The readiness, challenges, and barriers for introducing crowdfunding in Sri Lanka

Abstract

Crowdfunding is accepted as a viable alternative source of financing for start-up ventures. Typically a pool of investors funds a venture via an Internet platform expecting a monetary or non-monetary return. This is a popular method of fundraising for small ventures in developed contexts to solve funding problems. In Sri Lanka there are very limited financing sources available for entrepreneurs to initiate their business ideas. Banks dominate financial markets but these are not readily accessible to small entrepreneurs due to the latter’s lack of financial history. As a solution for funding small businesses, crowdfunding has potential in such contexts. Accordingly, this paper investigates the current conditions for introducing crowdfunding as a source of finance in terms of technology, entrepreneurial culture, regulatory background, and community engagement. A survey for self-assessment of readiness and indepth interviews were used to identify readiness, challenges, and barriers for introducing crowdfunding in Sri Lanka. The readiness index shows the need for further revision of financial and economic regulation for implementing crowdfunding in the economy. However, the overall investigation provides evidence that crowdfunding would not be implemented properly in the economy without regulations that create trust among both entrepreneurs and investors.