Leveraging crowdfunding to promote diaspora contribution to SDGs: Opportunities and challenges

Crowdfunding—or the use of online platforms to raise money for business ventures from a large base of investors—has been steadily gaining traction in Africa over the past decade. Still, crowdfunding in Africa remains limited compared to other regions: In 2015, the African crowdfunding market amounted to about $70 million, accounting for less than one percent of the global crowdfunding market. However, a 2013 World Bank report estimated that by 2025, crowdfunding will be a $96 billion industry growing at a rate of 300% per year.

With over 140 million Africans living outside of their home countries, the continent’s diaspora has the potential to be a major source of development financing. Indeed, the financial power of the diaspora is shown in the high remittance figures, $63 billion in 2015 that Africa receives annually from its foreign-based communities. Yet diaspora are sidelined development agents. Diaspora expertise and contributions must be better leveraged to deliver on the 2030 Agenda.

According to the World Bank, the diaspora has the ability to increase access to finance and to contribute to local employment but lack a trustworthy investment vehicle with appropriate products and lack the ability to make informed decisions on the use and management of money.

Crowdfunding can be the tool that can connect diaspora with investment opportunities in their country of origin.

While much has been made of crowdfunding’s potential to transform small business and entrepreneurship across the continent, there are important challenges and regulatory barriers that need to be better understood and addressed:

• Economic Regulations: Enabling policy from incorporation to bankruptcy, a regulatory framework for crowdfund investing, policy to enable North-South flows.
• Technology: Internet access, regulated portals to facilitate the process, technology to facilitate the ongoing communication and new services to facilitate transactions.