Crowdfunding: Emerging Funding Source to MSMEs

Micro, Small and Medium Enterprises are the backbone of Indian Economy by being the largest employer of workforce next to agriculture and contributing considerably to the national income. MSMEs are highly dependent on formal financial institutions for their funding, but unable to get their due share on account of various reasons. Access to capital being the major impediment in the growth of MSMEs, they look for alternative sources, with Crowdfunding evolving as a new source. Crowdfunding is the process of asking the general public to contribute funds to a new project through donations (with or without rewards), lending or equity participation predominantly campaigning through internet. Success stories in abroad and in India indicate Crowdfunding‟s popularity as an emerging source of finance for innovative and socially conscious projects. In spite of numerous advantages, crowdfunding collections are yet to be legalized in India. Future of crowdfunding is expected to be glorious.