ALTERNATIVE FINANCING Page 25 lending structure supported by the crowdfunding logic . Just like normal debt servicing , a lender will earn interest on the loan and the company has to repay its crowdlending debts as a first priority . A variation of this model exists in developing countries , where crowdlending is used as micro finance to support small companies . With socially responsible lending in micro finance , no interest , or a very small interest amount , is paid .
Equity crowdfunding is the fourth addition to the crowdfunding genre . In this model , many investors come together to invest jointly in the shares or equity of a company or a securitised project . Companies can raise capital and the investors become risk-taking shareholders . They are paid in dividends or , hopefully , by selling their shares at a profit after an increase in the value of the company .
The key to crowdfunding is building a social network of like-minded investors who are interested in the investments that you can offer and the track record that the platform is able to build . The emergence of social networks and changes in Internet use were among the most important building blocks that made crowdfunding possible . The ambition of every crowdfunding platform is to build a global network that is as big as possible , because its existence depends on crowds coming together to support its mission .
In 2013 the World Bank produced an extensive report ( http :// bit . ly / worldbank _ report ) on the potential of crowdfunding in the developing world . A crowdfunding ecosystem depends on key enablers to build trust . “ Trust does not just happen – it is a socially mediated phenomenon which relies in great part on the intrinsic trust people place in shared connections on social networks , community affinities , and the ratings of others on trusted , mainstream websites .” ( World Bank report : ‘ Crowdfunding ’ s Potential for the Developing World ’)
HOW DOES DEVELOPMENT CROWDFUNDING WORK ?
A property crowdfunding platform is a global community . The added value of a property crowdfunding platform is that it offers a marketplace and a security-based ecosystem where the real estate and infrastructure developers in sub-Saharan Africa can meet and transact with the worldwide community of small and large investors , as well as institutional investors . The crowdfunding platform facilitates the transaction , but should also inspire trust and project the transparency of the investment for the investor ’ s benefit . This helps the investor make an informed decision based on all the information available , and creates clarity , a proper risk profile and an investment that offers the investor as much security as possible . The difference between normal crowdfunding and property crowdfunding is the existence of a real asset . Property crowdfunding is basically asset financing , and the asset is used as collateral .
WHAT TYPE OF DEVELOPMENT IS THE IDEAL CANDIDATE FOR CROWDFUNDING ?
A property crowdfunding platform like Realty Africa typically offers a diversified portfolio of projects . Projects can be short or long term and include full development as well as refurbishment projects or asset finance on existing properties , with the right business case . A short-term project would typically be a residential development for selling . Longerterm projects might be rental properties or tourist accommodation .
Also the size of projects on the platform can vary from $ 200 000 to several millions of dollars . The success of the project depends entirely on the business case , the attractiveness of the project and how the interest of the investor can be captured . This means that the developer is obliged to come up with a sound , secure and transparent project that is as attractive as possible . Property crowdfunding is not just about securing