Universitas Gadjah Mada
Faculty of Economics and Business

In starting their business, it is not an easy matter for small and medium enterprises (SMEs) to get funding. One alternative funding that can be done by SMEs is crowdfunding. The topic related to this, titled as “Talking the Financing Constraints of SMEs: Lessons from the EU Regulatory Framework for Financial-Return Crowdfunding” was discussed in a series of lectures as part of a virtual summer program held by the Faculty of Economics and Business Universitas Gadjah Mada (FEB UGM) on Friday (01/07), namely International Week (iWeek) 2022. On the day of the event, the lecture series presented an expert speaker on the topic, namely Dr. Konstantinos Serdaris from the University of Southampton, United Kingdom.

SMEs often find it challenging to secure access to external sources of capital to finance their activities. Consequently, several promising new enterprises fail to get off the ground with negative effects for economic growth, innovation, and job creation. Against this background, crowdfunding has recently emerged as an alternative funding tool for start-ups and other SMEs. Broadly speaking, crowdfunding can be described as an open call to the public to raise funds for a specific project through the intermediation of an internet platform. The classification of crowdfunding itself as described by Dr. Serdaris is divided into four main business models, namely donation-based crowdfunding, reward-based crowdfunding, lending-based crowdfunding, and investment-based crowdfunding.

Based on the explanation of Dr. Serdaris, there are a number of benefits that SMEs can get from crowdfunding, for example crowdfunding allows more control to the project than when seeking financial support through banks or venture capital. However, apart from its obvious benefits for project owners, crowdfunding also carries significant risks for investors, one of which is the possibility of losing part or all of the invested capital or not getting the returns expected.

Furthermore, in his presentation, Dr. Serdaris explained about the EU Crowdfunding Regime. In the European Union (EU), investment and lending-based crowdfunding are governed by Regulation (EU) 2020/1503 on Crowdfunding Service Providers for Business (ECSPR). The objective of the ECSPR is to create a well-functioning single market for crowdfunding services which shall improve access to finance for European SMEs, while increasing the possibility for efficient portfolio diversification for investors. The EU Regulation on crowdfunding constitutes a positive step towards the direction of improving access to finance for SMEs. “However, in order to reap the full benefits that this new funding tool offers for such businesses, certain deficiencies of the regulatory framework need to be addressed,” he said at the end of his presentation session.

Reportage: Kirana Lalita Pristy
Watch the full video: https://youtu.be/6wcI_CLzYdk