For those of you in a rush, let me summarizes how fintech works. Remember when your parents wanted a loan for a business, what do they do? well! they walk into a bank, fill out a form and wait for months for approval. A lot of applications get rejected, because the applicant doesn’t have enough funds.
With the rise of the internet and e-commerce, a new technology came called “Financial Technology (Fintech),” which aims to compete with traditional financial methods in the delivery of financial services.
Fintech can be applied in areas such as banking, payments, investments, infrastructure, and insurance. It has the potential to benefit both consumers and businesses.
The focus of this article is FinTech Crowdfunding. Crowdfunding provides a great opportunity for both business owners and investors. Crowdfunding is the practice of gathering the funds required to carry out a business by calling on a vast number of people on a platform. Startups and SMEs who need money for their business are put on the platforms, then presented to investors/lenders who can contribute to their business.
There is equity crowdfunding and lending. Equity crowdfunding allows investors to fund SMEs by buying shares in their company. Crowdlending enables investors to lend directly to companies. As with all loans, borrowers repay them to the lenders on the basis of instalments and a fixed interest rate.
Crowdfunding in Saudi Arabia has been on the rise and there are a number of licensed crowdfunding companies, where a startup and business owner can submit for funding.
Now, let’s reverse! let’s say you’ve got an idea that can help people understand and manage their money better, and you really want to make a difference in people’s lives and you want to use a new tech to do it. You can start a crowdfunding platform.
Lawyers in Saudi Arabia can give tailored legal advice to business owners who want to start crowdfunding platforms, and can help them develop, strengthen and protect their digital infrastructure.
To get your crowdfunding license, you will need to submit an application called “Sandbox” to The Saudi Arabian Monetary Authority (SAMA). A crowdfunding application has four stages; Application (30 days), Evaluation (60 days), Testing (6 months) and Exit.
The first step (Application Phase) to the Sandbox journey is to submit an application, which sets out the business plan and describes how it meets the Sandbox’s eligibility. Then (Evaluation Phase), SAMA officials will work alongside with you in order to help finalize the testing plans and agree on tools. After that (Testing Phase), you will test your ideas in the Sandbox for a period of six months. Finally, (Exit Phase) if all goes well, you can enter the market.
SAMA is keen to promote Saudi Arabia in the financial technology sector and encourages the rise of digital transactions. SAMA also launched “Fintech Saudi” to help with the development of the financial service technology. All of this incredible support is part of Saudi Arabia’s Vision 2030 to support entrepreneurship and the enhancement of fintech services.