The Rise of Crowdfunding in Financial Financing: Regulations, Opportunities, and Growth

2024-02-24 01:28:00

Participatory Financial Financing, or crowdfunding, continues to gain ground in the market for alternative resource allocation to the financial system.

Since April 2022, when the first operating authorization was granted to these platforms, until August 2023, more than 230 projects, both personal and business, have been financed through crowdfunding, according to the Superintendence of the Stock Market (SMV).

The regulations have facilitated that, to date, four FPF platform management companies have an operating license and one more has organizational authorization, the regulator emphasized.

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In more than a year, financing was granted for an amount greater than S/ 18.3 million for investment projects, he said. As this market continues to develop, there will be more participants interested in competing, he said.

For his part, Simon Vacher, co-founder of Inversiones.iomaintains that there would have been more than 250 projects until the end of 2023 and the amount could be greater than S/ 35 million.

In recent months, the rate of placement of funds has doubled, especially in contracting projects with the State or construction of social housing, he added.

Likewise, the executive said that the process to receive authorization to operate the SMV is rigorous, in order to adequately protect the investor.

This process can take between six months and a year and a half, since they require minimum capital, a compliance officer, computer validation, cybersecurity and data protection, payment mechanisms, and reporting a series of manuals, he listed. .

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“There are many operations that are done informally, a broker knows a company that requires funds and looks for a group of investors to finance it, it may operate under a contract, but if it turns out to be a scam the SMV cannot act,” he stated.

In this sense, the superintendency warns that the evolution and dynamics that will appear in this market in the following years will depend on the promotion and evaluation that the private sector makes of its potential and opportunities that it identifies for its development.

With the crowdfunding regulatory framework, an attempt has been made to create a favorable regulatory scheme that enables the orderly development of this novel financing and investment system, the regulator indicates in an interview in the EY FinTech Business Guide.

Vacher specified that, although there are four entities with an operating license, not all of them are operational to date, there were those who were affected by late payments during the pandemic and others have not yet started to offer their service.

“To be profitable you have to reach a critical mass of customers; The cost of infrastructure, technology and regulation is important,” she said.

This year, the executive plans to multiply the amount of resources allocated by his platform by four.

The SMV indicated that it continuously monitors the development of crowdfunding and, if the need for any adjustment is required or identified, it will evaluate its impact and viability, always taking into consideration the casuistry generated, the flexibility of the current regulatory framework and the permanent contact with the participants in that market.