OTHER FACTORS IMPACTING DEVELOPMENT OF CROWDFUNDING

In addition to creating a pipeline of investment ready SMEs and a pipeline of potential investors, there are other factors that directly or indirectly impact the development of crowdfunding outside of facilitative and proportionate regulatory framework that will be discussed in chapter V. These include:

• Beneficial market conditions such as low returns on traditional investments and bullish market environment
• Clear and consistent legal frameworks that protect investors and minority shareholders to instill confidence among investors. To reduce agency risks of equity investments minority shareholders should be granted certain rights including voting rights, information rights, preemptive rights, and the right to participate in key corporate decisions, such as mergers, acquisitions, or changes to corporate governance structures, to protect their interests and ensure fair treatment.
• Robust financial infrastructure and continued technological innovation are also very important. Efficient payment systems and investor verification mechanisms are crucial for the smooth functioning of investment-based crowdfunding ecosystems. Interoperability between platforms, banks and payments system operators and collaboration among stakeholders is crucial for market liquidity and efficiency. Continued technological innovation, including exploring the adoption of blockchain technology for increased security, advanced data analytics for enhanced due diligence, and artificial intelligence supporting chat-bots and investor interactions, can enhance the efficiency, transparency, and accessibility of investment-based crowdfunding platforms. Ensuring user-friendly interfaces and mobile compatibility can further expand market reach and facilitate broader investor participation.
• Collaboration among industry stakeholders is essential to address common challenges, share best practices, and promote sustainable growth. Knowledge sharing initiatives between regulators, platform operators, investors, and issuers, industry forums, and research partnerships can facilitate dialogue and innovation supporting development of investment-based crowdfunding ecosystem.