Crowdfunding in 360º: alternative financing for the digital era

Financial crowdfunding can play an important role as a complement to traditional sources of financing, targeting business segments that are not covered by conventional formats. It can also help entrepreneurial ventures to get off the ground, boosting innovation and, with it, economic growth. On the other hand, in a context of scarce credit and economic crisis, it can become a key factor in alleviating funding needs, contributing to economic recovery while also providing high returns for savers. However, investing through crowdfunding can bring potentially high risks of solvency and liquidity, in a market where greater informality exacerbates the asymmetry of information between borrowers and lenders. Furthermore, the mediation carried out by platforms falls into the category of shadow banking meaning that, inasmuch as they are outside the traditional banking system, the regulation with which they must comply is much less onerous. Thus, there is a need to establish a balanced regulatory framework in order to enable this complementary source of funding to develop whilst simultaneously protecting retail investors and avoiding systemic risks.

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