The potential introduction of investment-based crowdfunding in Malta in addition to the rewards- and donations- based crowdfunding that already exist on the island was discussed today in a workshop at the Malta Financial Services Authority.

Coordinated by zaar.com.mt, Malta’s only local crowdfunding platform, the workshop followed the MFSA’s recent release of a discussion paper on the topic, which will close on January 31.

Explaining why crowdfunding is so important, Zaar manager Matthew Caruana explained that it could help eliminate the funding gap for start-ups and SMEs.

“Crowdfunding can offer unique support for budding and existing entrepreneurs on multiple levels. No other investment form, be it debt or equity, can provide the benefits of pre-sales, market research, word-of-mouth promotion, and crowd wisdom without additional cost,” he said.

The workshop explored the fact that regulators had the responsibility to setup a regulatory framework to give SMEs the opportunity to use all possible alternatives to raise capital.

“We believe that the objective should be to setup a practical crowdfunding regulatory framework that removes barriers to entrepreneurship, provides innovative projects access to finance and to stimulates efficient and transparent markets while ensuring investor protection,” Mr Caruana said.

He added that the business community needed to proactively help entrepreneurs, funders, legislators, regulators and other stakeholders to understand, support and use crowdfunding.

Speaking after the workshop, MFSA chairman Joe Bannister said crowdfunding had a lot of potential that could be harnessed to the benefit of the Maltese economy.

“The MFSA discussion paper has provided us with the opportunity to take a good look at the nature of the investment crowdfunding business, as distinct from other types of regulated activity, and consider whether a more customised regulatory regime is called for in the situation.”

 This exercise, he said, was meant to allow the MFSA to home in on the practical objectives and take a regulatory approach that would facilitate its growth as an alternative form of financing for start-ups and SMEs, while providing an alternative investment option for investors.

He encouraged stakeholders to respond to the issues raised in the discussion paper “as this would help to better determine what regulatory initiatives may be taken going forward”.

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