Md. Mizanur Rahman ACS :
Crowdfunding is a process of raising funds from different parts of the world using information and technology. It is a way of raising funds for an individual or organization by collecting donations through family, friends, strangers, businesses, and more. By using this platform, entrepreneurs, especially the new entrepreneurs can collect funds for their businesses. It is also known as Cyberbegging. In this platform, initially an entrepreneur has to write the details of his project and post it on the specific websites stating how much money the entrepreneur needs for the project. After posting, the entrepreneur can collect the desired amount of funds from the community members and well-wishers. But it does not mean that this platform is used only to collect fund for business purposes, rather it can be used for various purposes; such as fund for mitigating personal problems, the fund for the street children, special children, minority community, innovative idea, education, environment, Food, health, Sports, technology, women empowerment etc.
The first successful Crowdfunding campaign was initiated in 1997. But this concept got huge popularity during the 2008’s global economic recession when most of the European countries including the United States were hit by that economic recession and became financially weak. The financial institutions of those countries passed a tough time and became unable to do anything for their customers. Both the new and existing entrepreneurs became the victim of that crisis. Even the Venture fund firms of those countries were forced to reduce their operations. That time the Crowdfunding platform emerged as a blessing. Since then, this concept has been gaining popularity among entrepreneurs all around the world.
Since its inception every year, a huge amount of funds is being raised through this channel. In 2013, World Bank published a report named “Crowdfunding’s potential for the developing World” where they showed that by 2025, the market exposure of Crowdfunding in the developing countries will be US$ 100 billion. “The Crowdfunding Market Research” has predicted that by 2018-2022 it will be US$ 89.72 billion. This report has also predicted that the market will grow at a CAGR (Compounded Annual Growth Rate) of over 17% during the forecasted period.
The three dominating countries of the world’s Crowdfunding market are China, USA, and UK. China represents the highest volume in the world with 86% market share, where the USA has 10.3% and the UK has 1.88% market share. Recently Australia, Germany, Canada, France, Netherland, Japan, South Korea, Indonesia, Malaysia, Singapore, Philippines, and India have started it as a pilot project. In Australia “Crowd-Sourced Funding Act-2017” has been passed. This act has given recognition to this new platform. According to this law, an unlisted company can raise funds up to US$5 million from the investor each year. In 2013, New Zealand developed legal frameworks regarding equity-based Crowdfunding. In New Zealand, the companies can raise funds to US$ 2 million from the investor each year. In the United Kingdom, non-accredited investors can invest in startups as long as they agree not to spend more than 10% of their net assets in a year. In Italy, reward-based Crowdfunding websites have been active since 2011.
The success of a Crowdfunding project campaign is highly dependent on the fund-raising amount. When the amount of funds collected from the campaign successfully exceeds the target, then the campaign can be declared successful. “Kickstarter” is a well-known Crowdfunding platform in the United States. So far, they raised $ 22 crore or 1760 crore taka for their 61,000 projects. But all time the full required fund may not be raised through this channel. In 2014, “Indiegogo” tried to collect some fund from the investors through this channel, but they could collect only 9% of their requirements. If the required fund may not be collected, then the collected fund can be returned to the investors, or whatever collected can be used for the project.
The Crowdfunding platform needs to have some legal approval from the Central Bank, Stock Exchanges, Securities and Exchange Commission, Registrar of Joint Stock Companies, and other regulatory bodies as well. But in many countries of the world, this new concept has not yet got legal recognition. In Bangladesh, it has not yet started in full swing so far. From our country’s perspective, this platform has huge potentiality. If all goes well, it will become a major source of raising funds in the country soon. In our country students studying in higher education get very few budget allotments to do research. Many people want to open a school in their own village. Again, many people want to work with disadvantaged children as well. Crowdfunding platforms can play a significant role to implement these noble objectives.
Finally, today, the whole world is going through uncertainty. There is no doubt that our government is working relentlessly to change the fate of the people of the country. But the government has some limitations. Even, currently, banking or financial institutions are not doing well because of the Covid-19 pandemic. So, instead of depending on the government or the financial institutions, the young entrepreneurs should look for an alternative source of funding from their own initiative. It is high time to work on crowdfunding. To make this platform successful, people need not sacrifice too much. It just requires changing the mindset of the people.
