There is no express regulation on investment-based crowdfunding, otherwise known as equity crowdfunding, “susu”, “nnoboa” or “ntoboa” in Ghana, but Bank of Ghana (BoG), the country’s apex bank, is leading a campaign to change that. In a new policy document, the bank has not only expressly given a go ahead order for the operation of donation or reward-based crowdfunding, but it has, for the first time, spoken about the legality or the illegality of engaging in crowdfunding operations in the west African country.

“With the introduction of mobile money, associations and corporate entities have found crowdfunding to be an efficient channel for collecting donations and for raising funds. Mobile money platforms have been used to raise funds for old student association contributions, development contributions, funeral donations and donations towards medical expenses of vulnerable persons,” the bank stated in its latest document. 

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“This development signals the potential of digital platforms in transforming the traditional crowdfunding model to enhance its contribution to the implementation of the National Financial Inclusion Strategy and the Digital Financial Services Policy objectives of the country,” it added. 

In Simple Terms, What Does The New Policy Say? 

BoG’s latest document establishes the following certainties about crowdfunding in Ghana:

• That Bank of Ghana has the power under Ghanaian laws to regulate crowdfunding of any type. The bank quoted certain laws in Ghana that make this possible. These include: the Payment Systems and Services Act 2019 (Act 987); the Data Protection Act 2012 (Act 843); Banks and Specialised Deposit Taking Institutions Act, 2016 (Act 930); the Securities Industry Act, 2016 (Act 929); and the Cybersecurity Act 2020.

• That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding (that is, let the public come invest in my company and they will get shares) platforms will be regulated, but not yet regulated by the Bank of Ghana — since they deal with securities and loans and leverage payment platforms for the collection and disbursement of funds.

• That debt crowdfunding (or Peer-to-Peer lending) and equity crowdfunding, by their nature, fall within both the regulatory jurisdiction of the Bank of Ghana and Ghana’s Securities and Exchange Commission (SEC). And so, Bank of Ghana will work with SEC, which is currently putting together a set of crowdfunding regulations, to prevent possible regulatory lapses with regard to both types of crowdfunding. 

• That Bank of Ghana does not need to issue further regulations on any crowdfunding, which has to do with donation or giving back non-financial rewards to investors, as the bank’s policies currently support and encourage anyone wishing to do so to go ahead. 

• To be clear, Bank of Ghana goes ahead to state what it means exactly by donation or reward-based crowdfunding. The Bank says the two models — that is, donation and reward-based — involve the collection, holding and disbursement of funds. 

• The bank therefore says that its current policy permits Ghanaian banks — such as, Specialised Deposit-Taking Institutions (SDIs), Dedicated Electronic Money Issuers (DEMIs) and Enhanced Payment Service Providers (EPSPs) — to allow anybody wishing to run these types of crowdfunding campaign to do so. 

• It says, however, that if the donation or reward-based crowdfunding is run through a Dedicated Electronic Money Issuer (DEMIs) — such as ZeePay currently does — then merchant wallets must be created and dedicated to the collection of donations.

• For startups that hold the EPSP license — such as PalmPay — they would need to partner with a bank to fully deliver the service since they do not issue electronic wallets or accounts to their customers.

• The Bank also goes ahead to demand that Ghanaian banks which host crowdfunding platforms must go ahead to conduct due diligence in accordance with BoG’s NOTICE NO. BG/GOV/SEC/2020/15 dated 3rd December 2020. 

In Summary, What Does The New Policy Imply?

The implications of Bank of Ghana’s latest policy are fivefold:

• First, the policy implies that Ghanaian banks are only authorised to host companies that run donation or reward-based crowdfunding, pending when the BOG and SEC issue out regulations on equity or investment-based crowdfunding. This implication presents a big loophole as a smart startup running a crowdfunding campaign may call it donation while it is investment-based. 

• Second, BoG did not expressly prohibit equity crowdfunding, but discourages Ghanaian banks from hosting equity crowdfunding platforms. 

• Third, the policy implies that only crowdfunding companies expressly hosted by Ghanaian banks are legal. Therefore, the policy did not catch foreign-based crowdfunding firms targeting Ghanaian investors, thereby leaving investors to their fate. 

• Fourth, in the case of the disappearance of investors with the funds raised from crowdfunding platforms, the policy implies that BoG may go after those investors’ accounts to recover the funds. 

• Fifth, the new policy implies that BoG wants to monitor funds flowing through crowdfunding platforms. Thus, from now on, banks are expected to designate bank accounts associated with crowdfunding, appropriately. 

Last year, Ghana’s Securities and Exchange Commission (SEC) said it plans to introduce a framework for the commencement of crowdfunding services by 2021 and hopes to have a system up and running, backed by the requisite legislation. Emmanuel Ashong- Katai, the SEC’s head of policy, research and IT, said the framework being designed by the SEC aims to ensure that investors are protected from fraudulent entrepreneurs

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