{"id":3571,"date":"2022-12-20T14:42:15","date_gmt":"2022-12-20T13:42:15","guid":{"rendered":"https:\/\/health-inequalities.eu\/financing-e-guide\/?page_id=3571"},"modified":"2024-12-24T14:21:58","modified_gmt":"2024-12-24T13:21:58","slug":"crowdfunding-and-microcredit","status":"publish","type":"page","link":"https:\/\/health-inequalities.eu\/financing-e-guide\/crowdfunding-and-microcredit\/","title":{"rendered":"Crowdfunding and Microcredit"},"content":{"rendered":"
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Crowdfunding is the practice of funding a project or a venture by raising small amounts of money from a large number of people, typically via the Internet. Crowdfunding can be an alternative way to raise money to finance projects, start-up businesses or charitable initiatives.1<\/a><\/sup>[1] Cambridge Centre for Alternative Finance, 2019<\/span><\/p>\n

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From 2017 to 2018, Europe saw a 95% growth in the amount of money mobilised through crowdfunding, from a total volume of around EUR 3.45 billion to EUR 6.44 billion. In 2018, there were between 600-800 crowdfunding platforms operating in Europe, with the majority concentrated in Western Europe (e.g. 89 in UK, 63 in Germany, 51 in France and Italy, 45 in the Netherlands and 39 in Spain.)2<\/a><\/sup>Wenzlaff K., Odorovi\u0107 A., Ziegler T., Shneor R. (2020) Crowdfunding in Europe: Between Fragmentation and Harmonization. In: Shneor R., Zhao L., Fl\u00e5ten BT. (eds) Advances in Crowdfunding<\/a>. Palgrave Macmillan, Cham. &\u00a0CrowdfundingHub (2021). Current State of Crowdfunding in Europe<\/a><\/span> During the global COVID-19 pandemic, leaders in the European crowdfunding market \u2013 France and Germany \u2013 increased their crowdfunding market value and others (e.g., Italy, Norway) demonstrated good market performance as well.<\/p>\n

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The use of crowdfunding is unequally distributed across EU Member States, and, until recently, cross-border crowdfunding was difficult due to fragmented crowdfunding regulation. The European Crowdfunding Service Provider Regulation (ECSP) came into force at the end of 2020.3<\/a><\/sup>European Commission, Crowdfunding<\/a>, Europa.eu<\/span>\u00a0It outlines a single set of rules applied throughout the EU, to be supervised by each Member State, and further protects investors and allows crowdfunding to operate cross borders.<\/p>\n<\/div>\n<\/div><\/div>

Types of crowdfunding 8<\/a><\/sup>M., Renwick, E., Mossialos, \u2018Crowdfunding Our Health: Economic Risks and Benefits\u2019 Social Sciences & Medicine 191 (48-56), 2017<\/span><\/h3>\n
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Donation-based crowdfunding<\/strong><\/u> - Individuals donate small amounts to meet the larger funding aim of a specific charitable project while receiving no financial or material return, i.e. donating to a charity marathon.<\/p>\n

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Rewards based crowdfunding<\/u><\/strong>\u00a0\u2013 Investors donate to project\/business with the expectation of receiving non-financial rewards such as goods\/services at a later stage in exchange for their contribution.<\/p>\n

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Equity crowdfunding<\/u><\/strong> - Investors receive shares of the business or company in return for their investment. This works similarly to how common stock is bought or sold on stock exchange, or venture capital.<\/p>\n

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Peer to peer lending<\/u><\/strong> \u2013 The crowd lends money to a company with the understanding that money will be repaid with interest. The amount of interest is established by the company that needs financing before the lender gives them money. This is similar to traditional bank borrowing, except it is borrowing from lots of investors.<\/p>\n

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Real estate crowdfunding<\/u><\/strong> \u2013 Providing funding for property investments, either with loans or equity.<\/p>\n<\/div>\n<\/div><\/div><\/div>

