INTRODUCTION

          Why are we issuing this Feedback Statement?

        1.    This Feedback Statement has been issued following the public consultation conducted on the proposed amendments to the AIFC Crowdfunding Framework. It sets out the outcomes of the consultation process and is intended to enhance transparency and regulatory clarity, in particular by:

• ·       summarising the key themes and views expressed by stakeholders during
  the consultation;
• ·       explaining how the final amendments differ from the proposals consulted on;
• ·       outlining the main considerations that informed the final policy decisions; and
• ·       clarifying the rationale for not incorporating certain comments or suggestions.

           Who should read this Feedback Statement?

       2.    This Feedback Statement is particularly relevant to stakeholders who participated in the consultation process, as well as to current and potential market participants engaged in crowdfunding sector and other interested stakeholders.

            Terminology

3. Defined terms have the initial letter of the word capitalised, or of each word in a phrase. Definitions are set out in AIFC Glossary. Unless the context otherwise requires, where capitalisation of the initial letter is not used, the expression has its natural meaning. 

PART I – BACKGROUND

1.    In 2019, AFSA introduced the first dedicated regulatory framework in the Central Asian region for loan- and investment-based crowdfunding platforms. Since its introduction, the crowdfunding market has evolved, with increasing platform activity and wider use as an alternative source of financing. Alongside these developments, AFSA has sought to ensure that the regulatory framework continues to remain efficient, proportionate, and aligned with market practices.

2.    In particular, the continued growth of the crowdfunding sector has brought greater visibility to certain regulatory and operational challenges affecting investor confidence. Feedback from platform users has highlighted concerns relating to transparency, the quality of disclosures, and the alignment of platform conduct with investor protection standards. In response, the AFSA developed a comprehensive set of amendments and submitted them to public consultation for discussion with the market prior to finalisation.

3.    In July 2025, the AFSA published Consultation Paper AFSA-P-CE-2025-0003, setting out the proposed amendments to the AIFC Crowdfunding Framework. The public consultation was conducted from 21 July to 15 September 2025.

4.    Following the conclusion of the public consultation, the AFSA considered the comments and suggestions received. In December 2025, the AFSA Board of Directors reviewed the consultation outcomes and approved the amendments to the AIFC Crowdfunding Framework.

5.    The AIFC Authorised Market Institution Rules, AIFC Conduct of Business Rule and AIFC General Rules with the relevant amendments are available on
the AIFC and AFSA websites.

6.    The amendments will enter into force on 1 January 2026 with a 6-month transition period for existing Authorised Crowdfunding Platforms.

PART II – OUTCOMES OF PUBLIC CONSULTATION

1.    The consultation on the crowdfunding framework received extensive and detailed feedback. The proposed amendments aimed at enhancing investor protection and market transparency in the AIFC crowdfunding sector were generally well received by market participants, who expressed overall support for the proposed approach. Respondents broadly acknowledge the need for enhanced transparency, clearer default reporting, and more proportionate investor protection measures.

2.    AFSA assessed all inputs, taking into account practical application, potential risks, and the underlying regulatory objectives. Where appropriate, feedback was incorporated into the final amendments; in other cases, proposals were not taken forward where the justification provided was not considered sufficient, fell outside the scope of the current framework, or are more appropriately considered as part of future policy work.

3.    Of the 10 proposals consulted on, 5 were implemented as originally proposed in the Consultation Paper. Strong support was expressed for proposals on client classification and enhancements to risk disclosure and investor education requirements. Proposals on disclosure of creditworthiness grading or rating results and the introduction of an annual lending and investment limit for retail clients were also implemented as proposed, notwithstanding comments raised during the consultation, as AFSA considered the original approach to remain appropriate.

4.    Of the remaining 5 proposals, 1 proposal relating to suitability assessment was withdrawn, while the other 4 proposals concerning strengthened due diligence, the treatment and disclosure of defaults and overdue payments, restrictions on new lending proposals, and the participation of sole proprietors were refined following stakeholder feedback. 1 new proposal on loan restructuring was also developed. These refinements were intended to improve practical application and ensure operational feasibility, while maintaining the regulatory objective of strengthening investor protection.

5.    In addition, the effective date of the amendments for existing Authorised Crowdfunding Platforms was revised to provide adequate time to make necessary adjustments, align internal processes, and prepare for compliance with the new requirements.

