Treasury Reduces Crowdfunding Fees While Maintaining Strict Rules

A new law aimed at reducing the loss of investor money through unregulated investment products has seen the Treasury reduce its earlier proposed annual regulatory fee for businesses seeking to raise capital through online investment portals or crowdfunding, but it has kept a raft of other strict supervision terms.

Investment-based crowdfunding is becoming a more popular alternative tool as Kenyans look for different ways to increase their wealth.

It entails soliciting donations from individuals or groups online or through a mobile platform in order to provide debt or equity financing for start-ups or small enterprises.

Crowdfunding sites will now pay a Sh100,000 yearly regulatory fee, down from the Sh200,000 that had originally been established in draft guidelines distributed in July of last year, according to Treasury Cabinet Secretary Ukur Yatani.

However, the new regulations that now require crowdfunding sites to acquire regulatory license from the Treasury before raising funds from wananchi have kept the application and licensing fees at Sh10,000 and Sh100,000, respectively.

The new regulations call for stringent guidelines, including a minimum capital requirement of Sh10 million, for raising small sums of money from a large number of people to finance a business initiative.

Only money from affluent investors and sums under Sh100,000 from retail investors would be accepted by crowdfunding platforms.

If an investor withdraws their offer to buy shares or other investment instruments, they will receive their money back within 48 hours. When a company cannot reach the minimum requirement for the desired amount, removal from the platform is required.

The platform will also need to inform investors that their investments are speculative and hazardous, that they could lose all of their money, and that their money will be invested in a developing business, according to the Treasury.