Crowdfunding Emerging Markets
By Tadhg Walker
Crowdfunding has moved into the developing world, helping growth and the expansion of new businesses at an ever increasing rate. Technological knowledge and awareness are on the rise, opening up the developing world to new entrepreneurial opportunities. Crowdfunding platforms are beginning to help direct funds to these entrepreneurs to help build valuable infrastructure and stimulate economic growth.
Platforms, such as Homestrings, began as a vehicle to for African diaspora investors to make a difference back home. Eric Guichard, Homestrings CEO, has found strong support for Homestrings from diaspora and non-diaspora investors alike, due to what he calls a paradigm shift. Homestrings provides opportunities previously only available to institutional investors, offering projects, funds, bonds or public-private partnerships, for regions investors have come from, or care deeply about.
Emerging Frontiers also capitalises on the high growth of small-medium enterprises (SMEs) in emerging economies combined with a willing diaspora network wanting to invest. Growth stage businesses are able to raise up to £4 million on this UK & Singapore-based platform. Another new UK player in the field is EmergingCrowd, who offers equity and debt investments in unlisted emerging and frontier market companies.
Other platforms are based in Africa. ThundaFund is trying to activate local communities in Africa to build prosperity, while offering entrepreneurs mentoring. It’s founder, Patrick Schofield, believes “crowdfunding is the democratization of start ups.” Invest Africa also provides mentoring, and is seeking to be the “link between capital and expertise in Africa, and information and opportunity out of Africa.” Both ThundaFund and Invest Africa are helping to contribute postively to the burgeoning African economy, providing vehicles for start ups to attain valuable seed funding that others are reluctant to lend.
Africa has been identified for crowdfunding due to the the high returns on offer. According to the IMF, 7 out of 10 of the world’s fastest growing economies are in Africa. The middle class, arguably the driving force behind rapid economic development, is growing at an exponential rate; over one third of all Africans have now entered the middle class, up from 27% in 1990. In Nigeria there has been a 600% increase of individuals classified as middle class from 2000 to 2014. While there are significant increases in those entering the middle class it is important to remember these individuals are still in the minority.
Asia is also experiencing a meteoric rise of their middle class. The global middle class expected to more than double between now and 2030 to 4.9 billion, with Asia’s own share of the new middle expected to rise from 30% to 64%. Unsurprisingly, then, there has been rapid growth in crowdfunding in Asia.
The 2013 World Bank Report identified the potential market in Asia to be valued in excess of $50 billion USD. The University of Cambridge has teamed up with the University of China and corporate partners to help realise this potential. Provided regulations that facilitate investment while protecting investors are created Asia, like Africa, will see a massive increase in crowdfunding.
Action is being taken elsewhere in Asia. The Asia Thailand Summit, held February this year, identified the benefits and challenges associated with crowdfunding. Again, the widespread problem also faced by the Thai was lack of seed funding for start ups. In conjunction with Thailand’s stock exchange commission the summit worked towards establishing the necessary regulatory framework needed. In the coming months there are summits in Indonesia, Singapore and another in Thailand to continue to raise awareness about crowdfunding.
The Security and Exchange Board in India has issued guidelines for startups involved in crowdfunding. While these are nascent, it is hoped they will pave the way for further developments. The Monetary Authority of Singapore (MAS) has proposed easing financial restrictions on businesses and investors to aid entrepreneurs and investors alike. Eureeca, a platform based in Dubai, has become a major player in the UAE. It has recently obtained FCA approval to operate in the UK, which co-founder Sam Quawasmi hopes will create new business bridges between Europe and the Gulf. FundedHere is poised to take advantage of the new rules to be the first equity platform in Singapore, pending approval from MAS.
Crowdonomic, South East Asia’s largest platform, just obtained its equity crowdfunding licence in Malaysia. With over 600,000 SMEs in Malaysia this is a major coup. CoAssets offers crowdfunding opportunities for developments and real estate, brokering new ground. Having already raised over US $26 million over 15 projects this new idea seems to have taken hold. Flying V, a platform based in Taiwan has experienced exponential growth over the past three years with now over 170,000 users, successfully funding over 400 projects. This growth has led it to expand to Thailand, and in time, throughout Asia. China, the largest potential market has a lot of work to do surrounding transparency and trust according to Flying V founder Tim Cheng.
The World Bank identified if developing countries create “frameworks for early-stage finance that facilitate entrepreneurship, and the fostering of innovative technology enterprises” the emergence of new competitive industries will occur, inspiring growth. A healthy business climate is beginning to come to fruition in these developing economies with the right mix governmental structure, entrepreneurial culture and community engagement, building spheres of trust. Cultivating this business climate looks set to continue.
Both Asia and Africa, experiencing much higher growth than the developed world, have the ability to leap frog the developed world in both an economic and regulatory sense, paving the way for a very bright, crowdfunded future.