This study provides a summary of crowdfunding initiatives that support
developing country entrepreneurs. The purpose of the paper is to present
an overview of the crowdfunding industry to help DFID assess the need
and value of supporting such initiatives – particularly for climate and
The desk-based research approach undertaken for this study involved
qualitative and quantitative analysis of information sourced from
academic literature and the web.
This study provides an overview of the main concepts of crowdfunding and
the role of crowdfunding in the development sector. It also provides an
outline of the different crowdfunding models including donation-based,
reward-based, social lending, lending and equity. For each model, we
describe the types of projects supported, average funding amount,
frequency, financing arrangements, fees, funders, due diligence
processes and rates of success. We also provide examples of relevant
platforms, generic platforms and projects for each model. Lastly, this
paper presents a range of examples of crowdfunded projects with a focus
on pro-poor energy technology.
We conclude that crowdfunding can positively support development
programmes through a number of applications. It can improve access to
capital, help manage supply and demand, drive innovation and efficiency
and fund new markets. Through crowdfunding, entrepreneurs can also
benefit from aggregating and understanding demand for a given product or
service and from an assessment of a proposed pricing.
We suggest that co-operations can be struck between the development
sector and specific crowdfunding platforms for co-funding strategies
that are aligned with the development agencies goals.
Pre-sales – as a form of reward-based crowdfunding – has significant
potential for the development of customer facing products and services.
Here we see significant potential for supporting entrepreneurs from
developing countries with additional institutional lending. Furthermore,
this paper suggests that recoverable grant making can be facilitated for
micro-lending. Similarly, debt crowdfunding can be used to support
lending schemes in the development sector. Although equity crowdfunding
is currently subject to strict regulation, we conclude that it can also
be used to support businesses and innovations in the developing world.
Lastly, we conclude that despite the fact that development focused
crowdfunding platforms do not yet exist in significant numbers and
across crowdfunding models, with the exception of micro-lending and very
few renewable energy focused crowdfunding platforms, we think that a
strategic partnership with crowdfunding platforms can create positive
synergies and create opportunities for crowdfunding platforms to enter
into a new market.
We recommend further study in this area. We believe that research with a
focus on the design and viability of development-focused hybrid
crowdfunding initiatives would be particularly beneficial. We also
identified a lack of information related to M&E and Due Diligence
processes of crowdfunded projects. An analysis of primary and secondary
sources through interviews, in-depth assessments of live projects and
statistical analysis could provide more insight on these processes and
how to make crowdfunding more accessible to entrepreneurs in the
Gadja, O.; Walton, J. Review of crowdfunding for development initiatives. Evidence on Demand, UK (2013) 31 pp. [DOI: http://dx.doi.org/10.12774/eod_hd061.jul2013.gadja;walton]