Consumer Protection Regulations for Crowdfunding in the GCC: An Overview and Comparison

Crowdfunding (CF) is considered to be an instrument of financial inclusion as smaller firms that do not have access to financing from traditional legacy sources can raise funds using digital platforms. Since retail consumers provide the bulk of the funds in crowdfunding, they will not be forthcoming until their rights are protected. Regulations play an important role in protecting consumers and building trust in the systems. The paper develops a framework to assess the consumer protection regulations related to crowdfunding and uses this framework to assess the regulatory regimes of CF in four Gulf Cooperation Council (GCC) countries (Bahrain, Oman, Saudi Arabia and UAE). The results show that different regulatory bodies (central banks and capital market authorities) regulate the CF sector. Except for Saudi Arabia, where only debt-based CF is allowed, all other countries allow both debt-based and equity-based CF. The regulatory regimes for consumer protection differ in different countries, with Oman scoring the highest, and the equity-based CF regulatory regime in the UAE scoring the least. The paper identifies areas of consumer protection regulations that can be improved to develop a robust regulatory framework that can promote crowdfunding activities.