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\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tCrowdfunding campaigns in health\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t
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Crowdfunding campaigns in health tend to be donation- or reward-based and used for the development of new medical devices or to cover the costs of expensive personal healthcare (e.g. rare cancer treatment). They are not usually focused on public health. For example, in 2021 the European Institute of Innovation and Technology (EIT-Health) launched the first pan-European crowdfunding platform<\/a>, exclusively dedicated to promising start-ups or SMEs in the health sector.<\/p>\n

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However, there are some grassroots crowdfunding campaigns which aim to improve health and wellbeing in the community, <\/strong>developed by various actors and uploaded onto crowdfunding platforms like Kisskissbankbank<\/a> or Just Giving<\/a>. Those campaigns range from supporting victims of domestic violence, developing a mobile application helping individuals to lose weight, installing a gym, or building a shower facility for the homeless.<\/p>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t

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\n\t\t\t\t\t\t\t\t\t\t\t\t\t\tUnited Kingdom's microcredit as a public health initiative: bridging financial gaps for well-being\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t\t\t
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In the UK, health gaps exist and are widening between the best and worst-off in society<\/span>. These disparities are influenced by social, economic, and environmental factors, <\/span>and <\/span>financial exclusion <\/span>and<\/span> high-priced<\/span> debt <\/span>are associated with worse health<\/span>. Individuals with low incomes often lack access to affordable financial services, leading them to rely on <\/span>personal networks, <\/span>subprime lenders with high interest rates, or cutting back on essentials<\/span>. These coping mechanisms <\/span>exacerbate<\/span> stress, anxiety, and other health issues. <\/span>The 2007-08 <\/span>financial crisis<\/span> led to \u2018new geographies of financial exclusion\u2019 being created which affected deprived areas <\/span>subsequently<\/span> targeted by exploitative \u2018sub-prime\u2019 lenders.\u00a0<\/span><\/span>\u00a0<\/span><\/p>\n

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Intervention and financing model<\/h4>\n

One approach to foster financial inclusion is the provision of microcredits. Microcredits are small loans provided at affordable interest rates to individuals who cannot access traditional banking services due to a lack of collateral and\/or credit history.<\/p>\n

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In the UK, responsible finance providers are the main providers of microcredit. They are different from mainstream lenders \u2013 such as banks \u2013 because they prioritise the wellbeing and interests of borrowers over profit maximisation, and are lending responsibly. This form of lending is proposed as having potential to act as a public health initiative by impacting on social determinants of health. In Glasgow, two microcredit institutions \u2014 Grameen in the UK and Scotcash \u2014provided loans to respectively groups and individuals.<\/p>\n

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These microloans were designed to reduce financial stress and associated negative mental health outcomes by providing borrowers with resources to meet both expected and unexpected expenses.<\/p>\n

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The financing model involved low-interest loans provided by socially-oriented institutions. These organisations prioritised the wellbeing of borrowers over profit maximisation, operating with responsible banking practices to prevent over-indebtedness. This included thorough affordability checks and flexible repayment terms that were adjusted to suit the borrower's financial situation.<\/p>\n

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Key outcomes (if applicable) and associated measurements<\/h4>\n

Findings of a study evaluating the microcredit intervention in Glasgow found that microcredits had mixed outcomes. On one hand, loan use was perceived as impacting positively on health and wellbeing outcomes, including control, confidence, feeling of self-worth, positive mental health, and social participation. Access to flexible, responsibly delivered, loans helped participants feel less marginalised, enabling them to plan and feel secure when faced with (un)expected financial events.\u00a0 On the other hand, some borrowers experienced stress due to the obligation of repaying the loans, particularly those on very low incomes.\u00a0<\/span>\u00a0<\/span><\/p>\n

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While microcredit programmes may not be inherently profitable for financial institutions, systemic support such as subsidies or frameworks like the Community Reinvestment Act can incentivise responsible finance providers to continue offering these services, ensuring they remain accessible to vulnerable populations while delivering social benefits.<\/span>\u00a0<\/span><\/p>\n

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Publications<\/h4>\n