Published: Nov 29, 2020

Crowdfunding – New Financial Activity Regulated by UAE Central Bank

The UAE Central Bank has recently issued the “Loan – Based Crowdfunding Activities Regulation” (“Regulation”). The Regulation has regulated a new activity for the first time in UAE (onshore) and it has set out the rules to issue crowdfunding licenses under the UAE Central Bank.

Crowdfunding is an industry in rapid growth all over the world, with great potential for both investors and businesses looking for funding. It is a technology-enabled financial service that covers a wide range of ways to allow capital seekers to raise funds from a large number of capital givers through online crowdfunding platforms acting as intermediaries, instead of raising finance from traditional funding sources like banks or mutual funds.


Effective Date

The Regulation was issued on 14 October 2020 and published in the official gazette on 28 October 2020. The Regulation confirms that it shall come into force after one month from publication, which means that the Regulation is currently in force.


Scope of Regulation

The Regulation licenses and regulates loan based crowdfunding only, being platforms which connect lenders and borrowers and assist administering the resulting loans.

Platforms providing for other types of investment, including equity and donation based crowdfunding, do not fall within the Regulation.



  • Jurisdiction

The coverage of the Regulation is fairly wide and it considers a company to be carrying out crowdfunding activities in the UAE, even if it is not based in the UAE if it: (i) is incorporated in the UAE or hosted in the UAE; or (ii) uses an address in the UAE for correspondences; or (iii) provides crowdfunding to clients residing in the UAE.

The expansive jurisdiction of the Regulation will need to be considered by platforms located outside the UAE, including potentially those based in the DIFC and ADGM.

  • Crowdfunding company

The crowdfunding company must be a company incorporated in UAE under the Companies Law (excluding the Joint Partnership and Simple Commandite companies).

In addition to the capital requirements (AED one million or AED 300,000 depending on the category of the license), the crowdfunding company should submit a bank guarantee of a value equal to the required paid up capital.

The level of governance rules and oversight that would apply to the crowdfunding company are similar to that of a regulated financial entity. This includes the management fit and proper criteria, risk governance framework, internal controls, conflict of interest and auditing.

The crowdfunding companies must comply with applicable Emiratization requirements from time to time.

  • Platform

Each platform which facilitates loan based crowdfunding will be grouped by volume, with larger platforms being a Category 1 (AED 5 million cumulative loans facilitated in a year) and smaller platforms being a Category 2 (below AED 5 million cumulative loans facilitated in a year). The category of the platform will dictate the minimum capital requirements of the crowdfunding company.

  • Borrowers

It appears that the borrower in crowdfunding must be a UAE registered company and therefore the borrower cannot be an individual, sole proprietorship or a company registered outside of the UAE.

  • Lenders

There are no specific restrictions on who can be on boarded as a lender. However, the Regulation has grouped lenders according to their financial position:

  1. retail lender (who is not a market counterparty); or
  2. market counterparty, who can evidence assets of over AED 2 million outside of their primary residence and self-attest to being treated as a market counterparty.
  • Lending

The Regulation places various obligations on the crowdfunding company, from assessing the suitability of lenders, anti money laundering, borrower diligence and risk assessment through to loan administration.

The Regulation also contains very clear disclosure requirements to both borrowers and lenders, which the crowdfunding company must comply with.

With regard to specific lending, individual and cumulative limits are imposed on lending depending on the classification of the relevant lender (either retail or market counterparty) together with limits on borrowing (AED 10 million per borrower in any calendar year).

  • Client Money

The Regulation has introduced the concept of client money provisions and requirements relating to controlling client money. To the extent that a crowdfunding company receives any funds in relation to the crowdfunding activities, such funds are required to be received and held in segregated accounts held with UAE banks, with such accounts to be audited on a regular basis.

The Regulation is a welcome addition to the UAE’s financial industry and is likely to further enhance the variety of funding options for customers. The Regulation has however been careful to address the potential risks which exist with lending, placing strict obligations on the crowdfunding companies to ensure that the interests of both the borrowers and lenders are protected.