SME Financing: Crowdfunding vs Microfinance

ABSTRACT The aim of this thesis is to investigate whether crowdfunding could replace microfinance as a better funding alternative for SMEs (Small to Medium Scale Enterprises) in Ghana. It also serves as a guide for potential crowdfunding institutions that would be interested in knowing the motivations SMEs have for choosing their financing methods. The key words that were where investigated and guided the entire study were SMEs, Crowdfunding and Microfinance The study then compares financing preferences of SMEs with the structures available in microfinance institutions and crowdfunding institutions. The study used Pearson’s Chi Square test to test significance of relationships of variables in the questionnaires that were posted, and used factor analysis to drive to conclusions from themes generated by the factors. It was concluded that SME incentives did coincide with what crowdfunding offered but failed in guaranteeing speed of funding which was dependent on those willing to fund you. That would be a limiting factor in a country like Ghana where speedy access to capital is a requirement. It was also concluded that due to the volatility of the financial services industry in Ghana, SMEs were not looking for a specific structure but rather a financing method that was quick and cheap.