Thailand is advancing its economic development agenda
with new regulations aimed at expanding the range of
fundraising options available to startups and small and
medium-sized enterprises (SMEs). In May 2019, the Thai
Securities and Exchange Commission (SEC) introduced an updated
framework for debt crowdfunding based on public consultations
that took place at the beginning of the year.
One of the main objectives is to encourage investment in
sectors such as high technology, biofuels and robotics, which
form a crucial part of Thailand 4.0, the country's ambitious
plan to reshape its traditionally agrarian and export-reliant
economy into a hub of innovation.
It is a bold and forward-thinking move by a country that
could be on the cusp of transformation, offering small
enterprises more flexible fundraising opportunities to propel
their development while improving protection for investors.
However, Thailand is attempting this metamorphosis in a highly
competitive southeast Asian economy and could struggle to stand
out, particularly if the implementation process is not as
smooth as is being promised.
What is debt crowdfunding?
Debt crowdfunding – sometimes known as peer-to-peer
(P2P) lending – is a relatively nascent concept in
Thailand. Fundraisers invite direct investment through an
approved online funding portal, then repay the funds with
interest, much like a bank loan or other types of debt
instruments, such as bonds or debentures. It differs from
equity crowdfunding, wherein investors gain shares in the
As of 2018, the global P2P lending market is worth an
estimated $15 billion. This is expected to increase nearly
threefold by 2024, jumping to $44 billion as more countries,
such as Thailand, introduce legislation that regulates and
promotes the funding model.
Thailand's P2P lending regulations
The SEC's new regulations for debt crowdfunding are designed
to bring it in line with the existing framework for equity
crowdfunding – in which investors purchase shares in
Core elements of the new regulations include:
- The fundraiser must be a company
registered in Thailand with a clear business plan.
- Crowdfunding must take place through an
approved funding portal. These will play a critical role in
screening applications and overseeing compliance.
- Fundraisers must report
offering results to the SEC.
In an effort to minimise risk, there are also limits in
place on how much capital an enterprise can raise through debt
crowdfunding and how much investors can contribute to a single
Startups/SMEs can raise:
- from retail investors, THB20 million
($654,000) in the first 12 months and THB40 million in total,
for equity and debt combined; or,
- from non-retail investors,
such as venture capital funds, private equity trusts,
institutional and other qualified investors, there is no cap
on the amounts that can be raised.
- THB100,000 per retail
investor, equity and debt combined.
- There is no investment cap
for non-retail investors.
Growth on the horizon
To understand why these regulations have been introduced,
you first need to understand Thailand's objectives for
development as contained in its existing economic model:
As the name suggests, Thailand has already been through
three stages of development. Each of these was focused on
advancing a particular industry or set of industries and
thereby supporting the country's economic growth:
- 1.0: Agriculture;
- 2.0: Light industry (food,
textiles, consumer products). This was instrumental in
progressing Thailand from a low-income economy into a
middle-income one; and,
- 3.0: Heavy industry (steel,
energy, manufacturing, and so on).
While these economic models have helped Thailand move from
being a low-wage and low-income economy, they have also created
challenges of their own. Thailand is now stuck in a
'middle-income trap', meaning that its progress has temporarily
plateaued, and it requires an injection of innovation to
compete with more highly developed economies.
This is what Thailand 4.0 is designed to do. It focuses on
smart industry – high technology, innovation and
creative professions – and is designed to propel the
country from being a middle-income economy to a high-income
one. The Thai government is even offering 'smart visas' to
leaders working in one of Thailand 4.0's ten core
- Biochemical and
- Digital economy
- Medical hubs
- Automation and robotics
- Aviation and logistics
- Agricultural and
- Smart electronics
- Affluent medical and
- Food for the future
These are all industries in which startups and SMEs have a
vital part to play. New crowdfunding regulations are therefore
intended to make capital accessible to companies of any
Crowdfunding has enormous potential in Thailand 4.0's target
sectors. The majority of companies that this funding model is
designed to support are not listed enterprises; they do not
have access to The Stock Exchange of Thailand and the funding
associated with it. Nonetheless, they require capital to
develop and become the propeller of economic growth it is hoped
they will be.
