Can microfinance crowdfunding reduce financial exclusion? Regulatory issues

Abstract

Purpose – The purpose of this paper is to discuss how regulatory environment can be a fundamental constraint or lever in defining the scope of operations of a social innovation. Design/methodology/approach – Semi-structured interviews with top-level executives of pioneers of crowdfunding were run in India and France, two of the three leading countries in this field. Findings – Four main issues rise: choice of legal status, constraints for the operations model, compliance with anti-money laundering measures and challenges in marketing and sustainability. Originality/value – This paper contributes to knowledge advancement in the field of this new funding actor that could challenge the banking system. This is the first paper to explore these regulatory issues and their impact on marketing practices.

Sustainable Financing through Crowdfunding

“…Sustainability orientation was related to social innovation through appropriate technology [23], even with co-utility [51]. Furthermore, several articles [28,68] studied the effect of regulations on crowdfunding and social innovation, which is also a type of sustainability.…”

Are Social Enterprises Efficient? A Theoretical Approach

“…As an example of this in practice, Community Interest Companies in the United Kingdom are currently restricted from paying a dividend to investors in excess of 35 per cent of distributable profits (Marakkath and Attuel-Mendes, 2015). This firm would be considered a SC.…”

“…Alternatively, if they choose a = 1, then they prefer a zero real rate of investor return and higher social returns. As an example of this in practice, Community Interest Companies in the United Kingdom are currently restricted from paying a dividend to investors in excess of 35 per cent of distributable profits (Marakkath and Attuel-Mendes, 2015). As such, they are restricted to a ≥ 0.65.…”

Crowdfunding and Crowdmicrofinance, an Evolution of Models for Entrepreneurship of the Poor

“…MFIs intermediation costs to be brought much lower and thus to charge lower interest rates to borrowers [26]. This new medium of communication, by getting rid of geographical barriers in a more and more global village [27], allows to efficiently complete the action of microfinance to divide by two extreme poverty, as it is targeted in the first Millennium Development Goals developed by the United Nations.…”

“…Platforms, as well as MFIs, must struggle for sustainability and profitability, be they lender-based model as Babyloan or borrower-based as Rang De. Regulatory barriers must be overtook in both cases [26], for instance, that of market limitation to investors within the European Union for the French platforms.…”