Crowdfunding has taken the cyberspace by storm. Through platforms such as Kickstarter or Indiegogo, innovators can pitch their ideas and like-minded individuals around the world are able to come together to pool their resources toward a specific goal. Crowdfunding advocates say it is an entirely new model that goes beyond traditional types of investment — but regulators do not always agree.
From non-profit causes to art projects, crowdfunding has been a powerful force. But in the U.S., and in many other countries, it encountered a serious barrier when it comes to supporting small businesses and entrepreneurs: 80-year-old securities laws which made it illegal to publicly solicit money from unaccredited investors. As a result, Americans could use their money to help entrepreneurs in developing countries through platforms such as Kiva.org but were unable to invest in their local restaurant or gym.
Even though there are, in theory, many sources of funding available to such small businesses, in practice banks are often reluctant to lend to them and angel and venture capital options are also limited outside of fast growing sectors such as IT. This made changing the antiquated law an imperative. But how to do it? The story of how crowdfunding became legalized in the U.S. is the story of how 3 guys changed the rules of the game in 460 days.
Congratulations to CIPE Chair Karen Kerrigan, who was named a top 100 champion in the 2012 Small Business Influencer awards. Kerrigan, who is President & CEO of the Small Business & Entrepreneurship Council, said, “such recognition is an honor as I am doing what I love for people I admire and love. I get to represent the passion and hard work of entrepreneurs every day. This award is for them, and for everyone who is so dedicated to the work of the SBE Council.”
“Influencers are those who play crucial roles in the small business ecosystem, but who often are in the background,” said Anita Campbell, CEO of Small Business Trends and a co-founder of the awards.
CIPE Pakistan office director Moin Fudda, left, speaking at the forum discussion co-hosted with the Pakistan chapter of the Association of Chartered and Certified Accountants. (Photo: CIPE)
Generally, the media focuses on corruption and bribery scandals related to government, public corporations and large private companies. Not many consider that corruption is also a large burden on Small and Medium Enterprises (SMEs). Often with their limited resources, when survival remains the key objective, most SMEs get sucked in to the spiral of corruption and bribery. One of the key reasons for getting into this is their inability to keep their financial records in order.
A discussion board illustrating what business association members need. Is it also the foundation for successful association-based advocacy for economic reform in Ukraine?(Photo: CIPE)
Before dawn on Dec. 3 in the center of Kyiv, riot police and municipal workers dismantled a small tent city that had been erected two weeks earlier by entrepreneurs. The small- and medium-sized business owners, backed by tens of thousands of protesting entrepreneurs elsewhere in Ukraine, had been fighting proposed legislation that would have substantially raised their taxes. The entrepreneurs left peacefully that morning, having won a pledge from the government earlier in the week for inclusion in future talks on tax reform.
It was a dramatic conclusion to a showdown between the ruling coalition of president Viktor Yanukovych and a part of society – small business – that had sat out previous political battles. From CIPE’s point of view, the timing couldn’t have been better.
For weeks, the news coming out of Moldova has centered on the chaos surrounding the recent parliamentary elections and the resulting political uncertainty. Amid the growing crisis, a coalition of business associations organized by CIPE’s partner in Moldova the Institute for Development and Social Initiatives (IDIS “Viitorul”) began implementation of a project aimed at establishing a large-scale advocacy campaign to encourage the government to improve the national business environment by removing key barriers to small businesses. Why, in the midst of political repression not seen in the small East European country since the Soviet era, should Moldovans, let alone the international community, concern themselves with these seemingly mundane reforms?
The answer is that establishing responsible and accountable institutions is the only way to ensure that fair and competitive elections occur, election results are respected, and human rights are observed. With its monopoly on executive and legislative power, the ruling Communist Party has few incentives to develop such institutions in the political sphere. As pertains to business, however, the government may soon be compelled to act. The global economic crisis is likely to hit Moldova especially hard in the coming months. Many Moldovans depend greatly on remittances from family members working abroad, which flow into Moldova at a rate equaling 30 percent of the country’s GDP – the highest rate in the world. As unemployment rises throughout Western Europe and North America, this source of income will continue to shrink – by as much as 33 percent according to one article. The shock to families who rely on these payments will be substantial, and could well lead to further instability and dissatisfaction with the current government.
In order to overcome Moldova’s dependence on remittances and promote sustainable economic growth, these funds must be used not only to supplement incomes, but as capital for small businesses that will provide opportunities for increased employment and trade.
The CIPE Development Blog provides coverage of the Center for International Private Enterprise and its partner network at work -- highlighting successes, drawing out lessons from failure, and exploring the broader issues of political and economic development. For more information visit CIPE.org.