Peer-to-peer lending is a flexible and attainable
fundraising channel that could be instrumental in championing
the short and long-term progress of startups and SMEs. Making
investment more accessible will also ensure that the best
talent can be attracted to and nurtured in Thailand, helping
the country to build an essential domestic skills and knowledge
More protection for investors
It is not all about the startups. A robust regulatory
environment provides much-needed assurance for lenders as they
navigate a relatively new investment model. The risk level,
from the lenders' point of view, is actually three-fold, as
they are investing in: early-stage businesses, emerging
sectors, and nascent funding models.
Introducing these new regulations, particularly the use of
approved funding portals that are responsible for vetting
fundraisers, serves to safeguard investors against multiple
A competitive regulatory environment
This is a pivotal time for economies across southeast Asia.
The continuing US-China trade war has created instability in
the region's single biggest recipient of foreign investment.
Many international fund managers and private equity firms, and
some of the larger family offices, are therefore looking at
opportunities elsewhere, causing less high-profile investment
destinations to make upgrades to their regulatory
Thailand is no exception. The legislation covering debt
crowdfunding is the latest in a long line of initiatives
pursued by the Thai government over the last few years to
facilitate the ease of doing business for both foreign and
local companies. Notably, it has gained an edge over close
competitor Vietnam, which has not yet developed a robust system
for P2P lending.
Challenges to be addressed
This is undeniably a bold move by Thailand, and one that
positions it as a forward-thinking economy built with the needs
of small, innovative enterprises in mind. But the effectiveness
of new regulations can only be judged by how easy they are for
all actors involved to navigate. Thailand's bet on P2P lending
still has a few hurdles to conquer before its predicted success
or failure can be judged.
On a global scale, there is concern that investors do not
adequately understand the risks involved in debt crowdfunding.
In Thailand, the concept is just getting off the ground. There
will be plenty of need for educating investors, both as a means
of reassurance and minimising negative outcomes for those who
may be underinformed.
Low capital requirements
There is one notable difference in debt crowdfunding in
Thailand as compared to other Asian markets: the minimum
paid-up capital requirement for approved funding portals. This
existed before the new regulations were introduced and is set
at THB5 million (approximately $0.15 million), which is
substantially lower than other countries in Asia and around the
world. In Taiwan, for example, the minimum capital required for
a crowdfunding platform is NT$50 million ($1.6 million).
While this is clearly intended to reflect the needs of
smaller enterprises, the relatively low capital requirement has
led to some concern that many crowdfunding platform businesses
will fail to get off the ground due to the lack of financing
In strengthening its regulation for P2P lending, Thailand
has joined a growing legion of economies in southeast Asia
attempting to stimulate growth in high-tech and emerging
sectors, including China, Indonesia, Malaysia, Taiwan and
Singapore. It is worth noting that the majority of these are
upper-middle income or high-income economies, with the
exception of Indonesia.
Amid a growing regional fintech market and the US-China
trade war, all of these countries are trying to stake a claim
as the next innovation hub and attract higher levels of
investment in their startups and SMEs. This has huge potential
for both domestic and foreign investment, but it remains to be
seen whether it can measure up to countries with more developed
It could also set a precedent for more middle-income
countries, such as Vietnam or the Philippines, to focus on
alternative funding models for small enterprises in
innovation-led sectors. This would be positive for the
southeast Asia region as a whole and put Thailand under
pressure to continue improving its regulatory environment and
incentives for investors in order to remain competitive.
Will Thailand's big swing pay off?
In updating its debt crowdfunding regulations, Thailand has
broadened the playing field for investment opportunities and
taken steps to mitigate risks for all involved parties in an
emerging funding channel. This is undeniably a step in the
right direction in terms of achieving its Thailand 4.0
objectives, giving smaller operations in emerging sectors the
improved access to capital they need in order to reach their
However, like all new ideas, the greater opportunities often
come hand-in-hand with heightened risk. While it is probably
too soon to make concrete predictions about the future of
crowdfunding in Thailand, it is certainly a promising time for