Crowdfunding is a process of raising funds from different parts of the world using information and technology. It is a way of raising funds for an individual or organization by collecting donations through family, friends, strangers, businesses, and more. By using this platform, entrepreneurs, especially the new entrepreneurs can collect funds for their businesses. It is also known as Cyberbegging. In this platform, initially an entrepreneur has to write the details of his project and post it on the specific websites stating how much money the entrepreneur needs for the project. After posting, the entrepreneur can collect the desired amount of funds from the community members and well-wishers. But it does not mean that this platform is used only to collect fund for business purposes, rather it can be used for various purposes; such as fund for mitigating personal problems, the fund for the street children, special children, minority community, innovative idea, education, environment, Food, health, Sports, technology, women empowerment etc.
The first successful Crowdfunding campaign was initiated in 1997. But this concept got huge popularity during the 2008’s global economic recession when most of the European countries including the United States were hit by that economic recession and became financially weak. The financial institutions of those countries passed a tough time and became unable to do anything for their customers. Both the new and existing entrepreneurs became the victim of that crisis. Even the Venture fund firms of those countries were forced to reduce their operations. That time the Crowdfunding platform emerged as a blessing. Since then, this concept has been gaining popularity among entrepreneurs all around the world.
Since its inception every year, a huge amount of funds is being raised through this channel. In 2013, World Bank published a report named “Crowdfunding’s potential for the developing World” where they showed that by 2025, the market exposure of Crowdfunding in the developing countries will be US$ 100 billion. “The Crowdfunding Market Research” has predicted that by 2018-2022 it will be US$ 89.72 billion. This report has also predicted that the market will grow at a CAGR (Compounded Annual Growth Rate) of over 17% during the forecasted period.
The three dominating countries of the world’s Crowdfunding market are China, USA, and UK. China represents the highest volume in the world with 86% market share, where the USA has 10.3% and the UK has 1.88% market share. Recently Australia, Germany, Canada, France, Netherland, Japan, South Korea, Indonesia, Malaysia, Singapore, Philippines, and India have started it as a pilot project. In Australia “Crowd-Sourced Funding Act-2017” has been passed. This act has given recognition to this new platform. According to this law, an unlisted company can raise funds up to US$5 million from the investor each year. In 2013, New Zealand developed legal frameworks regarding equity-based Crowdfunding. In New Zealand, the companies can raise funds to US$ 2 million from the investor each year. In the United Kingdom, non-accredited investors can invest in startups as long as they agree not to spend more than 10% of their net assets in a year. In Italy, reward-based Crowdfunding websites have been active since 2011.
The success of a Crowdfunding project campaign is highly dependent on the fund-raising amount. When the amount of funds collected from the campaign successfully exceeds the target, then the campaign can be declared successful. “Kickstarter” is a well-known Crowdfunding platform in the United States. So far, they raised $ 22 crore or 1760 crore taka for their 61,000 projects. But all time the full required fund may not be raised through this channel. In 2014, “Indiegogo” tried to collect some fund from the investors through this channel, but they could collect only 9% of their requirements. If the required fund may not be collected, then the collected fund can be returned to the investors, or whatever collected can be used for the project.
The Crowdfunding platform needs to have some legal approval from the Central Bank, Stock Exchanges, Securities and Exchange Commission, Registrar of Joint Stock Companies, and other regulatory bodies as well. But in many countries of the world, this new concept has not yet got legal recognition. In Bangladesh, it has not yet started in full swing so far. From our country’s perspective, this platform has huge potentiality. If all goes well, it will become a major source of raising funds in the country soon. In our country students studying in higher education get very few budget allotments to do research. Many people want to open a school in their own village. Again, many people want to work with disadvantaged children as well. Crowdfunding platforms can play a significant role to implement these noble objectives.
Finally, today, the whole world is going through uncertainty. There is no doubt that our government is working relentlessly to change the fate of the people of the country. But the government has some limitations. Even, currently, banking or financial institutions are not doing well because of the Covid-19 pandemic. So, instead of depending on the government or the financial institutions, the young entrepreneurs should look for an alternative source of funding from their own initiative. It is high time to work on crowdfunding. To make this platform successful, people need not sacrifice too much. It just requires changing the mindset of the people.
(Mr. Mizanur Rahman is an Associate Member of the Institute of Chartered Secretaries of Bangladesh (ICSB). Email: [email protected])
