Ángel Sierra (Chile), Dennis Vivas Zelada (Perú), Edwin Zapica (Colombia), Miguel Ángel Mejía (México)

On Thursday, January 23, 2020, the Emergency Decree D.U. 013-2020 was published in the official newsletter "The peruvian" that promotes the financing of micro, small and medium enterprises, enterprises and startups.

As it was commented in our last monthly newsletter, as well as in our video in "streaming" format, within the D.U. Title IV was published “Rules that regulate and supervise the activity of Crowdfunding”.

According to Title IV of the D.U., corporations incorporated in Peru, duly authorized by the Superintendence of Securities Market (SMV), may carry out these activities of “Administrative Company of Crowdfunding Platform”.

In the next 180 days, the regulation must be published through an SMV resolution with the requirements for companies to request authorization to develop this new financial crowdfunding business in Peru.

In this sense, What impact could the development of this new crowdfunding industry have?

1.- New crowdfunding companies

The companies that are already supervised by the SMV, as well as the companies of the financial system included in article 16 of the General Law through a subsidiary constituted in Peru, will be able to develop the crowdfunding business requesting authorization for their activities.

In addition, the 25 companies that have requested authorization from the National Banking and Securities Commission (CNBV) in Mexico, the first company that has obtained authorization from the Financial Superintendence of Colombia, Chilean financial technology companies and Peruvian financial technology companies could become new players for the market.

2.- Growth of the negotiated volume of negotiable invoices

According to the Securities Settlement and Clearing House (CAVALI), in 2019, Peruvian companies have financed themselves with invoices for PEN 28 426 million soles (USD 8 788 million US dollars), an amount that almost doubles PEN 15 493 million soles (USD 4 694 million US dollars) reached in 2018. This amount represents about 2.5% of the Peruvian Gross Domestic Product (GDP).

It is expected that for the next few years, the negotiated volume of negotiable invoices will reach 9% of Peruvian GDP, in line with what happened in the Chilean market where factoring operations in the financial industry have been consolidated.

The growth potential of the negotiated volume, as well as the market yields obtained between 12% and 60% annual effective rate (IRR) could be attractive for participatory financial financing through the crowdfactoring modality.

3.- Innovation in new businesses

The advances made by the Securities Settlement and Clearing House (CAVALI) for the annotation in the account of electronic securities such as digital notes, digital bills of exchange and purchase orders/services for suppliers of the Peruvian Government provide the conditions for innovation in new businesses to crowdfunding companies.

The 5 impacts of the D.U. 013-2020 for the new crowdfunding industry would be the emergence of new crowdfunding companies, the growth of the negotiated volume of negotiable invoices, innovation in new businesses, the best financial conditions for raising capital, and increasing the alternatives investment.

4.- Better financial conditions for raising capital

Through crowdfunding platforms, technology-based companies (StartUps), as well as family businesses, would have better financial conditions to raise capital through public offerings of securities with the issuance of new shares complying with more flexible regulatory requirements than the Alternative Market of Securities (MAV), as well as simpler procedures for trading shares in an alternative trading market.

The recent creation of the Capital Fund for Innovative Entrepreneurships for PEN 70 million soles (USD 21 million US dollars) that will be managed by Corporación Financiera de Desarrollo S.A. (COFIDE) to invest in funds that invest in technology-based companies ( StartUps), as well as the good practices of good corporate governance that Peruvian family businesses have been implementing, would give better ratings to share issuance programs.

5.- Increase in investment alternatives

The low level of financial culture of investors has made investments in real estate in Peru through the acquisition of houses, apartments and offices the most preferred, although in most cases they turn out to be unprofitable investments due to the overvalued property prices in Lima at the time of acquiring the property and the low value of the monthly rentals that often does not cover with the monthly fee of the credit paid to financial institutions.

With new investment alternatives, investors will be able to obtain better returns for their surplus investments through these crowdfunding platforms by increasing their risk-adjusted return.

To learn more about the digital crowdfunding business in Peru, we invite you to chat with our specialists here, here or here.

We would like to thank the following people for their collaboration with the content of this document and their comments: Ángel Sierra (Chile), Dennis Vivas Zelada (Perú), Edwin Zapica (Colombia), Miguel Ángel Mejía (México).