'Crowdfunding is the future' - Times LIVE
   
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Fri Apr 28 14:03:58 SAST 2017

'Crowdfunding is the future'

ROXANNE HENDERSON | 2017-04-18 08:40:23.0
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Imagine how lucrative and efficient your stokvel could be if more people on your street could participate - enabling you to go online to do business, invest and borrow through crowdfunding.

In an alternative funding benchmarking report by the UK's Cambridge Centre for Alternative Finance, published last month, South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.

Peer-to-peer lending is the practice of lending money, at a profit, through online services that match borrowers with lenders.

In 2015 South Africa represented 18% of the total African online alternative finance market, raising more than $15-million. Kenya was the only African country ahead of it, with $16.7-million raised. South Africa's online alternative finance market focused more on business activity and less on charitable causes.

"In 2015, the vast majority of South African market activity, which was $13.8-million, came from peer-to-peer consumer and business lending, with the remaining $1.2-million spread across micro finance, donation-based and reward-based crowd-funding," the report said.

Local IT firm Khonology has partnered with the UK's White Label Crowdfunding to develop bespoke crowdfunding platforms for entrepreneurs here.

"There is a real-world opportunity across the business sector, in which the excessively stringent lending criteria of banks hinder start-ups and small businesses," said Khonology's Africa Nkosi.

Khonology's partnership with White Label will provide entrepreneurs with a website on which to showcase and share their business pitch with a wide network of accredited investors.

Nkosi said entrepreneurs would be able to develop non-traditional financial services, such as stokvels, online with a wider reach.

Simo Mcunu is one entrepreneur working with the company to launch his start-up. It will provide small black-owned enterprises with working capital.

"A lot of companies have invoices that haven't cleared. We want to offer businesses advances on those invoices and give them a cash injection," Mcunu said.

These cash injections would be raised through crowdfunding at a profit for the individuals or businesses pumping in the cash. Mcunu said this was the future.

"In future people will no longer go to banks but will go to the crowd instead. Crowdfunding can solve a lot of problems we face in the finance industry; it is a tool for transformation."

Ian Cruikshanks, chief economist at the SA Institute of Race Relations, said crowdfunding has had its successes and failures in South Africa but could help satisfy the country's investment demand.

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