":"\nSama wants to to see more crowdfunding of debt - 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