What Drives Small Business Crowdfunding? Impact of Macroeconomic and Financial Factors

This paper responds to the growing popularity of micro-finance platforms and the associated increasing volume of funding flowing through these platforms. This development also increases scientific attention to reward-based crowdfunding financing, an alternative to traditional bank loans and debt-based microloans. We choose a macroeconomic approach to look at the factors influencing the demand for crowdfunding funds in a particular country each year. Using a unique dataset extracted from the Crowdsurfer web service, we show that the volume of requested funds through reward-based crowdfunding projects in 27 OECD countries from 2009 to 2016 depends on the availability, effectiveness, and depth of the traditional banking sector institutions and financial markets. Our analysis also shows that macroeconomic variables such as GDP growth affect the demand for reward-based CF financing in the same way they influence demand for traditional bank loans. Finally, we suggest that the demand for reward-based CF loans is driven by similar motives as the demand for shadow banking loans in general.