Crowdfunding
Overview
Crowdfunding is when a project or a venture is funded by a “crowd”. Most of the crowdfunding campaigns take place via internet platforms such as Kickstarter and GoFundMe.
Crowdfunding can empower start-ups and SMEs as the platform's role is to arrange deals and allow raising funds from global investors and lenders.
In 2017, the Central Bank of Bahrain (CBB) issued its regulations on crowdfunding in Bahrain (Rulebook - Capital Markets Regulations Volume 6).
This Practice Note provides an overview of the legal framework of crowdfunding in Bahrain.
Definitions
CBB: Central Bank of Bahrain.
Crowdfunding platform: Online platform operated by a licensed crowdfunding platform operator by the CBB.
Practical Guidance
Permissible crowdfunding in Bahrain
Three types of crowdfunding are allowed in Bahrain:
equity based (where investors gain shares);
financing based (where you lend money to gain interests); and
Sharia compliant (equity or finance based), where lending and investing is according to Sharia principles.
Note that for the purpose of Islamic equity crowdfunding offers, crowdfunding platform operators must appoint an independent Sharia advisor. The appointed Sharia advisor must be a person or a corporation.