Crowdfunding is taking more and more ground in Latin America. Now in Colombia initiatives are being taken to regulate collective financing and support entrepreneurship in the country.

Colombia is a country of entrepreneurs, in fact, it is the third country in the region with the largest number of Fintech ventures, as indicated by the Ministry of Finance. So a regulation on crowdfunding is a great help for all those who wish to continue undertaking in that country.

Fortunately, in August 2018, a law was finally promulgated to regulate crowdfunding, joining the short list of countries that have crowdfunding regulation.

Keys to Understanding Crowdfunding in Colombia 1

Credits in Colombia

The association Asobancaria has observed with concern the little dynamism that the financial sector has in the country, if we compare it with the rest of the world, Colombia is far below the other countries in terms of providing loans to micro companies. In 2012, other countries granted loans to 45% of emerging businesses and Colombia to 25%.

The picture for microentrepreneurs in Colombia is not easy, especially when they face private banking. The averages of credits granted in the country are quite low. The reasons are for the lack of guarantees from employers and high risk rates.

Keys to Understanding Crowdfunding in Colombia 2
Source: Radio Caracol

The regulation of crowdfunding

The need for crowdfunding in the country stems from all the inconveniences that a company needs to finance. Collective financing becomes an alternative for any entrepreneur to have opportunities to finance his new business.

In this way, the Ministry of Finance defined crowdfunding as a new activity in the securities market, which could be advanced by the stock exchanges, the administrators of securities trading systems and full-time corporations, supervised by the Financial Superintendence. from Colombia.

One aspect that stood out from this law is that it established a maximum amount of financing for projects that corresponds to a total of 10,000 Colombian minimum wages. On the other hand it also gave a limit to the contributors, which indicates that you can not contribute more than 20% of the equity or of the annual income in crowdfunding.

Keys to Understanding Crowdfunding in Colombia 3
Source: Marketing4eCommerce

Critics of the document

Despite the government’s attempts to implement a legal framework for crowdfunding, there are those who criticize the way in which this law is proposed and how counterproductive such clauses could be.

An example of this is the Colombia Fintech association, which criticized the fact that the law is not in accord with the different forms of crowdfunding and does not correspond to the principles of confidentiality, freedom and transparency that characterize this type of payment worldwide.

In the first place, they pointed out that the supervision of the Financial Superintendency can limit the creation of campaigns; Secondly, it does not differentiate the modalities of crowdfunding (of donation, rewards and loans) it can cause confusion in transactions.

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Finally, they also rejected the limitations placed on the planners on the story they can request and how much they can donate for different campaigns.

Risks and Benefits

The main risks are the technical problems that emerging crowdfunding platforms may have or the conflicts of interest that may arise in case the project is more successful than expected.

One aspect that should be refined is the culture of crowdfunding in the country, in this way the population would have more confidence with this new type of financing.

The main benefit is that it facilitates access to angel investors quickly and immediately. By speeding up the financing of microenterprises, entrepreneurship is promoted, thereby increasing the technological and social development of the entire country.

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Without a doubt, crowdfunding is a way to promote the realization of projects anywhere in the world. If you live in Colombia, do not hesitate to use our crowdfunding platform to finance your initiatives.

If you found this article interesting, share it with your friends so that they know how crowdfunding will work in Colombia.

We recommend you read: Everything you should know to create a crowdfunding campaign from Colombia

The crowdfunding law is a reality in Colombia