Last year, over R1.7 billion was raised for crowdfunding projects in Africa and the number of crowdfunding platforms and project success rate is showing a lot of promise.
This is according to the Afrikstart Crowdfunding in Africa Report, which analyses the industry’s performance of last year.
African vs Foreign-based projects
In 2015, there were 57 active crowdfunding platforms headquartered and operating in Africa (21 donation based-platforms, 19 equity platforms, 13 rewards-based portals, two peer-to-peer lending platforms, and two hybrid platforms).
These platforms hosted 4 939 crowdfunding campaigns which raised an estimated total of $32.3 million (R438.6 million) in funding.
The chart below shows that the most launched Africa-based projects were for social causes.
However, the funds raised on Africa-based platforms primarily went to funding startups and small businesses ($17.7 million/R240 million), real estate crowd invested projects ($13.6 million/R184.2 million), travel crowdfunded trips ($319 434/R4.3 million), and to donate to social causes and charity projects ($307 860/R4.1 million).
On average, the rate for projects funded on Africa-based platform was at 67%, with business and personal loan projects being the most successful type of project (95% success rate) followed by social cause projects (84% success rate).
Platforms headquartered and operating outside the continent raised $94.6 million (R1.2 billion) in 2015 to fund various projects in Africa and the most funded and most successful foreign-based platform projects were aimed at social causes for children, education and women and girls.
Kenya was the country that received the most funds from foreign-based platforms, with $21.7 million (over R294 million) received in 2015 to support various social causes.
The top foreign-based platform (based on funds raised) is Kiva, from the US, which raised $35.9 million (R487 million) for African projects.
There are four types of funding models for both Africa and foreign-based platforms: donations, loans, equity and rewards.
Low rate of fully funded projects
While the success rate of funded projects on the continent is satisfactory, the rate of fully funded projects (those which received all or more than the funds requested) excluding loan-type projects, was low at only 13% or 79 out of 618.
South Africa is where crowdfunding in Africa thrives the most
South Africa dominates the African crowdfunding industry on all fronts.
It currently has the most operational platforms (21, up from 16 in 2014) and raised over 90% of the total funds raised by Africa-based platforms ($30.8 million/R418 million).
The top project funders are also based here.
South Africa saw the most projects launched on the continent (4 581 launched on 18 platforms).
Lending platform, RainFin, based in the Western Cape, was the top Africa-based platform which raised the most funds last year (R237 million) and Thundafund was the most visited crowdfunded platform with an average 15 000 visitors a month.
Mobile technology adoption a key driver in growing crowdfunding
According to Afrikstart the adoption of mobile technology in Africa is a key driver of the rise of crowdfunding in Africa.
With over 700 million Africans owning a mobile phone, crowdfunding platforms have been able to leverage this growth and come up with innovative ways to create and promote projects via SMS and by allowing the use of mobile money to fund the crowdfunding projects.
Social media also played a significant role, particularly in the best performing countries.
“Among the top four fundraisers on the continent, namely: South Africa, Egypt, Nigeria and Kenya- roughly over 50% of their population use internet,” Afrikstart said.
“Similarly, a significant number of people in South Africa and Egypt are connected to Facebook. At least 23% of the population in these countries use Facebook, which is twice the average social media penetration in Africa of 11%,” it added.
Crowdfunding to grow to R33 billion by 2025
By the end of this year, the African crowdfunding industry is set to see a gradual increase in the number of projects funded and the total amount raised.
“The African crowdfunding market is set to increase: money raised by crowdfunding platforms operating in Africa (both Africa-based platforms and foreign platforms funding projects in Africa) is projected at $190 million (R2.5 billion) in 2016, based on AlliedCrowds estimations. The overall market potential of the crowdfunding market in SubSaharan Africa is estimated at $2.5 billion (R33 billion) by 2025, according to the World Bank,” Afrikstart said.