Crowdfunding: Opportunities for the Banks
Today we will discuss that what are the opportunities for banks with elevated crowdfunding platforms in many developing countries. In evolution days banks consider CF websites as a serious threat to their business model. It is a fact that both can live in the market with mutual coordination.
Complete Background Checks:
If banks are partnering with major crowdfunding websites, they can share the information available with each other to create a central repository of credit history of Individual. The crowdfunding organizations do complete analysis of individuals through field partners located in various regions; It creates more trust to banks to support crowdfunding websites.
Create Regulations:
In developing countries there are no proper regulations for using crowdfunding websites, if banks are partnering with these sites, they can establish legal frameworks so that it can build trust between investors and crowdfunding platforms.
'Crowdfunding provides entrepreneurs with both part of the required capital and demonstrates involvement and confidence in the related plans.' -------- Paul Dirken, Director of Business Banking at Rabobank in the Netherlands.
Increase in Small Business Loans:
It is a fact that majority of campaigns running on crowdfunding website are related to small and micro business. If banks are selecting individuals to offer loans, they can increase the number of loans, and at the same time, they need to compromise on interest rates.
More investment with Less Risk
If banks are partnering with crowdfunding websites, they need to provide the portion of the loan to the individual. If there are any defaulters, they will be losing only partial loan amount. But in the traditional loan process, they may be losing all the invested amount. So the risk they are taking is less, and they can invest in more projects.
Addressing few CF challenges:
The biggest problems with crowdfunding websites are
- Only a few projects are getting successful funding, and
- An individual with higher loan requirement cannot start their campaign.
If banks are partnering with crowdfunding platforms, we can address these challenges to some extent. Over the period, banks and crowdfunding websites can create the right platform for the variety of projects.
Conclusion
In conclusion, banks should partner with Crowdfunding websites before the industry starts to scale. Banks with their strong branch networks and experience can help crowdfunding websites to help more people in both urban and rural areas. If banks are partnering with these sites, it can eliminate mistrust by creating a strategic partnership. It won’t bring banks what they are getting now but with the tremendous increase in crowdfunding platforms banks can do much more what they are doing over the period. Banks can diversify their business portfolio and attract more number of customers.
Yeah, CF websites & banks have to work together. In this way all the parties involved will be benefited whether they are banks, CF websites and loan seekers.
If we talk about india, it is still in developing phase. PM Modi is working to help small & medium scale business but I think he is still failing. Yet he advertised many policies with new names, granting loans on a big level.
post very very interestin.
I agree with this, crowdfunding is helping where banks have not been able to, and funding is such an issue, especially in developing countries like mine (South Africa). Banks are missing out on big opportunities because they're obsessed with playing it safe. Crowdfunding can sometimes lead to nothing, businesses flop before they even learn to fly. The expertise of the banks would weigh in nicely against the optimism of eager investors.
The problem with the current crowdfunding platforms are not in the difficulty of getting enough funding, but in the entrepreneurs' frequent failure(or unwillingness) to deliver the products.
When you back a CF campaign, one of these events is likely to happen;
The crowdfunding platforms are turning blind eyes on these issues because they still keep their part of the campaign money. But for the concept of crowdfunding to stay credible, the delivery process of the campaigns need to be somewhat regulated.
This post was very informative thank you for sharing
you have my upvote
Hi! I'm happy to choose this post for my "Care To Read "Crossword Puzzle Contest No. 3. I'm posting a link to this post in all my posts related to this contest. I hope it will send some more traffic to your post.
Thank you for writing awesome content!
Is crowdfunding a viable alternative to borrowing from the bank?