Crowdfunding trends 2018: Predictions for crowdfunding in India and globally
By: Jasmine Marfatia
Published On: August 10, 2018
Based on what we’ve observed so far, here are some popular crowdfunding trends of 2018, and some predictions for the global crowdfunding space, as well as for crowdfunding in India.
A report by The World Bank predicts that global investment in crowdfunding will reach $93 billion by 2025, which is far more than any other traditional form of fundraising has achieved. Crowdfunding statistics of 2018 have shown that what started out as a way to help nonprofits fund their operations, went on to individual medical treatment funds, to education crowdfunding, and business crowdfunding. As the concept of online fundraising rapidly grows among developed and developing nations alike, we’re expecting some exciting crowdfunding trends in 2018, that will enhance the future of crowdfunding in India, and world over.
Crowdfunding trends 2018
Financial boost for the social sector through NRI donations
According to an article by the Hindustan Times, foreign donations to Indian NGOs was at a soaring amount of INR 12,000 crores in the year 2013-2014. This number nearly doubled to INR 22,000 crores in the year 2014-2015, and is only expected to increase in 2018. It is to be noted that majority of the foreign donations to Indian NGOs was distributed across seven states - Delhi, Andhra Pradesh, Maharashtra, Kerala, Tamil Nadu, Karnataka and West Bengal.
The drastic increase of NRI donation calls for an enlightening discussion about the potential of crowdfunding for NGOs in India through NRI donations, and the role of the FCRA (Foreign Contribution Regulation Act) in paving the way for overall social development in a number of sectors. The pattern of foreign donations in India has highlighted child welfare, education, rural development, and public health, as the categories with the most amount of foreign funding. The consequence of this is that we have taken a significant step in improving and securing the future generations of India by growing in these categories, and allowing common man an easier access to it.
The FCRA implemented in 2010 came as a blessing to NGOs and nonprofits who truly wanted to further their projects in the development sector. FCRA enables individuals, associations, and NGOs in India to receive foreign funding after a formal registration process. The Hindustan Times highlighted that as of July 2016, 33,091 NGOs were registered under the FCRA, which regulates foreign donations to Indian NGOs.
An interesting dynamic can be established between the two aspects (crowdfunding and foreign donations) in the social sector. A combination of NRI donations and crowdfunding for NGOs in India not only allows NGOs to raise funds with higher currencies, but the FCRA is also a regulatory body that will keep a check on the utilizations of funds received, and the projects undertaken with those funds. Moreover, social media communication, which is fundamental to crowdfunding is a great catalyst to draw in, and encourage NRIs to make donations towards development in their homeland.
Crowdfunding for real estate
Real estate or property crowdfunding is not popular in India as yet, but is starting to make a presence in the crowdfunding space of developed countries. Realestate crowdfunding is essentially a way for property developers to cope with extremely high capital commitments of the real estate sector. Through real estate crowdfunding, property developers will find it much easier to reach out to several investors, and consequently surpass the challenges they face in funding any real estate project. As for crowdfunding in India, until equity and debt- based crowdfunding become more prominent, real estate crowdfunding will still take some time to grow to its full potential. In the meantime, platforms like SmartOwner, are building the foundations for real estate crowdfunding in India.
Increase in an entrepreneurial ecosystem
As our society undergoes changes, businesses are consequently seeing the need to develop and innovate new systems to keep up with the demands of newer financial landscapes. Enhanced internet connectivity, driven by innovations in technology has brought many development opportunities for businesses to carry out fundraising activities. Even though equity crowdfunding in India has a long way to go, owing to it’s illegal status, entrepreneurs, and start-up owners are exploiting the other benefits of crowdfunding, or simply approaching people through donations and rewards based campaigns.
