Chairman of the Securities Commission of The Bahamas [SCB] K. Neville Adderley, a retired judge, believes crowdfunding is an ideal tool to start and advance small- and medium-size businesses, particularly in Grand Bahama.

"I think everyone recognizes that small- and medium-size businesses are what drive the economy," said Adderley, who was the guest speaker at the Grand Bahama Chamber of Commerce's (GBCC) business meeting on Wednesday.

Crowdfunding is a way of raising money via online platforms, enabling fundraisers to collect donations from the wider internet audience to finance projects and businesses.

"Simply, it is a way of connecting the small investor with the small- and medium-size businesses," Adderley said.

"Hopefully, there is enough funding out there to help advance those businesses which we need in Freeport desperately."

In 2021, the government brought into force the Securities Industry (Business Capital Rules), informally known as the Crowdfunding Act. It laid down new regulations from the Securities Commission, establishing a legal framework for businesses to use crowdfunding as a source of capital.

"That was in the middle of COVID so it never really caught on," Adderley said.

"So, hopefully, if we can nudge people ... it's a wonderful tool and the people who put in their cash can do so with the thought of getting a profit, unlike leaving their monies in the bank with little to no interest."

He explained, "Basically, it is allowing small- and medium-size businesses to issue their shares to the public, and by issuing those shares they raise from the ordinary man, which represents the crowd, they get interest in the company itself.

"So, the advantage of it is they [business owners] would not have to borrow money and the small man who wants to take part in investments can do so."

However, at present there are no crowdfunding platforms in The Bahamas.

ArawakX was the only crowdfunding platform in the country but the Securities Commission has suspended its license.

On September 26, SCB began winding up proceedings against Mdollaz Ltd., trading as ArawakX, after finding via investigations and interviews that the crowdfunding firm is insolvent, that it commingled company funds with investor money, and that its principals sold Mdollaz shares without SCB approval. Arawak X has strenuously denied these allegations in recent court filings.

Adderley noted there are rules to safeguard investors.

"The rules require that the issuer [the people trying to get funding] be very frank and open with the investor as not to mislead them. Thereafter, the investor has to sign a declaration saying, yes, they understand this is a risk, but they still want to put in money," he said.

Adderley noted there is a limit of $50,000 on the amount an individual is allowed to invest.

"That is for their protection because of what we call the unsophisticated investors," he said.

"We don't want to expose them to a lot of risk that they can't afford, but at the same time they may not have enough funding to invest in the larger firms that require the much larger amounts."

Adderley said, "It is my hope is that it will help Freeport to get those small- and medium-size businesses going."

Chamber of Commerce President James Carey said the discussion of crowdfunding in Grand Bahama is long overdue.

"This is the first opportunity to discuss crowdfunding in Grand Bahama and Justice Adderley explained the safeguards and opening the doors to possibilities for small- and medium-size businesses on the island," Carey said.

"We have a lot of people with great ideas who don't have the resources and, provided they do their due diligence and get the support that they need, they can easily enter the realm of being proprietors in businesses and increase the wealth opportunity for many people."

Carey believes with more education, crowdfunding can be a benefit to Grand Bahama's economy.

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