Suitability assessment for Retail Clients

6.    The AFSA consulted on the introduction of a requirement to assess the suitability of Retail Clients before permitting them to invest through a crowdfunding platform. While limited support for the proposal was expressed, the majority of respondents raised concerns that the proposal would involve platforms in activities typically associated with investment advice, potentially creating legal uncertainty and disproportionate compliance burdens. Respondents also noted that Retail Clients are already subject to risk disclosures and investor education measures, and that introducing a formal suitability obligation could adversely affect onboarding processes.

7.    When developing the proposal, the suitability assessment requirement was intended as a proportionate investor protection safeguard and was broadly consistent with international approaches that rely on knowledge or appropriateness assessments rather than investment advice. However, the AFSA also acknowledged concerns regarding the practical application of such a requirement, including uncertainty as to how platforms would be expected to proceed where a Retail Client does not meet the assessment criteria, particularly in light of existing investment limits and risk acknowledgement requirements.

8.    Having considered the feedback received, the AFSA decided not to proceed with the introduction of a mandatory suitability assessment for Retail Clients at this stage. Instead, the AFSA will rely on the strengthened risk disclosure framework, enhanced risk acknowledgement processes, investor education tools, and additional investment limits introduced through the amendments to achieve the intended investor protection outcomes, while preserving proportionality within the crowdfunding framework.

Strengthened due diligence of Issuers and Borrowers

Clarification of the requirement to verify the Borrower’s financial strength

9.    Within the enhancement of requirements for due diligence of Borrowers or Issuers, the AFSA proposed introducing an obligation to verify their financial strength based on a review of financial statements. Respondents argued that many SMEs, particularly sole proprietors, lack formal financial statements and suggested allowing the use of alternative evidence such as management accounts, tax filings, or bank records. It was also noted that the term “financial strength” may be open to subjective interpretation. Accordingly, the proposal was refined to focus on the assessment of the financial situation, taking into account financial statements where applicable or other relevant financial information.

Removal of proposed requirement to verify the level of commitment and flight risk

10. AFSA also proposed introducing a new requirement within the due diligence of Borrowers or Issuers to verify the level of their commitment and that of its Directors, officers and Controllers to the business, including how much capital they have provided and any potential flight risk. However, respondents argued that similar to “financial strength”, the “commitment” and assessment of “any potential flight risk” are also open to subjective interpretation and platforms may face practical constraints in assessing such a subjective factor.

11. They also noted that requiring assessment of shareholders’ capital contributions might be inappropriate, since many SMEs have only nominal charter capital that does not reflect real commitment or viability. One of the respondents also requested clarification on who should sign commitment-related documents (although no specific requirement on this matter was proposed), noting practical challenges in identifying appropriate signatories. It was emphasised that such commitments should be signed exclusively by the ultimate beneficial owner (UBO), as the individual bearing primary responsibility for the business.

12. After considering the feedback, the AFSA decided not to proceed with this proposal. Although it was initially intended to be principles-based, providing flexibility for platforms to determine their approach depending on the profile of Borrowers and Issuers, their scale, and the risks involved, it was recognised that assessing “flight risk” would be highly subjective and difficult to implement in practice. Given the absence of clear parameters for such an assessment at this stage, the AFSA considered it premature to introduce this requirement until the scope and methodology can be further developed to provide adequate guidance to platforms.

Clarification on sole proprietors’ participation in crowdfunding

13. AFSA proposed to allow sole proprietors to use services of crowdfunding platforms as Borrowers, contingent upon the AFSA approval. This provision introduces a conditional framework that would expand eligibility beyond the current Body Corporate category while maintaining regulatory oversight through the AFSA's approval process. The proposed change builds on the existing modification previously granted by the AFSA, which permits such participation under specific conditions.

14. Respondents expressed support for the proposal to allow sole proprietors to participate in crowdfunding with AFSA’s permission and noted the importance of broadening access to financing for small businesses. At the same time, it was suggested to clarify that sole proprietors should only be permitted to participate in loan-based crowdfunding. AFSA agreed with this position and clarified in the amendments that sole proprietors may participate only as Borrowers.

