In efforts to explore new and innovative approaches to development finance, the Commonwealth is organising an exciting event to showcase the potential of crowdfunding.
The event, Leapfrogging Traditional Capital Markets: Exploring the Development Potential of Crowdfunding, will take place at the UN’s Third International Conference on Financing for Development in Addis Ababa, Ethiopia on 15 July 2015. Participants will have the opportunity to network with industry leaders and gain a better understanding of crowdfunding as a means to invest in developing countries.
Crowdfunding is a relatively new phenomenon which emerged during the financial crisis in 2008 when banks were less willing to lend to small businesses and artisans. It’s a simple way to ask a lot of people to invest small amounts of money in business, social projects or charitable causes through secure online platforms. Globally, it is estimated that US$16.2 billion was raised in 2014, and this is set to double in 2015.
“In the current financial climate, there is an urgent need to tap into new sources of finance and to continue to find ways of delivering development support more effectively”, said Commonwealth Deputy Secretary-General Deodat Maharaj, who will co-chair the event.
Mr Maharaj added: “The ambitious post-2015 development goals necessitate a rethink of previous approaches to funding development. We are entering a new era that requires new ways to access and deploy funds.”
“The Commonwealth is keen to support its member countries in their search for new resources to close the financing gap and to achieve their development objectives. The event in Addis Ababa will take place during a landmark conference to find better financing solutions for sustained and inclusive growth. Our contribution to the conference demonstrates our ongoing commitment to identify cutting-edge and practical solutions to advance development so at the end of the day, the lives of citizens across the Commonwealth and beyond will improve.”
Can crowdfunding help to close the financing gap
Crowdfunding represents a huge untapped potential for providing resources for development and making a difference in concrete ways such as improving education and supporting better health care for people in developing countries. But to date, very little work has been undertaken to assess the benefits of this new investment vehicle.
In less than a decade, it has gained traction in a number of developed countries, including Australia, the Netherlands, Italy, the United Kingdom and the United States. In the developing world, it has been slower to take off but is gradually gaining momentum. The World Bank estimates households in developing countries could deploy up to US$96 billion a year in crowdfunding investments by 2025.
Among diaspora communities, crowdfunding platforms are already successfully raising money and have the capability to attract greater diaspora investment.
Nevertheless, further research is required to look at ways to improve use of and access to these platforms by creating a more conducive environment, such as harnessing cost-effective technology and strengthening the regulatory environment.
Speakers at the crowdfunding side event include: Peter Baeck, Nesta, who is co-leading a large EU-funded research project on digital social innovation; Oliver Gadja, Founding Chairman and Executive Director of the European Crowdfunding Network and Jason Best, Crowdfund Capital Advisers, a technology entrepreneur who co-authored the crowdfund investing framework used in the JOBS Act to legalise securities-based crowdfunding in the United States.
