By launching the first regulated crowdfunding digital platform in Colombia, the Stock Exchange offers new investment possibilities for small projects or full blown SMEs.
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The Colombian stock exchange launches a new platform
Over the years, the stock market has been perceived as something reserved for large investors. This perception might be about to end now that the Colombian Stock Exchange (BVC) has provided Colombians with their first collaborative financing platform, or crowdfunding platform. It is 100% digital and monitored by the Government.
The tool was created to allow for, and provide a broader audience with greater investment opportunities, and SMEs with a broader range of options to acquire financing. In the long run, the a2censo tool will help companies to grow without needing to go through institutional investors.
With an investment of only $200,000, any given person will have the opportunity to invest in high potential innovative business initiatives, with a return potentially superior to that of existing alternatives that are currently available.
The first option will be debt financing for SMEs, however, the stock market expects the platform to evolve and move towards issues such as discounting invoices or financing ventures and is also considering gradually reducing investment amounts to $50,000.
How does this digital platform works
Crowdfunding is based on the concept of a “cow”. In other words, a collective saving for a specific project: a trip or a purchase. This is usually done by relatives or acquaintances. However, new technologies now allow thousands of people to take part in and access to these activities.
In both Colombia and around the world the tool has been used for a lot for donation support, and some media outlets, such as Noticias Uno or La Silla Vacía, have used this to finance their activities. However, in the case of this particular exchange platform, it is an investment. A 100% digital financial product. The idea for the product is to have people come together to finance and support a productive project that will then return the resources back to them through the terms initially proposed to them.
To get started, the first thing you need to do is to register on the platform as either an investor or as a company. The only requirement that needs to be met is having a savings account already set up from which to transfer your resources. From that point on, you will be given the option to select the type of investment that you prefer set within the different initiatives that look for resources and the interest rate offered includes all costs involved.
Prior validation process
In the situation where a company is seeking funding, the process and company details would first need to go through a review and validation process before this being granted. Additionally, companies will have to pay for the use of the platform on top of which they will need to add the interest that is to be paid to individuals and any commission to the National Guarantee Fund (FNG). The stock exchange is in charge of making sure that the investor has all the information required and available to make their investment decisions.
The stock exchange will take responsibility for assessing the companies risks and finding the best process with which the company can move forward with. Córdoba stated that “The Stock Exchange guarantees that the money that each person puts on the platform will reach the company they are saying and that the conditions agreed between the agents will be met. In addition to this, we make sure that the available information is enough for people to make their investment decisions,”.
The platform initially started with six companies, all of which were looking for resources valued between $140 million and $400 million. Each company will be categorized by sectors and companies include sectors such as agribusiness, biotechnology, electrical energy, process automation, information technology, and telecommunications infrastructure and the profitability will depend on each project type.
The project itself does not seek to replace bank credits but more to offer an alternative or complementary source. A person with $200,000 would most likely only be able to access a savings account that would give them between 2% and 4%, whereas an SME currently only has the option borrow at rates above 16%.
Entities such as Innpulsa, CAF and the IDB, among many others, all participated in the financing of the project which started nearly two years ago, the project fully complies with current regulations for this type of initiative and is under the supervision of the Financial Supervisor.
Córdoba concluded that “It is not the only platform, nor do we want it to be. This is the contribution of the Bolsa to create a digital financing ecosystem for the country’s entrepreneurship and companies, as well as to create new investment options,”.
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First published in Dinero, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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