15. Respondents also raised concerns regarding the lack of clarity around the proposed permission framework, noting that the absence of defined criteria or processes could lead to inconsistent application. AFSA considered that introducing detailed prescriptive requirements would not be appropriate and instead will allow platforms to apply a risk-based approach, determining relevant requirements proportionate to their scale, business model, and risk profile. At the same time, AFSA may issue further guidance if it observes inconsistent practices, discretionary treatment, or risks to investor protection.

Enhanced framework for defaults, overdue payments and failures

Enhancement of the “default” definition

16. In response to the proposal to treat a loan that is over 90 days past the due date as being in default, a market participant noted that the concept of default should enable lenders and investors to demand early repayment in case of any breach without being constrained by a fixed 90-day delay period. In other words, any violation of the terms of the agreement was proposed to be treated as default, to allow the platform to respond promptly to breaches.

17. The introduction of the concept of default in the framework was intended to clarify that, in the context of loan repayment, the 90-day period functions as a backstop, ensuring a consistent trigger point for enforcement where a loan remains unpaid. However, the framework does not prevent platforms from taking earlier action in response to a breach of payment terms. The 90-day benchmark serves as the point at which platforms are required to enforce a loan in default, ensuring transparency and consistency across the market.

18. Though platforms retain flexibility to demand repayment of overdue payments before the loan is treated as in default, to provide greater clarity and in line with international best practices, the AFSA decided to supplement the 90-day backstop with an additional criterion allowing a loan to be considered in default where the platform has reasonable grounds to believe that full repayment is unlikely, regardless of whether it is less than 90 days past the due date.

Revised information requirements on actual default

19. A number of comments were received on the proposal to expand the disclosure requirements regarding actual default. In particular, concerns were raised regarding the proposed indicator of “the total principal amount of loans in default as a percentage of all outstanding loans on the platform”, which was proposed to provide a point-in-time measure of portfolio quality by comparing current defaulted loans to the current outstanding loan amount. This metric was intended to complement required cumulative default rate by giving investors visibility into the present risk profile to be updated and reported every quarter.

20. However, respondents noted that the proposed approach to calculating default rates may be misleading, as changes in the volume of outstanding loans can distort the ratio. For example, repayments may inflate the default rate even if defaults remain unchanged, while a high volume of new lending may reduce the ratio without any real improvement in loan performance. To address this, market participants suggested retaining default rates based on total loans originated or applying a vintage cohort approach to ensure more consistent and comparable performance data over time.

21. Taking into account the comments received and the risk of potential misinterpretation, AFSA considered that the proposed indicator may not provide a clear view for retail investors. While the vintage cohort approach was also considered, it was assessed as overly complex for periodic disclosure. Accordingly, AFSA decided to exclude this indicator and retain enhanced disclosures on the number and aggregate principal amount of defaulted loans, complemented by the number of loans with overdue payments and clarified guidance on cumulative default rate calculations (“defaulted to date” rather than “current defaults”).

22. In addition, some respondents also noted that the number and amount of defaulted loans may not allow for direct comparison between platforms, but AFSA decided to retain this requirement as proposed considering its value in providing investors with a clearer picture of platform performance. Some respondents also suggested reducing the number of categories used for the disclosure of overdue payments; however, the AFSA decided to maintain the existing categorisation, while introducing refinements to the proposed periods. A more granular categorisation is intended to support a clearer understanding of overdue payment trends and portfolio performance.

Clarification of restriction on new lending proposals

23. The proposal that a platform must not permit a new lending proposal if a Borrower has outstanding loans in default or with overdue payments raised no objections. One respondent expressed support but requested further clarification of the specific requirements. Upon review, the AFSA noted that the provision could be interpreted ambiguously as to whether it refers only to loans on the same platform or also to those held elsewhere.

24. To clarify this, the AFSA decided to specify that the requirement applies to a crowdfunding platform in relation to any loans a Borrower may have, whether obtained through its platform, another Authorised Crowdfunding Platform, or any other financial institution. At the same time, the AFSA also emphasised that the obligation is not merely to comply with the restriction but to take reasonable steps to ensure compliance, recognising that much will depend on the availability and accessibility of relevant data.  

Loan restructuring

25. There was a new proposal from the market to consider prohibiting multiple restructurings that may hide the platform's real default rate from investors. Respondents also suggested that mediation cases resulting in new repayment schedules should be disclosed as restructured loans rather than treated as defaults. These comments highlighted the need for greater transparency around loan restructuring practices.

