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Crowdfunding dilemmas: understanding the roadblocks in Bangladesh’s SME’s financial landscape

Shabrina Jannat (Department of Economics, Chittagong Government Women’s College, Ministry of Education, Chattogram, Bangladesh)

International Journal of Innovation Science

ISSN: 1757-2223

Article publication date: 23 January 2025

24

Abstract

Purpose

The purpose of this paper is to examine the complexities of crowdfunding for small and medium-sized enterprises (SMEs) in Bangladesh, with a focus on its global significance and unique characteristics in Muslim nations. By identifying key challenges such as the lack of a legislative framework, limited understanding of crowdfunding strategies and insufficient knowledge among entrepreneurs, this paper aims to provide recommendations for overcoming these obstacles. Through the analysis of open access articles published between 2015 and 2023, supplemented by occasional non-open access resources, this review seeks to contribute to the understanding of crowdfunding dynamics in emerging economies and inform policy and practice in this area.

Design/methodology/approach

A comprehensive review of the obstacles facing crowdfunding in Bangladesh’s SME sector was conducted using a diverse range of literature sources. These included 15 paid journal articles, 49 open-access journal articles, three conference papers, two websites and 11 book chapters. The selection of paid articles was based on criteria such as relevance to crowdfunding and fintech in emerging markets, recentness and influence. The review focused on literature published between 2015 and June 2024, encompassing key developments like the impact of the COVID-19 pandemic. Articles were sourced from platforms like Typeset.io, Google Scholar and ResearchGate, with themes categorized by cultural, social, regulatory, technological and economic factors.

Findings

This review paper explores the complexities of crowdfunding in the context of SMEs in Bangladesh. It provides insights into its worldwide significance, unique characteristics in Muslim nations and the obstacles encountered in the financial environment of Bangladesh. Crowdfunding has become a prominent worldwide trend, revolutionizing traditional fundraising methods and providing a wide range of funding options for different projects. Nevertheless, the implementation of this technology in Bangladesh, despite its significant role in the worldwide economic sphere, is hindered by various obstacles. The assessment highlights the capacity of crowdfunding to tackle the financial obstacles encountered by SMEs in Bangladesh, which is a crucial sector for the economic progress of the country. The current crowdfunding platforms in Bangladesh, including Projekt.co, GoRiseMe, Fundsme and Oporajoy, encounter reliability problems, which impede the wider adoption of this innovative financial model, despite its tremendous potential. Multiple factors contribute to the lack of popularity of crowdfunding in Bangladesh. These factors comprise the absence of a legislative framework, a poor comprehension of various crowdfunding strategies and a general lack of knowledge among entrepreneurs. The research highlights various obstacles, including limited expertise, insufficient government backing, reputational risk, security weaknesses and the adverse characteristics of crowdfunding, as major hindrances. Moreover, this study investigates the factors that contribute to the lack of acceptance of crowdfunding among entrepreneurs and investors in Bangladesh. Challenges concerning the financial system, regulatory deficiencies and a deficit of confidence arise as crucial elements impeding the efficient exploitation of crowdsourcing. Cultural and behavioral factors, together with technical literacy, significantly influence crowdfunding intentions. To surmount these obstacles and fully use the possibilities of crowdfunding for economic advancement, the assessment puts out a number of suggestions. These factors encompass the requirement for a secure and reliable financial industry, strong development of policies, increased clarity and the incorporation of all individuals and groups. To enhance confidence, safeguard backers’ interests and expedite the adoption of crowdfunding in Bangladesh, it is recommended to implement government intervention, regulatory reforms and integrate blockchain technology. For crowdfunding to thrive in Bangladesh and make a substantial contribution to economic progress, it is necessary for multiple stakeholders to make coordinated and determined efforts. To fully unlock the revolutionary power of crowdfunding in Bangladesh’s SMEs financial landscape, it is crucial to address the regulatory loopholes, improve financial awareness and use innovative technology.

Research limitations/implications

The reliance on open-access sources, influenced by budget constraints and the lack of institutional access, may introduce some bias. However, the inclusion of a few key paid articles, identified through Typeset.io and reviewed for their relevance, aimed to mitigate this limitation and provide a well-rounded analysis.

Practical implications

The practical implications of this review paper are significant for improving crowdfunding adoption in Bangladesh’s SME sector. By identifying cultural, social, regulatory, technological and economic barriers, this paper provides insights for policymakers to design better regulations that ensure security and transparency in crowdfunding. It can also guide crowdfunding platforms to address these challenges, making their models more accessible and reliable. Entrepreneurs and investors can benefit from a clearer understanding of crowdfunding as an alternative financing option. In addition, this paper offers a foundation for future research and the development of fintech solutions tailored to emerging markets.

Social implications

The social implications of this review paper are crucial for fostering inclusive entrepreneurship in Bangladesh. By addressing the barriers to crowdfunding, particularly for women and marginalized groups, the findings can promote greater access to finance for underrepresented entrepreneurs. This could lead to increased economic participation and empowerment, helping bridge the financial gap for SMEs in underserved communities. In addition, enhancing crowdfunding adoption can drive innovation, encourage community-based projects and support social enterprises, contributing to overall socioeconomic development. The insights can inspire initiatives that make crowdfunding more inclusive, helping uplift disadvantaged groups in Bangladesh’s entrepreneurial landscape.

Originality/value

The originality/value of this review paper lies in its comprehensive analysis of the complexities of crowdfunding for SMEs in Bangladesh, particularly within the context of Muslim nations. By synthesizing existing literature and identifying key challenges such as the lack of a legislative framework, limited understanding of crowdfunding strategies and insufficient knowledge among entrepreneurs, this review offers valuable insights for policymakers, practitioners and researchers. The recommendations proposed, including secure financial practices, strong policies and government intervention, alongside regulatory reforms and blockchain integration, contribute to advancing knowledge and informing strategies to promote sustainable crowdfunding initiatives for SMEs in emerging economies.

Keywords

Citation

Jannat, S. (2025), "Crowdfunding dilemmas: understanding the roadblocks in Bangladesh’s SME’s financial landscape", International Journal of Innovation Science, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJIS-03-2024-0066

Publisher

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Emerald Publishing Limited

Copyright © 2025, Emerald Publishing Limited

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