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The potential of crowdfunding to promote business in the context of an emerging economy

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Abstract

Crowdfunding has the potential to change the historic standards of the financial services industry and reduce gaps between supply and demand economics. Over the past ten years, it has received increasing attention. However, the potential that crowdfunding holds in less fortunate economic contexts where SMEs are probably needed the most has not yet attracted the attention that it deserves. Acknowledging the influence of knowledge about crowdfunding, this research explores the viability of crowdfunding as a source of capital for SMEs, in a developing country. The research aimed to determine the difference in alignment that may exist from both the perspective of the investor and entrepreneur on the most suitable type of crowdfunding and motivations for venturing into a crowdfunding initiative. Empirical evidence was gathered through an electronic, quantitative survey. Statistical procedures included exploratory factor analysis, specifically Principal Axis Factoring, using Varimax rotation with Kaiser Normalization. Two-tailed t-tests were used to distinguish the preferences and anticipated behaviour of investors and entrepreneurs distinguishing respondents in terms of their knowledge about crowdfunding. Results indicate that it is crucial to create an increased awareness of crowdfunding among the broader public, amid evidence of empathy towards new businesses and willingness to support even up-starts, also indicating that investors' and entrepreneurs' motivation to participate in crowdfunding is not necessarily financially driven.

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  1. Geoffrey Tocknell

    Present address: Gordon Institute of Business Science, University of Pretoria, Pretoria, South Africa

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  1. Gordon Institute of Business Science, University of Pretoria, Pretoria, South Africa

    Alet C. Erasmus & Flip Schutte

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  1. Alet C. Erasmus
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Erasmus, A.C., Tocknell, G. & Schutte, F. The potential of crowdfunding to promote business in the context of an emerging economy. J Financ Serv Mark 28, 558–569 (2023). https://doi.org/10.1057/s41264-022-00165-w

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