Crowdfunding the Developing World

Hugo Smyly
Posted by Hugo Smyly on 04-Jun-2014 09:16:11

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2008 is often recognised as the year crowdfunding burst onto the scene, yet it is far from a new concept: In the late 1800’s, the Statue of Liberty was crowdfunded by 160,000 people raising $100,000. Now however, crowdfunding as we know it, is typically internet orientated. The internet offers the opportunity to combine a large group of people, for a common cause or idea. Given the explosion in technology and the rise of the internet, this predominantly developed world phenomenon has huge potential to have a positive impact on the developing world. However, platforms need the internet to facilitate crowdfunding and although internet adoption is evolving rapidly, it is currently estimated that only one third of the world’s population has access to the internet, is it quick enough?

The developing world are slowly but surely engaging with crowdfunding. The World Bank state that they are “showing encouraging signs of early adoption”. In addition to this is, it could provide the alternative source of finance that SMEs in the developing world are after, with, for example, 47% of small and 41% of medium enterprises in Africa stating access to finance as a key constraint to growth (World Bank, 2011). Given the embryonic nature of crowdfunding in the developing world, the current successful crowdfunding campaigns have, unsurprisingly, been projects focussed around raising money for cause and community related ideas. This echoes the evolution of crowdfunding in the developed world and it is of vital importance that entrepreneurs quickly understand what an effective platform crowdfunding is, not only for high growth technological ventures, but also as a means to ‘raise equity and debt capital’.

Crowdfunding may just be the catalyst for radical change to the current state of the developing world. It is well understood that robust businesses are only possible with the correct combination of government structure, entrepreneurial culture and public support. However, the emergence of crowdfunding might help to align these with those of financial and human capital to create ‘spheres of trust’, as noted in the crowdfunding report from infodev.com. The developing world has an opportunity to overtake the developed by using emerging technologies and business processes, instead of relying on legacy systems and processes that are imprudently entwined with the developed world.

The crowdfunding market as a whole, is still in its initial stages and although it is gathering momentum at an alarming pace, successful crowdfunding systems require more than entrepreneurs and keen investors.  If crowdfunding is going to have the desired positive impact on the developing world then the implementation of supportive networks, dynamic and progressive regulations, effective technological solutions and maybe most importantly, the advancement of cultures willing to adopt and adapt this new ‘investing vehicle’ are crucial.

Topics: crowdfunding, developing world, world bank

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