A new legislation is being proposed by the Government, aiming at boosting MSME entrepreneurs to easily raise capital, through either equity or debt in a regulated manner.
This would either be through Small Offers, Equity Crowd funding and Peer to Peer Lending.
Speaking at the media conference on access to capital, Acting Prime Minister and Minister for Trade, Manoa Kamikamica said in Fiji, access to finance for MSME’s has undoubtedly been a challenge, despite Government’s incentives.
Kamikamica said funding through commercial banks does not offer MSME’s tailor made products or services, lower interest rates, collateral –free and unsecured lending that support MSME’s.
Kamikamica said in Fiji there is an estimated $2 billion financial gap in the MSMEs businesses, where robust, vibrant and innovative entrepreneurs cannot access capital easily.
The proposed bill offers:
Small Offers – Small-scale offers (or “small offers”) regimes enable companies to raise funds through a limited number of investors without the costly and onerous disclosure obligations, which are required when making a public offer to invest in securities.
Essentially, investors targeted here are friends, families, and those familiar with the business such as customers, suppliers, and soft business network.
For instance, in Australia and New Zealand, under small offers, a company can offer shares in its company to raise capital up to $2 million from a maximum of 20 investors over a 12-month period.
Equity Crowd Funding – Under the crowdfunding model, large groups of people contribute money towards a campaign to fund a project or business in return for rewards.
Whilst there are various models for crowdfunding, for the purposes of the Access to Capital Bill – this will be limited to commercial and economic purposes.
Crowdfunding generally driven by three main participant groups: (i) the initiator of the project who is proposing the idea or project to be funded, (ii) the funders who support the idea, and (iii) the moderating organisation (intermediary) that connects the parties.
Peer to Peer Lending – is when entities raise funds through debts, which is facilitated through a licensed intermediary.
These occur when lenders or individuals are willing to lend their funds to business proposals and earn an interest when loans are repaid.
The Acting Prime Minister said the Government believes that embracing alternative financing is a pivot to addressing the challenges and opportunities ahead.
He said that the Cabinet has endorsed this proposed bill.