Overview of Crowdfunding in India

India
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Crowdfunding is changing the way people around the world approach the financial industry and this includes the Republic of India in South Asia. The country has the 7th largest in the world when you talk about size and the second most populous in the world with over 1.2 billion people in the country next only to China.

The sheer size of the country and the number of its citizens accounts to a purchasing power that is third in the world and seventh in GDP unadjusted for inflation. This makes the country a force to be reckoned with. Not to mention that India is rich in culture, history and heritage that it has given birth to a culture with a vibrant past and a bright future.

How crowdfunding is divided in India

One of the economic drivers in the country are the small and medium enterprises (SMEs) which accounts to about 45% of the country’s output for manufacturing. The country’s workforce also benefits from the SMEs with about 40% of the manpower in that industry. The exports also have the same amount percentage of dependency on SMEs at 40%.

These numbers all paint a positive picture on how crowdfunding could further boost the SME industry in the country. In fact, the Securities and Exchange Board of India or SEBI came out with a consultation paper on crowdfunding not too long ago and they have their own divisions on the types of social funding. Here they are:

  • Community Crowdfunding. This involves Social Lending/Donation Crowdfunding as well as Reward Crowdfunding because these two rally up the community for a common good. It taps mostly on the generosity of other people to help project initiators reach their funding goal. It can be because of a natural disaster or a business venture where investors get only a small token for their funding. 
  • Financial Return Crowdfunding. This includes both Peer-to-Peer Lending and Equity Crowdfunding because this already includes a return on investment for the people backing up a project. These include interest rates on the amount put in which they will reap on a future date. Lending basically allows people to borrow money from others repaying the same back with an interest rate much like how banks operate. Equity platform gives investors the chance to own part of the company and earn from the performance of the business.

Perceived social funding benefits

In the same consultation paper, the SEBI pointed out some of the financial highlights of crowdfunding to help understand the platform better. Here are some of them:

  • Financing support. The platform allows the SME sector to take advantage of available credit from a new source to fuel business formation. 
  • Strict traditional lenders. The 2008 financial crisis has triggered stricter lending procedures from banks to mitigate risk exposure. Crowdfunding is a welcome alternative for people trying to raise fund for a business venture. 
  • Investor opportunity. People looking to make investments has a wider choice in portfolio and allows them to practice the proverbial “not putting all their eggs in one basket.”

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This article is written by the Crowdfunders Editorial Team. In Asia, Crowdfunders.Asia is a leading portal on providing news related to crowdfunding, start-up, property and business. It is operated by CoAssets.com. CoAssets is South East Asia’s first listed and largest real estate crowdfunding platform. If you have any Crowdfunding news or stories to share, please email [email protected]

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