It is often the case the SMEs, and cottage industries bare the brunt of stringent borrowing rules by banks and other sources of raising capital. But did you know that small and medium scale enterprises contribute over 40% of India’s exports and more than 45% of industrial output? It is also believed that over 60% of total innovations from India have come from small scale industries. This is a huge boost to the economy, and adding greater financial support could make it grow further. Crowdfunding for business in India will primarily open up opportunities to such business owners, thereby creating an environment conducive for creativity and innovation.
Employment is easily one of the most important benefits that can come out of small-scale industries. Utilising their skills as well as domestic and local resources can help tackle the problem of rural and urban (since many migrate to metropolitans in hope of finding a job) unemployment. The growth of an entrepreneurial ecosystem is the need of the hour when it comes to crowdfunding trends in 2018 in India.
Crowdfunding and cryptocurrencies
Cryptocurrency is essentially a virtual form of currency that can be used to buy, sell, transfer, and make payments online. You may surely have heard of bitcoin, owing to it’s boom in 2016-2017. Besides bitcoin, there are several other cryptocurrencies out there that are being traded. Concepts such as ICO (Initial Coin Offerings) are giving rise to such currencies becoming more popular, and widely accepted. Considering that both concepts, crowdfunding and cryptocurrencies, largely operate on digital platforms, making contributions on crowdfunding platforms through cryptocurrencies makes the process quite easy and convenient. One of the biggest drawbacks here is that the cryptocurrency market can be quite volatile, which is the primary reason that it is not still legal in many countries, including India. In addition, cryptocurrencies are unregulated, which increases risk of scams and frauds. Stringent legislations and rules may help combat these issues in the years to come.
Growth of corporate giving strategies through crowdfunding platforms
More and more businesses are leaning towards what is called ‘strategic giving’, which blends an organization's business goals, with social responsibility. Corporates are developing a consciousness towards giving back. Corporate Social Responsibility (CSR) initiatives are a way to not only contribute to the development of the society, but also infuse values of responsibility and charity into the work ethic. The new Companies Act 2013 has mandated that organisations of a certain financial strength spend 2% of their net profit on CSR.
In any given situation, the relationship between a corporate and a nonprofit has to have benefits to both. For corporates, aside from the obvious good will, may also gain new customers, and have increased employee retention. The reason is because companies find that customers feel more confident and safe to be involved with them if they have a philanthropic background. As for nonprofits, their gains would be revenue, volunteers, publicity, and stability.
Identify the right cause for your company
Through crowdfunding, you can access several NGOs that support different causes and are based out of various different states in the country. You could easily find one or more causes that align with the CSR goals of your company. At Impact Guru, we have always been particular about verify the legitimacy of all campaigners after a thorough due diligence process, to ensure authenticity in the activities of a crowdfunding India.
Strategic and long-term relationships
Corporates can increase their impact and goodwill by nurturing long-term relationships with causes they align with. Moreover, strategic and well planned donations increase your impact by using your CSR budget in the most efficient way possible.
Employee Engagement/Matching funds
From volunteering for a cause to creating fundraisers of their own, doing good together can help build team spirit like nothing else. How? Through employee engagement programs such as volunteering activities, hosting donation drives, activities and events along with NGO partners, and most importantly, matching funds. This means that companies will match the donations made by employees to maximise the impact of their contributions.
Review of regulations for equity crowdfunding in India
We’ve already discussed the legality and other details of equity crowdfunding in India. If you’re interested to read about it, you can have a look at this article on our blog. Through equity crowdfunding, investors receive a share of the company in exchange for the proportions of funds they invest.
As shareholders, they are also liable to bare losses, meaning that equity crowdfunders run high risks of losing money they’ve invested. In order to protect potential investors from these risks, the SEBI is thoroughly scrutinizing the benefits vs risks of equity crowdfunding in India, and hopefully some headway is expected in 2018. In the meantime, businesses in India can still attempt to raise funds through a rewards-based approach, which has proved to work for innumerable start-ups in the past.
It remains to be seen how many of these crowdfunding trends of 2018 will catch on in the Indian crowdfunding space.
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