26. Loan restructuring currently remains governed by contractual arrangements between borrowers, lenders, and the platform, with such processes generally administered by the platform itself. In response to feedback, and notwithstanding existing disclosure requirements on overdue payments and defaults, AFSA considered it appropriate to require disclosure of how an Authorised Crowdfunding Platform approaches and manages loan restructuring.

27. In addition, to support consistent and transparent treatment of restructured loans for disclosure purposes, the AFSA introduced guidance that, for the purpose of default rate calculations restructured  loans in default may only be reclassified once the Borrower has made all scheduled payments on time under the revised terms for a continuous period of three months, and where the platform has reasonable grounds to conclude that the Borrower’s financial difficulty has been resolved and full repayment is likely.

Feedback not incorporated in the final amendments

28. In addition to the proposals reflected in the final amendments, the consultation also gave rise to a number of further suggestions from market participants. AFSA carefully considered these suggestions alongside the regulatory objectives, supervisory experience, and alignment with international practice, but concluded that they should not be incorporated into the final amendments.

Optional creditworthiness grading or rating disclosure risks

29. Market participants expressed concern that mandatory creditworthiness grading or rating disclosure conflicts with their role as neutral market operators and could expose them to legal liability. They suggested that it should remain optional.  However, the AFSA considers it essential that all platforms disclose the methodology used to evaluate creditworthiness, particularly where platforms set their own pricing. This promotes transparency and enables investors to understand how risk is assessed, while AMI 7.3.7(f)(iii) already provides for supplementing disclosure with a clear statement that credit grades should not be construed as investment advice.

Standardised formula for expected default rates

30. The proposal to provide a standardised formula for calculating expected default rates or removing the requirement altogether was submitted during consultation. After review, AFSA concluded that prescribing a single formula would not be feasible, as the calculation is closely linked to each platform's internal credit assessment framework and Borrower profile. Therefore, the guidance is introduced instead clarifying that the expected default rate should be derived from each platform's own creditworthiness assessment framework, allowing flexibility while ensuring transparency.

Revision of new investment limit

31. Market suggested raising the proposed USD 50,000 annual investment cap for Retail Clients to USD 100,000 or replacing it with portfolio-based limits. The AFSA did not support the suggestion as the USD 50,000 limit is calibrated to local economic conditions, provides adequate diversification opportunities at typical deal sizes, while allowing wealthier investors to pursue a professional client pathway. The AFSA also considered the suggested alternatives and concluded that they would not result in materially different caps for retail investors.

Excessive disclosure of historical defaults and overdue payments

32. The proposal to limit disclosure of historical information on each Borrower or Issuer in relation to any overdue payments, defaults or failures to a fixed period (e.g., 24 months) was suggested by the respondents. The AFSA acknowledges the concern and notes that disclosure should be materiality-focused rather than tied to a fixed look-back period. The proposed amendments do not restrict platforms from providing context for exceptional circumstances such as systemic shocks and platforms are allowed to exercise judgment in providing information that is accurate, proportionate, and meaningful to investors.  

Inapplicability of valuation of business requirement

33. Market participants also proposed to remove the proposed business valuation requirement for loan-based crowdfunding. They cautioned that imposing valuation requirements would create unnecessary costs and exclude many SMEs lacking formal valuations. However, the AFSA considers that even a basic valuation contributes to transparency by providing an objective reference point for assessing business viability and scale. The existing due diligence provision allows flexibility through the "as applicable" qualifier, and platforms should provide clear justification where the requirement cannot be reasonably fulfilled in practice.

Enhanced monitoring requirements

34. Stakeholders proposed imposing requirement for platforms to conduct quarterly monitoring of Borrowers' financial activities, including compliance with loan conditions, and publishing the results in investors’ personal accounts. As an example, the respondent noted its dedicated monitoring section where investors can track project performance and material changes.

35. AFSA decided to leave the frequency and format of monitoring to the platform’s discretion, provided that effective systems are in place to ensure transparency and investor protection. In this context and given the obligation to disclose any material changes as soon as practicable, platforms are expected to maintain robust monitoring arrangements. The monitoring approach described by the respondent illustrates how this may be implemented in practice.