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What Can Crowdfunding Bring to Latin America?
© Image: Flickr.com / Shared Interest
editorial

What Can Crowdfunding Bring to Latin America?

Editor's Note: The following comes to us from Juan Sebastian Torres, director of Colombian crowdfunding platform La Chèvre. Torres writes in to explain how, he hopes, crowdfunding will change Latin America in the new year and beyond. 

According to data in the Crowdfunding Industry Report published in May 2012 and Consumo Colaborativo’s directory, South America (excluding Brazil) has fewer than ten crowdfunding platforms, Argentina being home to most of them. Being involved in this emerging industry (I am the director of La Chèvre, a Colombian crowdfunding platform), however, I can say there will be drastic changes in the coming months.

The increasing popularity of crowdfunding has caught the attention of young entrepreneurs who happen to be interested in social, cultural, technological, and creative projects. Just in Colombia, four new crowdfunding platforms will launch in the beginning of 2013.

Seeing that the next year will be a relatively big year for the development of crowdfunding in South America, it seems important to briefly analyze how these countries may benefit from it.

Socioeconomic and technological gap

Even though South America has improved greatly economically and technologically, with cities such as Bogotá and Medellín competing – in terms of innovation – with New York and Tel Aviv, there’s still much to be done about people's lack of access to new technology. In recent years, government programs have encouraged the use of new technologies and have financially supported the emergence of innovative startups. Despite these initiatives, internet penetration is troublingly low. On top of this, the regions that do have good access to the internet lack the incentives to get more involved with the tools and technologies that the internet provides.

In this regard, crowdfunding platforms seem like a good way to push progress. They encapsulate a cooperative community, alternative funding, productive use of social networks and, most importantly, the encouragement of creative and innovative projects. Clearly, the emergence of crowdfunding platforms will not magically solve the technological gap, since it involves government investment and extensive educational programs. But as more and more projects come from distant cities and towns, they may help to proliferate some practices related to new media and networks.

improving costs, methods and laws Related to online payments

One of the biggest problems for crowdfunding in South America is online payments. There are a handful of companies operating in this space, but they don’t have the same standards as the ones in the U.S. In some cases, they even (unwittingly) inhibit good practices. With crowdfunding platforms set to grow in 2013, we hope two things will happen.

The first is incentivizing the use of online payments, which is something we’re still getting used to in South America (despite the guarantees the companies provide). We also hope that crowdfunding will draw attention of financial institutions for better laws and methods of online payments.

To get a sense of the state of online payments in South America, let’s look closely at Colombia. For an entrepreneur, there are, essentially, four popular and secure options to manage payments on a website. They work perfectly for a regular e-commerce site. Since Colombian laws charge for each refund, however, they don’t work so well for the “all-or-nothing” crowdfunding model. This was one of the reasons Idea.me (the biggest crowdfunding platform in Latin America) added the “keep what you earn” model in addition to the “all-or-nothing” model.

As I mentioned, online payments are also not as common for Colombians as they are for Americans or Europeans. Thus, payments need to be thought of as being in a “transitional” stage. As I see it, the complexity of crowdfunding payments system may help to advance online payments both logistically and legally.

Strengthening a cooperative, innovative and productive community

Yes, there are a few technical and cultural disadvantages that make the crowdfunding process a bit harder in Latin America. But that’s also the beauty of crowdfunding’s potential in the region. It has to overcome some small obstacles and when it does, it can help push our culture into a more productive and cooperative relationship with extended networks. We’ve seen the region move into this direction already. In the last few years, there's been an urge among entrepreneurs in the region to work collaboratively. Even though the initiatives have been small and have not included the general population, they have worked very well.

I, both as an entrepreneur and a collaborator, have a lot of hope on what crowdfunding platforms – and their derivatives – can bring to South America. It may seem like we’re late to the party, but everything must happen at its own pace. Surely, when crowdfunding does explode in the region, it will bring new, innovative and resourceful approaches to the industry.

For more on the crowdfunding scene in Latin America, check out our article on Crowdfunder's move into Mexico.

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Comments

  • Guest Justyna Król Dec 19, 2012 07:07 pm GMT

    Dear Juan,

    Thanks for this text! I would be very interested to learn about the support culture in your region. Are people trustfull and willing to invest their money in projects published on crowdfunding platforms? I know that your platform is very young, but I'm curious if you are taking any educational or promotional actions to increase awareness and trust in the area of crowdfunding? How do you deal with Intelectual Property rights?

    I'm in the process of launching a similar to La Chevre crowdfunding platform in Poland. It took us 18 months to get a permission from the ministry... Here are some of my experiences and thoughts about it: http://lifeanddev.wordpress.com/2012/10/07/my-crowd-is-different-than-yours/

    Hope to hear from you!
    Justyna

  • Guest Albert Cañigueral Dec 20, 2012 10:23 am GMT

    Thanks for the link to the blog. I would also suggest you to check http://www.mycrowdfundingstudy.com/ (http://www.shareable.net/blog/crowdfundings-future-in-latin-america) and if you want to skype for an exchange of views and opinions I ll be more than happy to.

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