Nov 6, 2017

Crowdfunding and its future in India

Written by Avantgarde
Reading time: 4 mins

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India is emerging as the most promising economy in the world. It hosts a population with the dramatically rising middle-class segment. The power of capital formation necessary for crowdfunding lies in the hands of this rapidly increasing middle-class Indians. Presently, equity crowdfunding has not been a popular model in India.

As of now,Ketto, Wishberry FuelADream, Catapooolt, and Crowderaare some of the popularcrowdfunding platforms in India. In the coming year, dozens of such platforms will existin the virtual world. Due to lack of regulatory issues, a majority of the recent Indian crowdfunding platforms are still in the rewards and donation phase. They will be profitable only if the concept of crowdfunding is well understood and taken in the Indian society.

There are three major crowdfunding models in India

  • Donation Model:In this model,investorsor individuals financially contribute to the development of a project without expecting anything in return.
  • Lending Model:Under this model, investors or individuals usually lend or invest money in a project with the expectations of either getting repaid or getting rewards, according to the agreed terms and conditions.
  • Investment Model:Investors and individuals financially contribute to a project in order to gain an equity stake in that project.

Major Challenges

Indians are not very investment-friendly and the typical Indian mindset is still not ready to accept today’s crowdfunding model.

Despite the fact that so many thriving e-commerce companies come from India, people here are not usedto trusting online transactions. With thedemonetisation move, people have started believing in digital transactions. This can be seen as a major step towards the evolution in the Indian crowdfunding scenario.

Equity-based crowdfunding is still not legalised in India making it prone to a few legal issues.

The SEBI needs to set up a regulatory framework for finding and restricting such activities, if any, persist. In addition to that, crowdfunding activities involving the sale of securities need to be regulated either under existing SEBI norms or under Collective Investment Scheme/Alternative Investment Funds. Together, these initiatives will bring about a greater transparency and trust in the entire Indian crowdfunding scenario.

The future of crowdfunding:

Crowdfunding as a concept that is still news to many indians needs to fight greater evils that threaten its very existence which are the evils of lies and deceit. People in India belong to a very close knit society, their most important value in life is of unity of family and of society so crowdfunding helps us help our people or people in need. But there is also the chance of getting cheated oand that is what this concept needs to fight out. It needs to make itself so strong and attractive that people trust their money to do some good to the society.

Investors can help aspirants in business so that the market in India grows with new ideas and is not flooded with the same shades of red and blue ideas.

Giving funds via crowdfunding will help new businesses to be born and this will generate emplyment at a smaller scale at first but as and when the importance and use of crowdfunding grows so will the need for new talent and labour not just hand labour but also mental labour.

It will also help businesses to go global and compete globally.

Most importantly, it can bring poicymakers and bussinesses together. They can join hands to take on problems and solve issues that befall the whole nation because sometimes one eye can see what the nation unsees.

People need to see crowdfunding as not a pain but as a lucrative investment that might not benefit them right now but it will benefit all in the future.

Conclusion

Crowdfunding in India shows apromising growth. It is looked upon as a key factor in raising funds forstartupsand new ventures. The US and other countries have already started implementing laws and regulations for this function. There are no serious concerns if India brings crowdfunding under the legal scrutiny.

An efficient and the all-inclusive crowdfunding system is about to play a majorrole in bringing startup ideas into reality. Moreover, entrepreneurs and startups should not shy away from using crowdfunding models as an essential means of raising capital.

To know more about SEBI guidelines and what is and is not legal in crowdfunding in India, read this:https://edge.zingohub.com/is-crowdfunding-legal-in-india/


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