Funding the micro-entrepreneurs

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Crowd-funding websites are projected to raise $6.2bn in funds

Crowd-funding websites are projected to raise $6.2bn in funds

Scattered in small workshops throughout Cairo, some micro-entrepreneurs have long struggled to find customers to purchase wares such as mechanical sunshades, clay pottery coolers and printing presses. Now some of them are turning to the crowd-funding site Yomken, which launched in Egypt in October, to connect with individual investors, scientists and research centres willing to either pre-purchase industrial goods or collaborate on design improvements.

“In Egypt, micro-entrepreneurs are facing intense competition from China and Asian borders, and there is no support system [for] the bottom of the economic pyramid,” says Tamer Taha, chief executive of Yomken.

Crowd-funding sites act as middlemen between investors and entrepreneurs. The biggest players — Kickstarter and Indiegogo — have become known for some of the quirkier products that people have pitched on their sites, including watches made out of old iPod Nanos that have raised millions of dollars over different stages of development.

More home-grown ventures are now cropping up in the Middle East and North Africa to cater specifically to Arabs. Yomken, Aflamnah and Flooosy have each recently launched in this region, while another potential player — Mawwell — appears ready to join the fray.

“This trend is real, it’s growing and it’s a movement we should all take notice of,” says Jonathan Axtell, program director at The Hub Bay Area, a group that helps entrepreneurs in the United States and is opening an office in Dubai.

Globally, there are now more than 450 crowd-funding platforms in operation. They are projected to raise a total of $6.2bn in funds mostly for entrepreneurs and small to medium enterprises (SMEs) next year, which is up from $1.6bn in 2009, according to data from the research firm Gartner.

Demand for crowd-funding platforms in MENA, in particular, is growing amid a dearth of financing available for SMEs. It is tougher in this region than other emerging markets to secure capital and only one in five SMEs has a loan or line of credit, according to the World Bank.

In fact, one survey conducted by the World Bank last year found that just eight percent of total lending in Middle East and North Africa trickles down to SMEs.

At the same time, small-fry investors who lost money during the global economic downturn have become pickier about where their money goes. Some crowd-funding sites allow them to select individual entrepreneurs based on descriptions detailing how donations or loans will be used.

“People began to realise that they have absolutely no ownership or power over their own funding, and it’s not going to their communities,” says Celia de Anca, director of the Saudi Spanish Center for Islamic Economics and Finance in Madrid, which organised a financial forum in October that discussed social impact investing and the rise of crowd funding.

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