The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas International Securities Exchange (BISX) plans to launch into the crowdfunding space in 2021, its top executive confirmed yesterday, suggesting it will happen “sooner rather than later”.

Keith Davies told Tribune Business that the exchange was still debating whether to launch a separate platform for small and medium-sized companies (SMEs) to raise financing via this mechanism, or whether it will simply integrate them and the new Securities Industry (Business Capital) Rules into its existing structure.

“Our goal is 2021, this year, to be able to launch,” he said. “If we don’t launch a platform we will integrate these Rules and provide access to capital through these Rules through BISX. We might do it sooner rather than later. We need to tie these rules, these specifics up.”

Mr Davies added that BISX plans to treat the new formalised, regulated crowdfunding structure provided by the Securities Commission as a marathon rather than a sprint when it comes to market development. He reiterated that the exchange will not compromise on market integrity, and the level of trust and confidence that the market requires from investors to succeed.

“We see this as a developing aspect of the market,” Mr Davies explained. “Over time, this will become instrumental in building the capital markets but we’re not going to see a massive inflow. We want to grow and build the market over time.

“Our focus is on building the integrity of the market over time. It’s not throwing 100 companies at the market. That will fail. If you don’t take care of the companies coming to you, and the information they provide to investors, you will lose the confidence of the market and that’s something we’re not prepared to compromise on.

“It would be foolhardy to throw numbers out.... We want to focus on these companies and build them. Our platform will be a little different. It will be about building companies as opposed to throwing spaghetti at the wall. A great idea does not make a business work.”

Meanwhile, D’Arcy Rahming Jr, chief technology officer for rival crowdfunding platform, ArawakX, said yesterday’s implementation of the Securities Industry (Business Capital) Rules had removed the last obstacle to its planned launch during July’s second week.

“We’re very much on track to do that,” he said of the launch, suggesting that the potential ‘financing gap’ faced by Bahamian SME’s could have doubled from the originally projected $800m per year as a result of the COVID-19 pandemic although no studies have been conducted to prove this.

He added that “certainly three” of the five companies that ArawakX had hoped to present to investors at its launch will be ready, with those businesses involved in the medical, food services, agri-business and technology sectors.

“There’s a lot of innovative ideas out there that have been starved of capital,” Mr Rahming said. “As the saying is, there’s nothing like an idea whose time has come. It’s about opportunity; opportunity for businesses and opportunity for investors, and that is how wealth is created by lowering barriers to entry. We’re trying to lower it to $25.”

Kwasi Thompson, minister of state for finance, in confirming that the Securities Industry (Business Capital) Rules have been brought into effect, branded the move “another revolutionary step in the development of entrepreneurial and small business opportunities in The Bahamas”.

“With these new and innovative crowdfunding regulations, we are furthering the potential of MSMEs to raise more investment money on the private capital market. We are breaking down the walls that were once only able to be traversed by big corporate players. A new wave of possibilities for Bahamian ownership and entrepreneurship is here,” he argued.

“The new rules are now in effect and they represent a game changer. Eligible entrepreneurs can raise up to $5m to put towards the development of their start-ups or existing small businesses. And, better, the platforms allow them to raise this money from citizens and residents across the country who are interested in investing in promising businesses.

“This administration is streamlining the bureaucracy. We are undertaking real structural reform. We are allowing Bahamian entrepreneurs and small businesses to have the same kind of opportunity to raise capital like the big businesses currently do.”

Mr Thompson said capital-raising businesses will not be required to file the typical prospectus required by the Securities Commission. “Instead, they would file a streamlined ‘Crowdfund Offering Document’ or ‘COD’ prior to conducting a crowdfund distribution,” he added.

“This is a significantly less expensive process when compared to the minimum $20,000 prospectus. This is just one way that we are breaking down the barriers for Bahamian entrepreneurs and small businesses to raise capital in The Bahamas.

“The new crowdfund rules provide an appropriate balance between access to capital for entrepreneurs and, of course, provisions to ensure protection for potential investors. The rules also seek to minimise systemic and jurisdiction risks.”