How crowdfunding works

Crowdfunding is collecting small sums of money from multiple people for a specific project, business venture or social cause.

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Community crowdfunding which includes donation based and rewards-based crowdfunding are legal.
1. Crowdfunding is collecting small sums of money from multiple people for a specific project, business venture or social cause.

2. It uses a web-based platform or social networking sites to solicit funds for the fundraiser by showcasing the story to potential donors or investors.

3. According to the rules in India, equity-based crowdfunding is illegal, whereas peer-to-peer lending is regulated by the RBI.


4. Community crowdfunding which includes donation based and rewards-based crowdfunding are legal and are quite popular to raise funds for social causes.

5. The crowdfunding websites typically charge a fee for using their platform and services to bring money for the cause.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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