In January 2017 the Cambridge Centre for Alternative Finance (CCAF) published a report entitled Crowdfunding in East Africa: Regulation and Policy for Market Development. Non-profit organisation FSD Africa, corporate law firm Anjarwalla & Khanna (A&K), and CCAF collaborated to conduct a comparative assessment of the current and forthcoming regulatory and policy landscape surrounding crowdfunding in East Africa.

The report highlights the major trends and developments in crowdfunding globally, with particular focus on the existing and emerging regulatory and policy landscape. Additionally, it aims to outline the key priorities necessary to facilitate regulatory and policy development in Kenya, Uganda, Rwanda, and Tanzania.

Key findings showed that Eastern and Southern parts of Africa lack bespoke or specific regulations on crowdfunding. Market activity in East Africa is dominated by non-financial return-based crowdfunding models, whereas financial return-based loan and equity models are still in the earliest stages of development. In contrast, loan and equity-based models dominate global market activity in more established markets.

By and large, regulators recognize the importance of crowdfunding for East Africa. The additional channels for raising capital that crowdfunding offers present excellent opportunities for both entrepreneurs and consumers, and help to promote financial inclusion and economic development. It has previously been demonstrated in Malaysia, New Zealand, and the UK that engaged, open, and proactive regulators play a crucial role in accelerating crowdfunding market development.

Based on the research findings, detailed recommendations for furthering crowdfunding market development in East Africa were provided and outlined in three key phases, each consisting of a variety of activities. A short summary of the recommended three-phase approach is provided below.

• Phase 1 • Sector mapping, capacity building, and industry engagement activities – development of platform database, crowdfunding regulator capacity and awareness building, industry events, and conferences.
• Phase 2 • Crowdfunding ecosystem trust-building initiatives – bespoke regulation is not recommended at this time, instead provide register of regulator-acknowledged firms, consider establishing a ‘RegLab’, encourage East African crowdfunding industry to build regionally-focused association.
• Phase 3 • Government support and endorsement – public-private co-investment funding, create a currency volatility hedge fund, and provide a clear, regulator-endorsed and sanctioned signpost to guide new crowdfunding businesses hoping to operate in East Africa.

To read or download the complete report, click here.