Six Things You Need to Know About Crowdfunding in Developing Countries
December 18, 2015 Editor 0
This post was originally published on “Crowdfund Insider.”
If you are an entrepreneur in emerging markets, you have probably heard a lot about crowdfunding, but have wondered how it could be useful for your early-stage business.
In developed markets, crowdfunding is swelling the ranks of early-stage entrepreneurs and bolstering the pipeline of enterprises that diversify economies and create the majority of jobs. However, for early-stage entrepreneurs in emerging markets, the path toward crowdfunding remains untrod.
Microlending platforms like Kiva are issuing consumer lending finance but cannot provide enough capital to fund the core business operations of a startup – the average loan on Kiva, for example, is $454. Larger amounts of debt or equity are available via online platforms, but these are best suited for more mature companies or projects with an established track record.
What is missing is a normative usage of presale, rewards, or contributions crowdfunding for early-stage companies, as they attempt to move their idea to prototype and on to customer engagement. In societies where e-commerce is underutilized, payment systems are frail, and even the term “crowdfunding” is widely unknown, the lack of established models and best practices is understandable.
Despite these challenges, many African entrepreneurs are paving the way for crowdfunding by experimenting with different online platforms, testing new techniques, and adapting models to developing markets. The new World Bank Group’s study “Crowdfunding in Emerging Markets: Lessons from East African Startups” captured and analyzed what these first crowdfunding adopters have learned through their innovative campaigns in East Africa.
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