Basseterre, August 19th, 2022

Access to finance, particularly in the wake of COVID-19, is a major challenge and impediment to growth for Caribbean MSMEs, which number approximately 20,000 and make up 95% of enterprises in the region, contributing 50% of GDP and employment.

This challenge is driven by several factors: many MSMEs have high levels of informality, with little or no collateral, inadequate financials and weak business plans. Additionally commercial banks impose burdensome application procedures and high interest rates for borrowing. Outside of these loans there are limited options for borrowing in the region, with demand outstripping supply by as much as 850% in some territories.

There is therefore a strong case for increasing the range of financial options for MSMEs and to cater to firms at all stages of the business development cycle, to increase economic growth and facilitate a sustainable recovery for the region from the pandemic. The ECSRC, an independent, autonomous regional securities market regulatory authority, is contributing to this effort by promoting the development of a framework to support crowdfunding activities in the ECCU member countries. To this end, the ECSRC has embarked upon an 18-month project, funded by the Caribbean Development Bank’s Caribbean Technological Consultancy Services (CTCS) Network. The goal of the project is to have a viable equity crowdfunding platform launched in the ECCU member countries by 2023. Equity-based crowdfunding, allows prospective investors to offer funding to businesses in exchange for shares or an equity stake in these businesses.

According to the World Bank, the three key aspects essential to the development of a viable ecosystem for crowdfunding are user capacity, regulation and technology. As regulator, the Commission has already developed a draft policy framework (the Securities (Crowdfunding) Rules 2020) to guide the development and regulation of equity crowdfunding activities, but recognises that it also has an important role to play in promoting user capacity and facilitating the development of the technology. Acting as convener, the ECSRC aims to bring the following key stakeholders together around a common vision of how crowdfunding will be developed and implemented in the ECCU member countries:

• Public sector stakeholders, such as Ministries of Finance, Central Banks etc.
• Regional organisations such as the OECS, CARICHAM etc.
• Chambers of Commerce, Manufacturers’ Associations etc.
• Investors and advisors familiar with and interested in crowdfunding
• Entrepreneurs and MSMEs seeking finance and interested in crowdfunding
• Developers of viable crowdfunding platform(s)
• Interested members of the public

Over the coming weeks, the ECSRC will host a number of awareness-raising and training activities for these stakeholder groups, including awareness-raising webinars and virtual training sessions aimed at educating stakeholders on crowdfunding and equity investment as an asset class. Interested parties are strongly encouraged to register for these free activities.