A sustainability analysis of Crowdfunding and Peer-to-Peer lending platforms
Horacio Morales
A sustainability analysis of Crowdfunding and Peer-to-Peer lending platforms
In the wake of the financial crisis, and with the advent of Internet 2.0 and its ability to allow users to interact and collaborate with each other in a social media dialogue, Crowdfunding Platforms (CFPs) have emerged as a credit alternative to the intermediated financial services industry. Through donation, investment, or pledge private individuals can contribute funds online to projects such as social enterprises, personal loans and technology start-ups. As its inception as a financial innovation has been recent, the majority of research has been focused either on definitions of the concept or case studies based on the most well-known platforms, particularly those dealing with arts and creative industries (Kickstarter) or social lending (Zopa). Therefore, exploring the landscape of crowdfunding from a sustainable development perspective seems relevant. This study examines the most up to date research on the industry, with particular emphasis on defining the types of CFPs categories and an overview of market performance, including market growth and composition. A number of sustainability related CFPs were selected and using a framework adapted from entrepreneurial finance and incubator activities, were segmented based on their project selection criteria, type of intervention in the submitted projects, graduation/exit process and the business models they use. The concept of Triangle of Microfinance is introduced as the organizing framework and analytical core to describe the reach, impact and financial sustainability of CFPs. Possible synergies and trade-offs between the three elements of the triangle are explored, a tension that could influence the outcome of crowd funding activities.