The Iranian Association of Islamic Finance held the fourth pre-session of its 10th Islamic Finance Conference on "CrowdFunding and General Public's Participation in Financial Markets".

The speakers of the meeting were Zarezadeh, the director of financial instruments and institutions, and the secretary of the crowdfunding working group of Iran Fara Bourse, Meisam Hamedi, the head of research, development and Islamic studies center of the Securities and Exchange Organization, and Mahdi Farazmand, the CEO of FinTech Investment Consulting Company.

Shariati Nia, an expert at the Research Center of the Securities and Exchange Organization, also presented an article on the pathology of crowdfunding in Iran.

At the beginning of the meeting, Shariati Nia said although the crowdfunding industry is a new industry, we are facing all kinds of challenges and obstacles to the development of this industry in the capital market. These challenges can be divided into four categories: structural and technical challenges, challenges related to the field of competition, challenges in the field of policymaking and regulation, and the challenges of Shariah governance and compliance with the Shariah framework.

He added as for the inefficiency of the competition environment, we are facing 3 challenges: the impossibility of competition for new platforms, the entry of large companies at an uncompetitive rate, and the creation of restrictions for innovation. According to the latest statistics, in the field of crowdfunding, about 17% of the volume of financing was provided by capital-friendly companies whose life span does not reach 3 years. We often see a phenomenon in which big companies finance many plans and projects in this way after their capacity is filled in the money market.

Mahdi Farazmand, another speaker, said the introduction of the crowdfunding model has made our capital market, which is the foundation of innovation in the financial field, able to provide new instruments.

This is promising, because contrary to what was imagined, crowdfunding rates (in terms of helping to curb inflation) greatly helped the country's economy, because unlike other capital market tools that are liquid ones, crowdfunding and participation certificates bring investors' resources into a company and these resources are focused on a project. Therefore, this tool prevents the rapid movement of cash resources among markets. Another privilage is that no money is created in this plan.

He emphasized the biggest strength of crowdfunding is speed, and if we go towards regulation like issuing bonds, we will lose the whole advantage of this tool. We are in a gradual process, definitely in this process investors will learn which platforms are more reliable, while the rates will be determined in the market. People also learn that there is a different market to participate in.

He went on to say that in the field of crowdfunding, two good things have happened: the ceiling of crowdfunding has reached 50 billion tomans from 2 billion tomans, which was approved by the Supreme Council of the Stock Exchange.

“Regulations have been made in this field as well, this tool has grown and in the future we will see more growth of this instrument”, Farazmand said.

Meisam Hamedi, Head of Research, Development and Islamic Studies Center of the Securities and Exchange Organization, said since the competition has increased, the ability to develop should be created. The directive has not been revised for several years and now is the time to amend it.

He added participation certificate is a security tax-free, and these two points are a great opportunity. The development of this tool should be discussed, we should discuss whether the certificate of participation can be entered into the secondary market or not. The first step in the correct development of this instrument is to modify the instructions, and the modification of this instruction is within the power of the Stock Exchange Organization.

Regarding the ways to introduce this tool to people and build trust, he said crowdfunding does not have a specific trustee. Policy should be made to create a culture, and by the way, the policy of the Securities and Exchange Organization is not to promote instruments that have special benefits, and the platforms themselves should take an action in this area.