Crowdfunding for Development: Recommendations Vs. Reality


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John Hogg / World Bank Group

Crowdfunding – think Kickstarter, Indiegogo or Kiva – is popular and growing. About a year ago, infoDev, a global innovation and entrepreneurship program in the Trade and Competitiveness Global Practice, released a report titled ‘Crowdfunding’s Potential for the Developing World’ in which it explored what crowdfunding, on a larger scale, could mean for high-potential enterprises in developing countries. The study quantified for the first time the value of crowdfunding, estimating a global market of $96 billion by 2025 - 1.8 times today’s global venture capital industry. The study outlined specific recommendations for policymakers and business accelerators that focus on high growth entrepreneurs and innovative ways of access to finance.
Now, almost a year later, infoDev is seeing the first results of the pilots it is putting in place to test the viability of crowdfunding within its network of incubators. With the support of Crowdfund Capital Advisors, infoDev’s Kenya Climate Innovation Center (KCIC) is implementing the Crowdfund Investing Pilot, a project designed to mentor and train six carefully selected Kenyan startups on crowdfunding and online fundraising campaigns.
With the six entrepreneurs already working on their campaigns, it’s time to reflect on a few key recommendations of the report.

Recommendation 1: make sure companies are ready to crowdfund. Identifying companies suitable for crowdfunding is key to the success of every support program. In order to “vet” businesses, it might be useful to employ a number of different methodologies, such as concept and marketing competitions, online surveys, and in-depth interview with the candidate entrepreneurs.
Reality: In Kenya, infoDev devised the Crowdfunding Readiness Survey to screen companies by interest, capacity and capability for participation in the pilot. This selection mechanism examined the profile of the company’s management team, legal status, maturity, business model (including value chain), current accounts, capital needs, crowdfunding aspirations, and social media presence.
The difficult part was to make a selection in a standardized way. The selection process could only provide the selection panel with a ‘raw’ indication of the entrepreneurs’ readiness and was necessarily augmented by additional evaluation methods. Out of the 73 companies that are currently working with the Kenya CIC, 16 were invited to a pitch competition. By observing other factors, such as personality, presentation and communications skills, the project team was able to make a more accurate decision on which entrepreneurs could be successful crowdfunders. The process was analogous to the investment decision of Silicon Valley super angel Ron Conway who famously said: “We invest in people first.”
Recommendation 2: partner with the right platform. There are four types of crowdfunding platforms: Donation, Perks/Pre-order, Debt, and Equity. To launch an effective campaign, the project needs a systematic method for selecting the appropriate platforms for each identified company.
Reality: in Kenya, given the infancy of the crowdfunding market, it was crucial to identify platforms with a critical mass of active funders. Out goes Kickstarter. Project backers that register on Kickstarter may hail from anywhere across the globe, but project originators must be registered in the US, UK, Canada, Australia, New Zealand, the Netherlands, Denmark, Ireland, Norway and Sweden.
Next, our team established which platforms posed the least legal and regulatory risk in Kenya. The team relied upon local legal experts for an analysis of the Kenyan securities regulatory environment and determined that although equity crowdfunding might be permissible within current framework, it posed too much legal risk to the outcome of the pilot.
Lastly, the team considered which platforms would best to complement the business models of the pilot companies. Because many of the businesses sell their products directly to consumers, the “pre-sale” model offered by Indiegogo was a very interesting choice. Moreover, many of these consumer products target underserved African communities and therefore could be best supported with the addition of crowdfunded consumer finance, offered for example by platforms like Kiva.
Recommendation 3: learn from previous experiences. Every country, every company, every product, every community of users is different. There is no perfect formula for designing and running a successful crowdfunding campaign. Learning by trial and error is very important and organizations that support crowdfunding play a critical role in capturing, analyzing and spreading this knowledge.
Reality: the Kenya CIC is capturing knowledge around all aspects of the Crowdfunding Pilot, including company selection, training materials, mentorship techniques and will conduct ongoing data capture and analytics on the crowdfunding campaigns while they are active.   The data captured by center on the six winning companies and their campaigns - whether or not they turn out to be successful - will be a stepping stone to a better understanding of the challenges and opportunities of crowdfunding in the country.
Development organizations like the World Bank, governments, venture funds, and NGOs should continue to study crowdfunding to better understand its potential and determine how it can provide innovative solutions to the “last-mile-funding problem” faced by many start-up companies in the developing world.


October 20, 2014

Interesting read! Thanks for sharing these learned lessons. I work at 1%Club, a crowdfunding platform for projects/businesses with social or environmental impact and we've just organised a two-day bootcamp on crowdfunding in Nairobi. The important thing we learned from previous bootcamps is to include M-pesa as a payment method on our platform. And the first results of that decision are really hopeful. I would be happy to exchange our first results & learned lessons.

