Barring any final minute rejection, Tunisian startups are set to get a new law that will allow them to raise money from the general public through equity crowdfunding. The Tunisian Minister of Industry and SMEs, Slim Feriani has said the Tunisian crowdfunding bill which has been adopted by the country’s Council of Ministers on January 31st is now before the Tunisian Assembly of People’s Representatives (ARP) for final adoption.
‘‘The crowdfunding law could generate funds in the range of 40 to 50 million dinars (around $17.6mn) during the first year of its implementation. This would contribute to changing the dynamics of start-ups and SMEs anchored on the Tunisian three-focused areas: entrepreneurship, digitization and renewable energies,’’ Feriani said.
Here Is All You Need To Know
- According to Feriani, the new law is a new mechanism for alternative financing for startups and the Tunisian bill on crowdfunding meets international standards and can support investment.
‘‘Despite the financial facilities granted by the State to SMEs to cover their financial needs, the SMEs often encounter enormous difficulties in accessing finance, which hinders their development and threatens their sustainability,’’ he said.
- According to Feriani, the two types of crowdfunding envisaged under the bill are crowdfunding through investing in financial securities to help finance the capital of startups and innovative projects lacking equity; and tedfunding, which is based on the granting of loans.
- Slim Feriani also highlighted the role of the Tunisian Agency for the Promotion of Industry and Innovation (APII) which, in coordination with the European Union, had helped to set up these new mechanisms in the spirit of improving the Tunisian business climate and by the way of also improving of Tunisia’s ranking on the World Bank Ease of Doing business index.
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- Feriani praised the contribution of Tunisian Union of Industry, Commerce and Handicrafts (UTICA) and CONECT which helped in the development of the legal framework especially as it regards the management of funds from small investors
- The Global Crowdfunding market was valued at 10.2 billion USD in 2018 and is expected to reach 28.8 billion USD by the end of 2025, growing at a CAGR of 16% between 2018 and 2025.
Understanding How Crowdfunding Works
Crowdfunding refers to raising money from the public (who collectively form the “crowd”) primarily through online forums and social media.
Crowdfunding models include: Donation-based crowdfunding (in which donors are not typically granted anything in return for their donation)
Rewards-based crowdfunding (in which backers contribute funds in exchange for some reward–in many cases the item produced by the campaign)
Equity crowdfunding (Equity crowdfunding refers to raising money from small public investors (who collectively form the “crowd”) primarily through online forums and social media. In exchange for relatively small amounts of cash, investors get a proportionate slice of equity in a business venture).
Debt/lending crowdfunding (in which lenders provide money and expect their loan to be paid back with interest).
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com