Crowdfunding is the natural way forward for real estate development in Africa
INCE CONNECT / 15 JANUARY 2020 - 15.01 / UPRISE.AFRICA
With a vision to empower local landowners, developers and architects, Uprise Africa has proudly launched it's very first real estate crowdfunding opportunity, in order to create a total service portfolio that supports entrepreneurs and investors, enabling their businesses and diversified portfolio's.
To this end, Uprise Africa offers a unique crowdfunding platform where entrepreneurs can source funding for their projects by marketing them to local as well as international investors.
Crowdfunding is a win-win for everyone. Developers have an alternative funding source and can market themselves to the local and international community. Investors have access to investment opportunities with good returns that would otherwise not be available.
Uprise Africa's crowdfunding platform has enabled a large variety of projects to date, in a number of industries.
Africa actually had a long history of 'crowdfunding' before the digital version of it emerged. Whole communities have been known to pool funds to create a building. This approach to financing not only facilitates the funding, but also creates a feeling of mutual ownership and care for the longer term.
Uprise Africa is enabling the African community to take this concept to the next level by moving the process onto the internet, with its much wider reach, thus allowing a national and international investor community the opportunity to participate in projects that would otherwise not be available.
There are four different crowdfunding models
The original concept was donation-based crowdfunding, a way in which people could donate without receiving anything in return. This typically applies to charity causes of different kinds.
The second model is reward-based crowdfunding, with platforms such as Indiegogo and Kickstarter. This helps companies collect small contributions from people to develop a product or service. Backers donate to projects that they believe in, developed by companies they want to encourage. In return, they receive a reward in the form of a product or service that has been developed with the funds committed. These rewards are typically called perks, and a company usually offers different kinds of perks at different contribution levels. These platforms are also ideal as a market research tool, as the backers will let you know immediately which perks they like and which they don't.
The third model to appear was debt crowdlending, basically a peer-to-peer 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 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').
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER