Securities and Exchange Commission, UNCOF launch crowdfunding guidelines to boost MSMEs growth

The Securities and Exchange Commission of Ghana (SEC) and the United Nations Capital Development Fund (UNCOF) have launched comprehensive guidelines for equity and investment-based crowdfunding in Ghana to boost the growth of small and medium-sized enterprises.

The guidelines were developed in collaboration with key stakeholders and followed extensive consultations and technical assistance support from Lelapa African FinTech Advisory as well as feedback from sector players.

The guidelines aim to unlock the potential of crowdfunding as a viable financing option for Micro, Small, and Medium Enterprises (MSMEs) and startups in the country while ensuring investors’ protection, providing a regulatory framework and addressing critical gaps that have hindered the growth of the entrepreneurial community.

Launching it, the Director-General of the SEC, Rev. Daniel Ogbamey Tetteh, said the guidelines marked  a significant milestone in Ghana’s financial and investment landscapes and the capital market.

“This marks a significant step towards democratizing finance and empowering our Micro, Small, and Medium Enterprises (MSMEs) and startups. By providing an alternative avenue for capital raising, we are not only fostering innovation and entrepreneurship but also injecting vitality into the real sector of our economy,” he said.

“This initiative has the potential to stimulate job creation, enhance productivity, and ultimately contribute to our GDP growth,” he added.

“As we unveil these Guidelines, we are not only addressing the financing gap faced by MSMEs and startups but also ushering in a new era of financial inclusion and investment opportunities. By integrating crowdfunding into our financial ecosystem, we are aligning with the National Financial Inclusion and Development Strategy, making capital markets more accessible to all Ghanaians,” Mr Tetteh said.

He said the initiative was a key component of the Capital Market Master Plan (CMMP), which aims to create a more robust and inclusive capital market.

“Slowly but surely, we are making progress to implement the sixty-three initiatives under the four pillars in our CMMP and I am thrilled about the fact that we are very well on our way to achieve the vision of the CMMP which is to achieve a deep, efficient, diversified and well-regulated capital market with a full range of products attractive to both domestic and international investors,” he said.

Crowdfunding serves as a bridge, connecting retail investors with the real sector, mobilizing domestic resources for economic growth. It also provides a platform for fintech innovation, leveraging technology to streamline investment processes and reach a wider audience.

The absence of a clear regulatory framework has, until now, limited the full potential of this innovative financing model.

However, with the launch of these Guidelines, we are establishing a secure and transparent environment for crowdfunding to flourish, ensuring investor protection while promoting financial inclusion and economic development.

“We expect the launch these Guidelines to provide incentive to MSMEs and startups by facilitating access to much needed capital and paving e the way for a new era of investment opportunities. Crowdfunding, as a concept, has the power to democratize finance, allowing individuals and businesses to connect directly, bypassing traditional barriers.”

These Guidelines, he said, were designed to provide a clear roadmap for businesses to access funding, for investors to participate in promising ventures, and for our economy to thrive.

“With our eye on the future, we envision Ghana emerging as a hub for crowdfunding in Africa and we see a vibrant ecosystem where entrepreneurs can easily access the capital they need to grow, where investors can confidently support innovative projects, and where our economy can benefit from the collective wisdom and resources of the crowd.”

The guidelines encompass a wide range of entities, including crowdfunding intermediaries, companies seeking to raise funds, and foreign entities interested in operating crowdfunding platforms in Ghana.

“However, the absence of a clear regulatory framework has limited the full potential of this innovative financing model. The guidelines we launched today are designed to change that. They provide a robust framework that protects investors, ensures transparency, and fosters trust in the crowdfunding ecosystem. By establishing clear rules and standards, we are creating an environment where both investors and fundraisers can thrive.”

UN Resident Coordinator, Ghana, Charles Abani, on his part, indicated that Ghana remained among the pioneers in the region and continent when it comes to financial innovation, stressing the launch of the crowdfunding guidelines confirms this vision and ambitions.

He said crowdfunding has played a pivotal role in other countries to connect individuals with investment possibilities with other individuals with financing gaps to expand their business.

“Ghana’s estimated finance gap is 43 billion a year between now and 2030. We must explore this innovative mechanism that mobilises resources from a broader base crowdfunding with its ability to democratise finance and empower individuals to contribute to courses they believe in.  Crowdfunding is one such mechanism as it can help finance projects that drive economic growth, social inclusion and environmental sustainability,” he said.

Technical Lead, UNCDF, Arianna Gasparri, remarked, “On behalf of UNCDF, we are very happy to have worked with SEC in contributing to the future of investments and innovative channels for supporting MSMEs in Ghana. UNCDF is indeed meant to work with government and government agencies to assist with the favourable conditions to crowd-in private capital.”

Through the GrEEn Project, funded by the European Union Trust Fund for Africa-EUTF, UNCDF has been at the forefront of pioneering crowdfunding in Ghana, recognizing its potential to unlock investments for segments traditionally excluded from formal finance.

The guidelines encompass a wide range of entities, including crowdfunding intermediaries, companies seeking to raise funds, and foreign entities interested in operating crowdfunding platforms in Ghana. They prioritize investor protection while encouraging crowdfunding for social and environmental impact projects.

The guidelines will boost innovation and safeguard investors by requiring crowdfunding platforms to provide clear and comprehensive information about investment risks and potential returns and implementing a rigorous licensing process to vet crowdfunding platforms based on their business model, governance structure, and financial stability.

It will foster collaboration between crowdfunding platforms, banks, MFIs, and investment funds to create a seamless financial ecosystem.

The launch of the guidelines has the potential to unlock significant growth opportunities and empower Ghanaian businesses by enhancing access to finance, promoting financial inclusion, and fostering sustainable finance practices.

It also positions the country as a hub for innovation and investment in the digital age. UNCDF and SEC will continue to collaborate closely to ensure the effective implementation of the guidelines, ensuring that they translate into tangible benefits for entrepreneurs and investors alike.

Source: GNA