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The IUP Journal of Applied Finance

Crowdfunding as a Source of Finance in India: An Empirical Study

Article Details

Pub. Date	: Jan, 2024
Product Name	: The IUP Journal of Applied Finance
Product Type	: Article
Product Code	: IJAF020124
Author Name	: Babu Lal Gedar and Shilpa Lodha
Availability	: YES
Subject/Domain	: Finance
Download Format	: PDF Format
No. of Pages	: 17

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Abstract

Crowdfunding is an emerging platform for raising capital. It is a good way for entrepreneurs, organizations, NGOs, startups and others to raise resources. This paper focuses on crowdfunding as a source of finance. The study is based on a survey and aims to explore the general awareness about crowdfunding and the challenges of using it as a source of finance in India. A questionnaire-consisting of 17 questions focusing on demographic profile of the respondents, awareness about crowdfunding, challenges, and popular projects for investment in crowdfunding-was administered to 75 respondents. Descriptive statistics, One-Sample Kolmogorov-Smirnov Test and Kruskal-Wallis H Test are applied in the study for data analysis. The results reveal that people are aware about crowdfunding, and that there is a significant difference in the opinions of the respondents on the basis of their educational qualifications. The major challenges faced are lack of information on crowdfunding and risk of failure and losing money.

Introduction

In finance, procuring funds is the basic step for investment and distribution decisions. Of late, crowdfunding is emerging as an alternative way of procuring funds for startups and entrepreneurial projects. There are several definitions of crowdfunding.

"Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project, business venture or social cause" (SEBI, 2014).

"Crowdsourcing takes place when a profit-oriented firm outsources specific tasks essential for the making or sale of its product to the general public (the crowd) in the form of an open call over the Internet, with the intention of animating individuals to make a [voluntary] contribution to the firm's production process for free or for significantly less than that contribution is worth to the firm" (Kleemann et al., 2008).