Some shareholders on Wednesday expressed concern that emergence of crowdfunding was posing a threat to Collective Investment Scheme (CIS) on the Nigerian Stock Exchange (NSE).
They said Lagos that local investors were getting more interested with crowdfunding due to guaranteed high return-on-investment, against CIS.
Crowdfunding is the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the internet.
The CIS, otherwise known as Mutual Funds, is a pool of funds as investments that is managed by a professional money manager comprising of equity-based funds, fixed income funds, ethical funds, mixed funds, real estate funds, money market funds and bonds.
These pools of funds further provide investors the benefit of diversification and professional management of their funds and investments at a relatively low cost.
However, CIS investments will not state a percentage of returns on invested fund. Although, Crowdfunding is similar to CIS, there is a stated guarantee for return-on-investment of any amount of money invested within a stipulated period under the Equity Crowdfunding.
Mr Adebayo Adeleke, a former Publicity Secretary, Independent Shareholders Association of Nigeria, said that crowdfunding was developing in Nigeria and retail people were embracing the investment scheme more than CIS put together by market regulators.
“If you look at the way crowdfunding is emerging, people are being told if you invest X amount of money with us, we will invest on agricultural produce for six months to raise pigs, chicken or cultivate maize, and after then we guarantee you X amount of money.
“So, I think what we need to do is for the regulators to look at what works, why are people reluctant to embrace the structured investment scheme and why people are moving to the informal sector,’’he said.
Adeleke, however, reasoned that most investors were not ready to fund the high-end lifestyles of managing directors of investment companies and so, the trend of investors delving into more creative sectors and leveraging on technology.
On his part, the National President of Constance Shareholders Association of Nigeria, Mr Shehu Mikail, said that the CIS was not so attractive to local investors because of unimpressive return on investment it offers.
Mikail said that local investors were skeptical to patronise the CIS due to lack of liqiudity in the economy, as well as unfriendly economic policies.
“Based on incentives and policies being put across by the regulatory bodies, investors are not having key interest, especially local investors. Apart from that, the situation of the economy in Nigeria is not really friendly.
“That is one of the reasons why investors are not interested in the CIS but if there are people-friendly policies in place, investors morale can be boosted and people will key into it.
“There are many ways by which shareholders can boost the CIS, first is by fully participating on issues relating to capital market, but with incentives from the regulatory bodies by giving shareholders friendly policies that will encourage investors into the market.
“When these are put in place, there are bound to be prospects and investors will feel safe to invest,’’ he said.
The Chairman, Professional Shareholders Association of Nigeria, Mr Godwin Anono, said that there was room for investors to choose the sector to invest in and in return get back return on investment.
