How Crowdfunding works in Africa
African weddings are an expensive affair, with Konbini reporting that the average Nigerian wedding costs between $10,000 to $15,000 with some going as high as $300,000. This means that almost nobody gets married without some form of assistance from friends, family & colleagues.
Take Michael Adebowale, he works in a bank as a teller and earns around $552 a month but pays out close to 70% of that for rent, utilities, contributions to his family, and food, this means he has barely anything to save or to make big purchases.
The budget for his wedding is $8000. There is no chance he can pay for this himself, so his friends and family come together and begin a contribution for the wedding, everyone is encouraged to “bring whatever they have”, after about a month the total contribution from all Michael’s friends, family, colleagues, alumni organisations and the church is $5000. And just like that, Michael’s wedding has been crowdfunded.
Lack of access to credit is one of the biggest problems for people in developing countries across the world. Financial institution’s in sub-Saharan Africa consider simple loans to individuals as extremely high risk, so much so that government legislation has been required to force them to provide these kinds of loans. In Nigeria, the Central Bank has issued new guidelines to banks forcing them to maintain a 65% loan to deposit ratio.
It’s not surprising then that alternative systems for credit have been created in order to meet what is obviously a huge need.
As a community-oriented society, West African countries have always had a form of crowdsourcing. In the eastern parts of Nigeria, communities would often pick a “gifted” child, raise funds from every single family and put that child through school from secondary & tertiary to the postgraduate level usually abroad with the expectation that he would become hugely successful and take on some community-oriented projects as well as pay it forward to another child.
The Igbos have a saying that you can find in virtually every community in Africa; Gidi gidi bu ugwu eze (Unity is strength ). This applies in many aspects of life and extended family members are expected and sometimes even required to contribute funds when a member is in need.
There is also the concept of a family home or family compound. Due to Rural-Urban drift, whole families have moved from their hometowns to cities while still maintaining strong ties to their hometowns. Extended families will usually raise funds among themselves to build & maintain a large home or group of homes in their “villages”.
The general idea behind crowd-funding is leveraging the power of your community to achieve things that would be impossible for you to do alone, an idea that is a part of daily life in Africa. It's unsurprising then that there has been a raft of interesting tech startups on the continent digitising the crowdfunding space for several different sectors.
A few notable examples are:
- Bezomoney: based in Ghana, they are digitising the susu groups by creating an app that automates monthly contributions which are then given to a single member to take care of capital intensive projects, the cycle is repeated every month.
- Farmcrowdy: based in Nigeria they crowdsource funds from middle-income Nigerians who they call sponsors, these funds are then given to smallholder farmers to help facilitate the farming cycle. The sponsors and the farmers share in the profit after the farming cycle.
- FINC: This is a P2P lending app, users can request loans to meet immediate needs. The loans are provided by other users who can contribute to the person in need for a share of the interest when the loan is paid back
- Indiegogo: This is a more international platform dedicated to raising funds for hardware projects. People with gadget ideas can visit the site and try to raise funds from people across the world in return for perks like T-shirts, early access and free copies of the device when it's ready.
Cofundie is also a crowdfunding platform based in Nigeria & Ghana. the focus is to fund homes created using alternative materials like wood, rammed earth & shipping containers. The goal for Cofundie is to shift the paradigm in the real estate construction space and create a viable alternative to traditional brick and mortar homes which are cheaper, have faster build times and are eco-friendly.
Crowdfunding is a “big” and relatively new word, however, the concept and general applications are commonplace on the continent. With the strong communal ties, the pre-existing and deeply ingrained culture of mutual assistance & help, it's a pretty solid bet that crowdfunding will play a deeper role in the evolving financial sector in Africa.
