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Crowdfunding certain to boom like never before in Tunisia

Crowdfunding, this participatory financing method, is a trendy way of soliciting financial support from individuals through online platforms. It allows you to raise funds, but also to test the relevance of business ideas.

In this spirit, a conference on “Crowdfunding, what contribution can it make to the financing of businesses?” was held in Tunis on February 16. It was organized by the Tunisian-French Chamber of Commerce (CCI) in partnership with the Ministry of Finance, the BCT, the UBCI and the APII.

Director General of the APII, Omar Bouzaouada, announced that the first national meeting on crowdfunding will be held in May 2023, an event with enormous potential, but whose operationalization needs to be well studied in order to avoid a stumbling start and to minimize the risks involved.

 Risks to consider

According to Bouzaouada, crowdfunding can be “a lever for citizens to finance projects and can be one of the factors to promote inclusive growth”.

He recalled a survey carried out by the World Bank in 2016, which estimated the potential for raising funds through crowdfunding for developing and emerging countries at $96 billion. In Tunisia, if properly implemented, crowdfunding could raise around 2.5 billion dinars in the first 5 to 10 years. This figure deserves to be updated given the exponential development of this activity around the world,” he added.

Moreover, unlike traditional financing methods, crowdfunding is a solution that can be implemented quickly. Once the project has been decided and validated, all that is needed is to find an online crowdfunding platform and launch a campaign.

The challenge is to communicate, i.e. to make your project known to the public. You can do this in any way you like: using social media, using your network of contacts, advertising, etc.

The crowdfunding activity requires the existence of 4 actors: a specialized Internet platform operator who brings the public into contact with the companies and projects whose owners wish to obtain financing; the contributor, i.e. any natural or legal person, resident or non-resident, who contributes to the financing of a company or a project by crowdfunding; and the investor, i.e. a person who is willing to invest in the company or project in question.

Crowdfunding is the “future of business

The project leaders, namely the Financial Market Council (CMF), the Central Bank of Tunisia (BCT) and the Microfinance Supervisory Authority (ACM), are committed to finalizing the regulatory framework. This was underlined by Mehdi Boukari, Deputy Director of Credit Risk Supervision. He affirmed that the exercise of the activity of crowdfunding in credit is subject to the authorization of the Governor of the BCT, who will issue circulars concerning the interest rate ceiling, the list of information and documents that must accompany the request for authorization, as well as the content, periodicity and modalities of transmission of the required statistics.

For his part, Mehdi Ben Mustapha, head of communications at the Financial Market Council, said that crowdfunding will be the “future of business”, a prophetic phrase predicted by entrepreneur and founder of a crowdfunding platform, Duncan Madden.

It is also a risky business, with only 20% of projects succeeding,” he said. “The main advantages of this activity are the speed with which it can be set up, the ability to reach new backers and the funding of certain small projects. But there are also risks to consider. These are mainly the risks of project failure, fraud or lack of information,” he added.

On the other hand, there are risks associated with the lack of personal guarantees from the entrepreneur. When providing equity finance in the form of a loan, investors take on more risk than a banker.

Therefore, their expected return is higher. In this respect, it is important to know that the interest rate of a crowdfunding loan can be around 10%…

Certain types of crowdfunding can have an impact on the financial structure of the company. While donation-based crowdfunding can generally be considered as equity, credit crowdfunding is considered by banks as financial debt.

Consequently, if the company is successful in a credit crowdfunding campaign and applies for a professional bank loan, the banker will recalculate its debt capacity. In the end, it is reduced by the same amount.


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