How Does Crowdfunding Work in India?

Financial constraints sometimes disable our potentiality and ultimately lead to drastic results. People often face such situations where they have the desired potential but cannot act upon it because they do not have funds. For instance, if you want to start a business, you have a full-proof solid plan, but it would be in vain if you do not have the required capital. So, here the capital fund is required. The person can opt for various methods such as loans or other methods. But, these days, Crowdfunding is also an emerging source of funds.

A corporate or a business individual can post about their ideas, and the relevant people will invest in their business. So, this could be the best source of funding. But, this is a vague idea about Crowdfunding. Do you know what Crowdfunding is? How does it function? Let’s learn about it in detail.

What is Crowdfunding?

Crowdfunding is a practice where an individual, a corporate, or an NGO can raise funds for a specific purpose. The purpose may be related to business, social purpose, economic reasons, or anything else. It fulfils the fund requirement of the beneficiary who receives the money. It is operated online on a crowdfunding website that allows people to post their needs, conduct a campaign, and collect money for their specific cause.

Now that we have covered what crowdfunding is, let’s understand how it works in India.

How does Crowdfunding work in India?

Crowdfunding in India is regulated by the Securities and Exchange Board of India (SEBI), which regulates India’s securities market. According to SEBI rules in India, there are three types of Crowdfunding available for people. They are as follows:

• Donation-based Crowdfunding: It is the most famous Crowdfunding for social causes. For any social problem or a medical problem that requires a donation, one can raise for donation-based Crowdfunding.

• Reward-based Crowdfunding: It is a type of Crowdfunding through which the donor receives the reward in the corporate he is investing in. The donors are hopeful of getting returns from their funding.

• Peer-to-Peer crowdfunding: It is funding in which the donor gets the interests for their funds once the purpose of raising funds is fulfilled.

In India, one can use this Crowdfunding for limited purposes; for instance, one can use it for medical emergencies, real-estate projects, start-ups, or loans. India has specific rules about which purpose can be involved in crowdfunding activities.

There are Crowdfunding platforms in India that help people post about their specific reason for Crowdfunding, and then the website allows them to campaign about it. Once the campaign is completed, and the goal amount is collected, the beneficiary can withdraw the amount. So, this is the simple procedure of Crowdfunding in India.

Similarly, you can learn more about Crowdfunding and its functioning on the Ketto platform, which allows thousands of users to raise funds seamlessly for their specific purpose.