The move forms part of QCB’s permanent endeavor to regulate and develop the financial sector in the country and is line with the financial sector strategy and the financial technology (fintech) strategy of the central bank.
QCB classifies Loan Crowdfunding Platforms as innovative financial platforms that connect borrowers in need of funding with diverse group of investors.
“These platforms also contribute to the improvement of the financial sector by making the borrowing process more accessible, transparent, and efficient,” the central bank said in its announcement.
Through Loan Crowdfunding Platforms, borrowers facing difficulties in securing traditional bank loans, such as SMEs, can access financing for their businesses and overcome challenges related to growth, expansion, and short-term financing, QCB added.
“Additionally, investors on these platforms can diversity their portfolios and investments while actively supporting the businesses they care about,” it stressed.
The purpose and objective of regulation is to set out licensing procedures for Loan-Based Crowdfunding activities in Qatar, regulate the operators that facilitate the listing of campaigns by a borrower on their platform, and regulate the activities of borrowers seeking to raise funding through platforms.
Additionally, the regulation seeks to institute safeguards to protect the interest of investors participating in crowdfunding campaigns and safeguard the financial system against the risk posed by those platforms.
The central bank, however, stressed that the following activities are not within the scope of the regulation: donation-based or reward-based or equity-based crowdfunding activities; crowdfunding activities that are not conducted through an electronic platform; and crowdfunding activities that are agreed to directly between a fundraiser and a fund providers that are not facilitated by a platform.
The regulation document also lays out the activities that are prohibited. QCB said the platform shall not be used for real estate business and property investment crowdfunding. It shall not be used also for raising deposits as defined under QCB laws, among others.
The platform is also now allowed to make personalized recommendations to investors on crowdfunding campaigns, grant credits or loans to investors or borrowers, raised funds beyond the campaign period, and underwrite the loan or taking credit risk in the campaign.