Crowdfunding operations: Outreach factors in developing economies

• DOI: http://doi.org/10.1002/pa.1988
• Date: 01 February 2020
• Published date: 01 February 2020
• Author: Waleed Eid Abdel Rhman Samarah,Saleh Fahed Saleh Alkhatib

ACADEMIC PAPER

Crowdfunding operations: Outreach factors in developing

economies

Waleed Eid Abdel Rhman Samarah |Saleh Fahed Saleh Alkhatib

Business Administration Department, Yarmouk

University, Faculty of Economic and

Administrative Sciences, Irbid, Jordan

Correspondence

Saleh Fahed Saleh Alkhatib, Assistant

Professor of Operations Management,

Business Administration department, Yarmouk

University, Faculty of Economic and

Administrative Sciences, PO Box 566. Irbid

21163 Jordan.

Email: dr.saleh@yahoo.com; saleh.f@yu.edu.jo

This study aims to explore factors that contribute to the outreach of crowdfunding

platforms in developing economies. Specifically, it aims to examine the perspectives

of experts, funders, and fundraisers to provide several applicable recommendations

to accelerate the outreach. An initial framework has been developed to fit with the

developing economies; experts from Jordan were meet to validate the framework

suitability; two questionnaires were developed for funders and fundraisers;

crowdfunding experts from more than 10 countries worldwide reviewed and vali-

dated the methodology and the questionnaires; 833 questionnaires were collected,

coded, and analyzed; analysis and statistical tests validated by statistical academic

and analysis specialists. Outcomes affirm the importance of crowdfunding outreach

proposed factors in developing economies with a variation between concerned

parties: Experts emphasize “supervision and a regulatory framework”; funders focus

on “Openness and Transparency”; and fundraisers focus on “Financial Knowledge”

as essential factors to the outreach of these platforms. This study focused on the

“Debit ‐based”and “Equity ‐based”crowdfunding platforms. Therefore, some findings

may not be generalized to the “Donation ‐based”and “Reward ‐based”platforms.

Several applicable recommendations have been suggested.

1|INTRODUCTION

Micro ‐small and medium enterprises (MSMEs) make up more than

96% of all Asian businesses that provide two out of three private sec-

tor jobs in the continent (Yoshino & Taghizadeh‐Hesary, 2017).

Studies show that registered SMEs contribute up to 45% of employ-

ment and up to 33% of gross domestic product in developing econo-

mies (Teima et al., 2010). In Jordan, 157,211 registered MSMEs that

represent 99.4% of all registered enterprises (Department of Statistics

[DOS], 2014) are estimated by Central Bank of Jordan (CBJ) to con-

tribute around 40% to gross domestic product (CBJ, 2017). Therefore,

MSMEs considered the backbone for business environments in both

developed and developing economies. But, after the financial crises

in 2008, more prudential instruction forced on banks (Aggarwal &

Stein, 2016) and therefore, more and more banks move back from

lending MSMEs (Brown & Lee, 2014; Aggarwal & Stein, 2016).

Moreover, banks show difficulties to measure MSMEs creditworthi-

ness and prefer to fund large corporates (Yoshino & Taghizadeh‐

Hesary, 2017). These issues increase the financing gap especially in

the Arab region where it reached around 210 to 240 billion USD

(Saleem, 2013). In Jordan, a significant expected credit gap for MSMEs

estimated to be JOD 2.7 billion, whereas the MSMEs loan portfolio of

banking sector amounts only JOD 1.6 billion (European Bank for

Reconstruction and Development, 2015). Now more than any other

time, MSMEs suffer from limited access to source of fund (Yoshino

& Taghizadeh‐Hesary, 2017). One can raise question such how to

facilitate funds for MSMEs and solve these massive issues?

Crowdfunding operations/platforms (CFO/Ps) emerge as a new

source of fund for MSMEs (Aggarwal & Stein, 2016; Tuomi &

Harrison, 2017). CFO/Ps show highly growth rate exceeds 300% in

certain countries (Massolution, 2015) except Arab region where it is

very limited growth. Although the slow growth of MSMEs in Arab

region, there is good yet unrealized potentials (Zhang et al., 2017).

CFO/Ps achieve growth around 96%, 188%, and 119% in Europe,

North America, and South America with volume of 6.1 billion USD,

36.7 billion USD, 110 million USD, respectively (Masslution, 2015).

Received: 16 April 2019 Accepted: 9 May 2019

DOI: 10.1002/pa.1988

J Public Affairs. 2020;20:e1988.

https://doi.org/10.1002/pa.1988

© 2019 John Wiley & Sons, Ltd.wileyonlinelibrary.com/journal/pa 1of15