Crowdfunding in the Caribbean could bolster early stage capital markets, entrepreneurship, creativity, economic growth, and employment – provided that policymakers create the right environment.
This was revealed in the report “Crowdfunding’s Potential in the Caribbean: A Preliminary Assessment,” commissioned and recently released by infoDev, a global innovation and entrepreneurship program at the World Bank Group.
Karlene Francis
Crowdfunding is the process of financing a project or venture by soliciting funds from a large group of people, primarily through the Internet. Crowdfunding and other forms of virtual alternative finance are flourishing around the world and in the Americas. A study conducted by the University of Cambridge Judge Business School and Chicago Booth School of Business indicates that this market reached 35.2 billion in 2016, of which 324 million was generated from Latin America and the Caribbean.
Caribbean entrepreneurs typically launch non-financial return crowdfunding campaigns, for example, donation of capital to a cause or charity, or rewards-based crowdfunding in which a contributor “pre-purchases” an item in a crowdfunding campaign. Among the Caribbean’s most successful crowdfunding initiatives was the Jamaican Bobsled team, which used the platforms Indiegogo and Crowdtilt to fund their participation in the 2014 Winter Olympic Games in Russia — an effort which reaped over $155,000. The first study to focus on developing crowdfunding in the region, the infoDev report was funded with the support of the government of Canada through the Entrepreneurship Program for Innovation in the Caribbean (EPIC) a CAD 20 million program aimed at growing Caribbean businesses and the regional economy. “This infoDev report is timely, given the demand for innovative access to finance solutions for SMEs in the Caribbean,” said Karlene Francis, Operations Officer at the World Bank Group who supervised the study.
The report notes that there are limited financial options available for businesses to grow in the region. Commercial bank loans are difficult to secure due to cash flow and collateral requirements, compounded by the informal nature of Caribbean businesses, which makes it difficult to effectively connect capital supply and demand. Data from Compete Caribbean indicates that access to finance is one of the main barriers and challenges to growing businesses in the region, with 30% of firms citing it as a moderate obstacle and 26% as a major and severe obstacle.
The report examines the critical elements considered to be the foundation of a well-functioning crowdfunding ecosystem in the Caribbean. These include enhancing user capacity, strengthening the regulatory framework, and optimizing technology.