The Capital Markets and Securities (Investment-Based Crowdfunding) Guidelines, 2023

This article aims to highlight key changes brought forth by the Capital Markets and Securities (Investment - Based Crowdfunding) Guidelines (the Guidelines). The Guidelines came into force through Government Notice No. 732 of 2023 published on 13 October 2023, and apply to all crowdfunding activities operating in the United Republic of Tanzania (Tanzania).


Key Definitions


The following are some terms that have been defined under the Guidelines;


“crowdfunding” means the act of funding projects or ventures by raising money from a large number of people who each contribute funds through an electronic system;

“crowdfunding operator” means a person licensed by the Capital Markets and Securities Authority (CMSA) to provide crowdfunding services in Tanzania;

“crowdfunding platform” means an online portal or electronic platform used to facilitate crowdfunding;

“issuer” means a legal entity hosted on a crowdfunding operator’s platform to offer its equity or debt securities on the crowdfunding platform for business undertakings;

“micro-fund” means a fund used to finance early stage emerging companies with small amounts of capital that is typically less than that of a venture capital; 

“Partner States” means a member of a regional economic corporation such as East Africa Community or the Southern African Development Community; and

“regional crowdfunding operator” means a person licensed in any of the Partner States who has a certificate of compliance from the Business Registration and Licensing Authority (BRELA) and who is approved by the CMSA to carry out crowdfunding operations.


Licence Requirements, Prohibitions and Eligibility for Crowdfunding Operators


Individuals or entities intending to offer, operate or provide crowdfunding in Tanzania must obtain a licence from the CMSA. Persons eligible to operate a crowdfunding platform must be duly incorporated in Tanzania as a company limited by shares, adhere to all requirements set out under the First Schedule of the Guidelines and provide any additional information as specified by the CMSA. An application for the licence must be submitted to the CMSA accompanied by the relevant documents.


It is worth highlighting that crowdfunding operators must have at least one certified responsible person as the main contact for interactions with the CMSA and another responsible person overseeing operations. Vacancies in these positions should be filled within one month of the departure of the former responsible person with notification to the CMSA in accordance with guideline 8 of the Guidelines.


Presumption of Operating Crowdfunding


A person is deemed to be operating or maintaining crowdfunding in Tanzania under numerous circumstances including if the crowdfunding platform operates in Tanzania or if it operates from outside Tanzania but specifically targets Tanzanian investors. A crowdfunding operator situated outside a Partner State will be considered as actively targeting investors in that Partner State if the operator or its representative directly or indirectly promotes crowdfunding within that specific Partner State.


Determination of Promotion of Crowdfunding


In evaluating whether there is direct or indirect promotion of crowdfunding, the CMSA may consider factors such as advertising securities related to the crowdfunding and issuer presence on the crowdfunding platform, either in Tanzania-based publications or electronic communications sent to Tanzanian addresses. It is important to note that while determining whether crowdfunding targets Tanzanian investors, the CMSA will assess all relevant facts and circumstances, prioritising investor protection and the integrity of Tanzanian capital markets.


Due Diligence


Crowdfunding operators are obligated to conduct thorough due diligence on both issuers seeking to raise funds through a crowdfunding platform, and investors participating in the platform. For issuers, this due diligence includes assessing their identity, business registration, and financial standing, as well as the credentials, financial history, and compliance with relevant legislation. 


Similarly, due diligence on investors extends to verifying their identity, financial standing, fitness and propriety, and risk assessment, in addition to assessing the level of sophistication and the sources of their funds. These due diligence processes are carried out alongside the requirements stipulated by the Anti Money Laundering Act, 2022 of Mainland Tanzania and Anti Money Laundering Act and the Proceeds of Crime Act of Tanzania Zanzibar, ensuring a comprehensive evaluation of both issuers and investors in the crowdfunding ecosystem.


Operations of Crowdfunding Operators


Crowdfunding operators are prohibited from offering financial assistance to investors for investments in issuer offerings on their platforms. Furthermore, only locally incorporated private limited companies are permitted to be hosted on crowdfunding platforms. Specific entities are also prohibited from fundraising via crowdfunding platforms, including complex financial structures, public listed companies and their subsidiaries, companies without a clear business plan or those intending to merge or acquire unidentified entities, entities planning to provide loans or invest in other entities, and entities with paid-up share capital exceeding the equivalent of USD 100,000, among others as specified by the CMSA. 


Issuers are not permitted to be hosted on multiple crowdfunding platforms simultaneously. However, crowdfunding operators may host micro-funds on their platforms under the condition that these entities are registered with the CMSA as fund managers, have a defined investment objective, and solely raise funds from sophisticated and angel investors.


Investments in Crowdfunding


The following individuals or entities are eligible to invest in crowdfunding;


  • High net worth or sophisticated investors;
  • Venture capital companies;
  • Professional investors;
  • Institutional investors; and
  • Retail investors, subject to specific investment limits, which include a maximum of Tanzanian Shillings equivalent of USD 500 per issuer and a total amount not exceeding Tanzanian Shillings equivalent of USD 5,000 within a 12-month period.

Limitation on Crowdfunding Platforms


For issuers hosted on crowdfunding platforms, specific limitations are in place: they can raise a maximum of Tanzanian Shillings equivalent of USD 150,000 within a 12-month period, irrespective of the number of projects undertaken. Additionally, crowdfunding platforms can only be used by issuers to secure a total of Tanzanian Shillings equivalent of USD 300,000, excluding the issuer's own capital contribution or funds obtained through private placement exercises.


An issuer shall meet the prescribed minimum threshold for the targeted amount. If this amount is not met, then the offer shall be withdrawn, and refunds shall be processed within 48 hours with costs of refunds borne by the issuer. A fresh crowdfunding offer may only be commenced no earlier than 90 days after the said withdrawal. 


Offers of Equity or Debt


An issuer intending to offer equity or debt on a crowdfunding platform is required to provide a comprehensive offer document, which will be submitted to the CMSA and provided to the crowdfunding operator. The document contains essential details, including the issuer's name, physical address, information about directors, officers, and significant shareholders, a description of the issuer's business, and capital structure information. Once approved by the CMSA, the crowdfunding offer document will be published on the crowdfunding platform and filed with the Registrar of Companies at BRELA, ensuring transparency and access to relevant information for potential investors.




The Guidelines establish clear legal requirements for crowdfunding activities in Tanzania. It defines the eligibility criteria for both issuers and investors, sets precise fundraising and platform usage limits, and ensures a transparent and well-regulated environment. These Guidelines strike a balance between encouraging crowdfunding as a means of raising capital and safeguarding the interests of investors and the integrity of the capital markets in Tanzania. It is imperative for stakeholders to familiarise themselves with these Guidelines in order to operate within the legal parameters governing crowdfunding in Tanzania.




Read the original publication at Clyde & Co. 

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