Name
Global FinTech Guide
Country _ Name
Thailand
SectionTitle
Crowdfunding/crowdinvesting/crowdlending
Body
FinTechs belonging to this category operate crowdfunding, crowdinvesting and crowdlending platforms on which money is raised to invest in various projects, mainly start-up companies and real estate projects.

Crowdfunding is not a legal term, but often used as the general term for donation-based crowdfunding (the investor donates the money to the project), reward-based crowdfunding (the investor receives an often symbolic consideration for his investment), equity-based crowdfunding (crowdinvesting: the investor participates in the profits of the financed project or acquires shares or debt instruments) or lending-based crowdfunding (crowdlending: the investor is reimbursed at the end of the project with or without interest).

Introduction

Attitude of the country towards crowdfunding, crowdinvesting and crowdlending platforms

The Securities and Exchange Commission (SEC) and the BOT have issued notifications regulating crowdinvesting and crowdlending, respectively. Currently, the SEC supervises the offering of newly issued shares and debentures, while the BOT supervises peer-to-peer lending.

The Thai crowdfunding market is developing and poised for growth as there are now six (6) operators approved by the SEC as funding portals for equity-based crowdfunding, and one (1) licensed peer-to-peer lending platform operator and two (2) operators currently testing their services in the BOT regulatory sandbox framework for financial services that leverage new technologies. The regulatory sandbox allows financial service providers to test new technology in a live environment within a limited, well-defined scope.

As for donation-based crowdfunding, there are only a few major players in Thailand's market, including taejai.com, and kaokonlakao.com.

Legal affairs

Obligations and requirements to provide crowdfunding, crowdinvesting and crowdlending platforms described above

Equity-based Crowdfunding (Crowdinvesting)

The SEC's crowdfunding notification sets out restrictions and requirements (including reporting requirements) for issuers and crowdfunding portals. Crowdfunding platforms are also required to carry out KYC processes for issuers and investors using their services and must provide investors with information and risk assessments in order to protect inexperienced investors. The SEC crowdfunding notification also places higher restrictions on individual retail investors than on other types of investors.

Under the crowdfunding notification, the value of crowdfunding securities offered by an issuer to each retail investor is limited to THB 100,000 (approx. USD 3,000). Furthermore, the total value of crowdfunding securities which may be offered to retail investors from the date of first offering is capped at THB 50 million (approx. USD 1.49 million).

Any entity intending to become a crowdfunding platform, or an approved provider of electronic systems or networks (so-called funding portal) must file an application with the SEC Office, together with the documents specified in the application and in accordance with the guidelines provided by the SEC Office in the electronic system. Applicants for approval as a crowdfunding portal must have the following characteristics:

  • Be incorporated under Thai law.
  • Have paid-up registered capital of not less than THB 5 million (approx. USD 149,000).
  • Not be in a financial condition that is likely to cause damage, or in any other circumstances indicating financial hardship. In addition, there must be no reasonable grounds to believe the applicant has any deficiency or is not appropriate in regard to control and sound business conduct.
  • Be able to demonstrate that the persons who are, or will, become directors, manager, or persons with management authority of the crowdfunding portal business do not have any prohibited characteristics as specified in the Notification of the Capital Market Supervisory Board concerning Rules on Personnel in the Capital Market Business.
  • Have installed systems that are ready to operate the crowdfunding portal business, as prescribed.
  • If the applicant is a company that has operated other businesses previously, the applicant's other businesses must be related, beneficial, or supportive to undertaking the crowdfunding portal business, and must not have potential conflicts of interest with the crowdfunding portal business, except where the applicant is able to demonstrate that there shall be an effective system to prevent such a conflict.


The fee for the application for approval is THB 250,000 (approx. USD 7,450) per application. THB 50,000 must be paid on the application filing date, and the remaining THB 200,000 is due on the date of approval.

A crowdfunding portal must comply with the business conduct prescribed by the SEC Office on (a) general business conduct; (b) management structure, operating system, and personnel; (c) advertisement and promotional activities; (d) acceptance, communication, and provision of services to members; (e) compilation and assessment of member information; (f) conduct in providing services to members; and (g) criteria and period for report filing.

Lending-based Crowdfunding (Crowdlending)

On 31 July 2020, the BOT issued Notification 14/2563 Re: The Determination of Rules, Procedures, and Conditions for Peer-to-Peer Lending Businesses and Platforms. The notification provides a number of parameters within which peer-to-peer (P2P) lending platform providers and P2P lenders must operate. It defines a P2P platform provider as a person who provides an electronic system or network for P2P lending, and a lender as a natural or juristic person who offers a loan through an electronic system or network (excluding crowdfunding providers). Key provisions of the notification are below.

P2P Platform Provider

The BOT has stipulated that a P2P platform provider, its majority shareholders, directors, and management personnel of the parent company of platform provider must be qualified and must not have any of the prohibited characteristics stipulated in the Ministry of Finance Re: Business Subject to Approval According to Section 5 of the Revolutionary Council Decree No. 58 Re: Peer-to-Peer Lending Businesses and Platforms. Any financial services providers looking to provide a P2P lending platform must first be part of the BOT's regulatory sandbox before applying for a licence from the BOT. The application for approval to be a P2P platform operator can be done via the BOT's online system, with no government fees. Credit Limits

The notification also prescribes credit limits for obtaining loans, depending on the type of loan. For example, a loan for consumer purposes is subject to the same criteria as a personal loan. If the loan is for business purposes, the credit limit is set at THB 50 million (approx. USD 1,460,000).

Lenders

Lenders must possess knowledge and understanding of loans and the risks associated with P2P lending platforms by conducting client suitability assessments before providing loans. Additionally, a lender must not be a platform provider. The credit limit for individual lenders is THB 500,000 (approx. USD 14,600) within one (1) year.

Additional comments regarding the legal situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

In developing countries, where the small and medium enterprise (SME) sector is a significant driving force of the economy, alternative financing can be a successful tool. However, this financing from retail investors is capped at an aggregate of THB 1 million (approx. USD 29,200) for all issuers in twelve months, with a single-issuer investment limit of THB 100,000 (approx. USD 2,920) during a 12-month period.

Economic conditions

Market size for crowdfunding, crowdinvesting and crowdlending platforms and biggest companies in this business area

The total transaction value of the crowdinvesting market was approximately THB 1.43 billion (approx. USD 42 million), while the IPO transactions value in the Market for Alternative Investment (MAI) in the SET was approximately THB 137 billion (approx. USD 4 million). Therefore, the market size of crowdfunding in Thailand is still relatively small compared to traditional funding. Amid the COVID-19 pandemic, the Thai government has also demonstrated its commitment to support the growth of the SME sector by rolling out financial measures to aid proprietors, such as low interest rates for loans from commercial banks, or alternative sources of funding (i.e. SME Public Offering or SME Board), and these could be contributing factors that divert proprietors' attention from crowdfunding. The information in relation to crowdfunding market share is not publicly available.

Additional comments regarding the economic situation for crowdfunding, crowdinvesting and crowdlending platforms or what FinTech’s must be aware of in this business area

N/A

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