Investor Motivations and Barriers to Crowdfunding Adoption for SMEs in Emerging Nations: A Qualitative Investigation Using Agency Theory (Perspectives in Social Sciences)

Summary

• The qualitative study interviewed 22 participants, 18 investors and 4 domain experts, on crowdfunding in Pakistan's SME ecosystem.p.1
• Pakistan has over five million SMEs, but only 319,000 received financing from banks and DFIs.p.2
• SME financing represented only 7.76% of domestic private-sector credit.p.2
• Global crowdfunding exceeded USD 34 billion in market volume as early as 2015, a 1,000% growth in just three years.p.2
• The analysis identified sixteen barriers in three clusters: Institutional (4 items), Informational and Behavioural (6 items), and Technical and Social (6 items).p.13

Key insights

1. Female entrepreneurs' participation in Pakistan is just 1%.p.25
2. The study identified six investor motivations, led by financial returns and portfolio diversification.p.21
3. Equity crowdfunding in Pakistan has grown only within the SECP Regulatory Sandbox, and the first platform was authorized for live testing in October 2020.p.4
4. Policy proposals include a diaspora digital KYC process so that part of the remittances of around USD 27 billion can flow through regulated crowdfunding platforms.p.26