Crowdfunding Platform Exits CMA Regulatory Sandbox

The Capital Markets Authority (CMA) has granted a ‘No Objection’ to Pezesha Africa Limited (Pezesha) to operate its debt-based crowdfunding platform in the Kenyan capital markets, after a successful one-year testing period in the Regulatory Sandbox, which was launched in March 2019. 

A crowdfunding platform is a website that allows firms and entrepreneurs to raise and collect funds from investors, contributors, and donors.

The No Objection has been issued subject to Pezesha’s maintenance of existing compliance requirements including; an appropriate financial risk management framework, adequate local capital market transaction control procedures as well as efficient, orderly, and fair operations of the business segment, product or intermediaries.

This is subject to the finalization of a comprehensive regulatory framework to operate a debt-based crowdfunding platform in Kenya’ in the medium term.

CMA Acting Chief Executive Wyckliffe Shamiah noted Pezesha effectively tested its crowdfunding innovation and achieved its testing objectives and control boundaries between July 2019 and July 2020.

“This positive outcome is a clear demonstration of the unique opportunities arising from the sandbox environment and potential for scaling up innovative ideas. The success of Pezesha’s testing phase underlines the Authority recognition of the need to nurture innovations that can transform the fundraising model in the capital markets,” CMA Acting Chief Executive Wycliffe Shamiah said in a statement.

“The ‘No Objection’ is timely given the impact of Covid-19 on the economy. At Pezesha, we believe the approval highlights our commitment to building the trust of all key stakeholders within our digital ecosystem and the capital markets,” said Pezesha Chief Executive Officer, Hilda Moraa.

“Our goal is to introduce innovative products for investors aimed at providing SMEs access to capital. We will do this by maintaining the highest standards of governance, and transparency as we continually derisk the value-chain for all stakeholders. We are excited about this new phase of our company’s growth,” she added.

Alternative capital raising initiatives including crowdfunding platforms provide a different way to raise funding for large companies, small enterprises, and retail borrowers through equity, debt, or a hybrid model.

“CMA is firmly committed to review and adopt global best standards and monitor the growth and activities of the crowdfunding space in Kenya,” said Mr. Shamiah.

“This will ensure prudent management of investor funds and risk mitigation as well as ensure efficient, orderly, and fair operation of this segment and players,” he added.

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