A new report, Crowdfunding’s Potential for the Developing World, commissioned by infoDev studies the promise and the risks of crowdfunding as a tool to finance innovation and growth in developing countries. The report, edited by Colin Blackman, also provides an in-depth case study of crowdfunding’s potential in funding clean energy and climate technologies.
Crowdfunding—the practice of raising funds from multiple individuals via the web—first emerged in an organized form in the low-investment environment of 2008, and has quickly grown into a multi-billion dollar industry projected to reach $5 billion this year, channeling funding to hundreds of thousands of ventures globally.
Crowdfunding combines the traditional practice of raising funds from friends, family and community for projects or business launches, with the power of the Internet, mobile technology, and social networks to drive donations and investment. It essentially democratizes financing, putting the decision to fund new ventures in the hands of the communities and customers who would benefit the most.
The revolutionary power of crowdfunding also extends to the realm of international development, the report suggests. Preliminary modeling estimates that the possible market potential for crowdfunding in developing countries could reach up to $96 billion a year over the next 25 years given the right answers to current regulatory, infrastructure and cultural challenges.
In a foreword to the report, AOL co-founder Steve Case highlights crowdfunding’s potential in enabling the “Rise of the Rest,” and calls for further study of appropriate regulation and investor protections.
Organizations such as the World Bank, governments, venture funds, and NGOs are watching crowdfunding closely to see whether it has the potential to solve the “last mile funding problem” faced by many start-up companies.
To assist them in making the most of crowdfunding, the report provides practical guidance via a self-assessment tool, a set of policy recommendations, and suggestions for the World Bank and infoDev to pursue the topic further.
The report also includes a special case study section on climate and clean energy technology addressing the applicability and opportunity of crowdfunding to infoDev’s Climate Innovation Centers.