Qatar Central Bank (QCB) has issued its regulation on loan-based crowdfunding, paving the way for P2P lenders, including Shariah compliant ones, to enter the market.
“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. Additionally, investors on these platforms can diversify their portfolios and investments while actively supporting the businesses they care about,” QCB noted.
The regulator has determined that loan-based crowdfunding platforms, however, cannot be used for real estate business and property investment crowdfunding.
Operator, including their shareholders, senior management and board of directors, are not allowed to: contribute any proprietary funding in campaigns promoted through their platforms; hold any equity or investment in any form, in any of the campaigns; and provide any financial assistance (including loans) to investors to invest in a campaign hosted on their platforms.
Minimum capital requirement is set at QAR1 million (US$272,718) as initial paid-up capital and on an ongoing basis.
Operators must submit a performance guarantee, issued in favor of QCB, of at least 2% of the capital requirement specified for a QCB-licensed bank, or QAR200,000 (US$54,543.6), whichever is higher.
Shariah compliance
The new regulation also caters to Shariah compliant platforms.
Any companies looking to offer Islamic products will need to appoint an AAOIFI (or equivalent)-qualified Shariah advisor to advise on the structuring of the products as well as related campaigns.
All funds raised through an Islamic offering must also be deposited into a Shariah compliant account held with an Islamic bank regulated by the QCB.
It is worth noting that Qatar prohibits the window model for banks and insurance companies, allowing only fully-fledged Islamic banks and Takaful operators to offer Shariah compliant financial services while excluding conventional players. The new loan-based crowdfunding regulation does not prohibit platforms from offering both conventional and Islamic offerings.
Regulating P2P financing platforms is part of QCB’s fintech strategy, which should be noted for its Islamic fintech focus. The regulator has been assertive in providing an enabling environment for digital and fintech solutions to support the government’s Vision 2030. It has so far issued regulations on payment services, buy-now-pay-later and insurance price comparison website.