In March 2022, Dubai government approved the establishment and practice of crowdfunding to encourage entrepreneurship and innovation, a legislation that will boost the economy of multiple industries in the UAE.
Chairing the final Cabinet meeting that took place at Expo 2020 Dubai before it shuts down forever, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai, announced the official legislation and regulation of crowdfunding in public and private sectors to finance new projects and support small and medium enterprises (SME’s).
This will be done via the new UAE System for Crowdfunding Platform Operators, regulated by the Securities and Commodities Authority.
His Highness Sheikh Mohammed said, “Crowdfunding is one of the best means to support the financing of new innovative commercial ideas and support entrepreneurs by financing their ideas.”
Chairing the final Cabinet meeting that took place at Expo 2020 Dubai before it shuts down forever, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai, announced the official legislation and regulation of crowdfunding in public and private sectors to finance new projects and support small and medium enterprises (SME’s).
This will be done via the new UAE System for Crowdfunding Platform Operators, regulated by the Securities and Commodities Authority.
His Highness Sheikh Mohammed said, “Crowdfunding is one of the best means to support the financing of new innovative commercial ideas and support entrepreneurs by financing their ideas.”
What is Crowdfunding?
Crowdfunding is the activity of raising funds for a project or business by a large group of people contributing small investments to provide capital that enables the venture into fruition.
In the past it has typically gained fame for humanitarian practices such as raising funds for medical expenses of ill children. However, there are many other uses such as funding small businesses, innovations, and education.
Crowdfunding is the activity of raising funds for a project or business by a large group of people contributing small investments to provide capital that enables the venture into fruition.
In the past it has typically gained fame for humanitarian practices such as raising funds for medical expenses of ill children. However, there are many other uses such as funding small businesses, innovations, and education.
How Does it Work?
The entrepreneur or initiator creates a campaign with a mission, vision, and purpose, and a fundraising goal, which is the amount required to get the project off the ground. They may also offer an incentive for expediting funds, such as a stock share in the venture.
The crowdfunding campaign goes live on a regulated platform and a marketing initiative begins, typically online, to reach as many channels and communities as possible.
The entrepreneur or initiator creates a campaign with a mission, vision, and purpose, and a fundraising goal, which is the amount required to get the project off the ground. They may also offer an incentive for expediting funds, such as a stock share in the venture.
The crowdfunding campaign goes live on a regulated platform and a marketing initiative begins, typically online, to reach as many channels and communities as possible.
How Crowdfunding Affects the Real Estate Sector
Mohammad Abu Ghaush, Group Chief Financial Officer at D&B Properties stated that crowdfunding is already causing a huge wave on how we invest in different industries. Now, more than ever, it is widely accessible to invest into real estate among various industries, and own a share that sees growth over the years. “Crowdfunding is an opportunistic tool within financial instruments, and more people are realizing its potential,” Abu Ghaush said.
“The real estate market is consistently receiving higher demand in Dubai as we have observed each quarter from our own data and from the reports published by the Real Estate Regulatory Authority (RERA). With the launch of a safe and regulated crowdfunding platform in Dubai, anyone can invest and own a share in innovative projects or businesses. Where before a handful of investors would fund a project, now the campaign would be open to individuals and corporations to own a share in those projects and businesses seamlessly."
"The announcement of establishing crowdfunding platform in the UAE will boost the economy as it will facilitate and finance innovative projects and businesses within the small and medium enterprises, which will play a major role in population growth and that will definitely have a direct positive impact on real estate sector in Dubai. Compared to other developed cities around the world, Dubai's competitive edge in innovation, secured financial & legal environment, and most importantly the real estate price levels as per UBS Global Real Estate Bubble Index, makes the city's real estate price level and returns one of the most attractive price levels compared to all developed countries and cities around the world. For this reason, it is evident to me that Dubai will continue to grow.”
“Crowdfunding is an opportunistic tool within financial instruments, and more people are realizing its potential,” Abu Ghaush said.
“The real estate market is consistently receiving higher demand in Dubai as we have observed each quarter from our own data and from the reports published by the Real Estate Regulatory Authority (RERA). With the launch of a safe and regulated crowdfunding platform in Dubai, anyone can invest and own a share in innovative projects or businesses. Where before a handful of investors would fund a project, now the campaign would be open to individuals and corporations to own a share in those projects and businesses seamlessly."
"The announcement of establishing crowdfunding platform in the UAE will boost the economy as it will facilitate and finance innovative projects and businesses within the small and medium enterprises, which will play a major role in population growth and that will definitely have a direct positive impact on real estate sector in Dubai. Compared to other developed cities around the world, Dubai's competitive edge in innovation, secured financial & legal environment, and most importantly the real estate price levels as per UBS Global Real Estate Bubble Index, makes the city's real estate price level and returns one of the most attractive price levels compared to all developed countries and cities around the world. For this reason, it is evident to me that Dubai will continue to grow.”
Models of Crowdfunding
The UAE Government portal reports on the common types of crowdfunding:
Donations model where funders donate a sum for a cause and do not expect any returns
Rewards model where funds are asked for in exchange for a future reward
Crowd-sourced equity funding (CSEF) where the investors receive shares in a company in exchange for the fund they provided
Debt or peer-to-peer lending model where the lenders provide loans to borrowers and expect it to be paid back with interest at an agreed rate, or a rate fixed by the crowdsourcing platform.
The UAE Government portal reports on the common types of crowdfunding:
Donations model where funders donate a sum for a cause and do not expect any returns
Rewards model where funds are asked for in exchange for a future reward
Crowd-sourced equity funding (CSEF) where the investors receive shares in a company in exchange for the fund they provided
Debt or peer-to-peer lending model where the lenders provide loans to borrowers and expect it to be paid back with interest at an agreed rate, or a rate fixed by the crowdsourcing platform.
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