May 20, 2015

Hello, We want to initiate CF in Iran. We can not use foreign CFPs like Kickstarter or others because of impossibility of bank transfers.
What is M-pesa payment method?

Sam Raymond
June 05, 2015

Very happy to see you embarking on a pursuit of crowdfunding in Iran. I have a number of thoughts to consider before you set on your journey. First, to answer your question on Mpesa- this is a mobile payment system in Kenya which allows the unbanked to buy goods and services using their handheld phone. This technology is a revolutionary innovation for Kenya, but is only a small step toward an environment which will spawn a critical mass of crowdfunding activity.
I would suggest it is important for you to consider the readiness of Iran for crowdfunding within the context of Iranian adoption of ecommerce more generally,  Does your local environment have the regulatory, technological and social foundations necessary to build a crowdfunding ecosystem.
I know this question can be very hard to answer without much background on the subject, but there is a lot of academic material on ecommerce development which you can read and consider, a personal favorite of mine is ​Factors affecting e-commerce adoption among SMES in Ghana (…).
Lastly, I would strongly encourage you to keep an eye on where I will be posting numerous knowledge papers on crowdfunding in emerging markets emanating from the past year's work.
Good luck and very best wishes!!


Isabelle Macquart
February 08, 2015

Hello Sam Raymond,
Thank you for this article on Crowdfunding.
One of the key success of the financing is indeed the quality of the relationship between the entrepreneur and investors. For this, it is necessary to transmit not only intelligible strategy but also emotion for full adherence to this entrepreneurial adventure
But I wonder about some of the issues mentioned, including the selection of the right platform
Indeed, should African countries not acquire its own platforms to their users? The platforms would then in line with needs of project holders and local African law: African platforms for African by Africans.
Regarding the selection of the most likely to succeed with this method of financing projects, again I wonder. Is not it a problem formalization of transparency of the strategy indicated by KenyaCIC?
Indeed, the key to business success is a feasible attractive and sustainable business model. Communicating the strategy can be considered an art that is not necessarily that of the entrepreneur experiencing operational problems.
Finally, today data concerning crowdfunding on Africa are not representative because too low in my respectful opinion. The only solution is to build African platforms, building laws allowing maximum project funding, also build software for SMEs to simplify the monitoring of shareholders allowing access to risk capital for SMEs. (for Infodev)
Crowdfunding is new way. It allows entrepreneur to fund their projects while they did not have the collateral required for a bank loan, or have lower financing costs.

March 12, 2015

Its a great idea! I have personally been able to fund raise capital and put up major investments that will position Kenya in the world map of one of the greatest Angro-Environmental green enterprises in Africa while sharing equity with the crowd of local farmers acting as my funders; I would like to share my experience with Kenya Climate Innovation Centre and probably they can borrow a leaf from my success story!

Sarah Hugo
March 20, 2015

Hi Sam, IFAD FFR has recently launched a Virtual Forum on Remittances and Development (
There is currently an online discussion on Diaspora investment and we would be delighted if you, or a representative from infoDev, were able to join, sharing your experiences and insights - especially relating to crowdfunding.
The Virtual Forum is informal and free to participate in. Please register and start posting. The aim is to become an online community platform where new ideas and fresh perspectives from around the world can be shared and discussed and new partnerships and networks formed. Your support would be greatly appreciated. Let me know if you have any questions. Also please spread the word and invite others to participate and/or feel free to start your own topics of conversation. Look forward to seeing you on there ....

David Michael
October 19, 2015

Excellent Article. This is a great article on crowdfunding issues to be dealt with even if the conclusions are not agreed with or contentious. One area that requires careful treatment is that of the legal and regulatory structure. Crowdfunding exists in large part because of overreach by existing regulatory structures which, in many if not all countries, have gone beyond protecting stability of the financial system. The result is lack of capital for SMEs in particular. That Kickstarter list of 10 countries required for project originators is headed down a high regulatory pathway that may not suit the typical developing country and do little for actual capital raising for SMEs that's not already done and largely failed. By the way, Australia (one of Kickstarter's approved project originators) is currently reviewing their regulatory requirements for crowdfunding because its not working effectively and their new PM who understands capital markets wants more activity from entrepreneurs. Agree with Isabelle above that adaptation to African country circumstances is important, rather than just importing an off-the-shelf platform that may have worked elsewhere.
Questions for Sam and company:
1. Do you need an existing regulated securities exchange for crowdfunding to run off? I dont mean to duplicate but work alongside as a light regulatory structure. I dont think you do but interested in other views and why.
2. Can a crowdfunding regulatory structure become the catalyst for change and innovation in the general regulatory climate for banking and finance and capital flows?
3. Role of remittance regulation in crowdfunding. With an effective and efficient, secure and fast remittance transfer system is this the basic building platform for a light regulatory crowdfunding market to work in a developing country that does not have all the traditional building blocks.