What is Crowdfunding?
While crowdfunding in the world is developing quite rapidly, only reward and donation-based crowdfunding types operate as examples due to the lack of legislation in Turkey. This backwardness, especially in financial crowdfunding, is a serious disappointment. However, it would be nice if these funding tools, which minimize the costs of big intermediaries such as banks and thus their costs, become widespread in our country.
In the classical sense, financial crowdfunding is the mechanism that brings together those who have surplus funds and those who need funds, by establishing them on a platform rather than an occasional company (bank, intermediary institution, etc.). The Financial type of this model, which brings together small-scale investors, is also typically divided into two. Including loans and equity investments. In credit investment, investors ensure that small amounts are given as loans to those in need, while in equity investment, they become the partners of the asset subject to the investment.
Equity Crowdfunding
As BaFin, we would like to talk about equity crowdfunding. This tool is actually a very useful mechanism for Turkey in terms of spreading the capital to the base and placing the savings into long-term investments. Savers choose to finance an investment on the platform first, sending small amounts of money compared to the entire investment to an SPV (intermediary) of this platform through the crowdfunding platform. Then the investment’s rent, dividend, etc. In addition to its income, it may also be entitled to a return if the value of the investment itself increases.
It is possible to keep the money collected in the process of collecting the investment and financing the necessary investment in a reliable brokerage house or bank called escrow account. In addition, the fact that the SPV, in which the investment is operated, is separate from the main platform company, bankruptcy, etc. It prevents the investor from being harmed due to the risks.
As an example, our crowding platform is focused on energy utilities. A geothermal power plant is for sale in Denizli. For small investors, it is impossible to buy this facility. It is through this platform that those who want to buy this facility can come together reliably. For the required investment amount, for example, it is possible to provide from 1000 TL to a certain amount.
Equity crowdfunding mechanisms are authorized and supervised by the country’s capital market institutions. However, many countries in the world make these institutions easier to operate by making positive discrimination. This discrimination manifests itself in the process of tax regulations and easy obtaining of licenses. However, AML (Black money) and CFT (terrorist financing) etc. Taking measures on these issues is a necessity, regardless of which country it operates in.
In the European Union, member states exempt crowdfunding platforms from MIFID regulations with various regulations and can also make an exception from the “The Alternative Investment Fund Managers Directive” depending on the amount to be intermediary. The real carrot, however, was introduced by the EU Crowdfunding Proposals-editing draft, which is currently in draft form.
You can always contact BaFin’s expert and experienced staff to get detailed information about the legal and business models of crowdfunding platforms in our country or the European Union.