Description

In crowdfunding, individuals financially contribute to an infrastructure project that is of particular interest to the public through direct investment in the project or the sale of mini-bonds. Crowdfunding is an alternative source of income for projects and small-scale infrastructure. It is guided by the principle that citizens can voluntarily invest a certain financial amount into a proposed project or initiative. Due to its limited scale and the need to be quite specific about the scope and funding targets, crowdfunding sources usually finance certain elements of an infrastructure project, such as small-scale feasibility studies and a water supply for a specific small community. Crowdfunding can also be used as a debt instrument through mini-bonds, where pooled contributions can be structured effectively as a bond and provide the potential return on crowdsourced investments.

Instrument category

Individual and community financing

Implementation status

Low - limited evidence available

Enabling conditions and success factors

• Very few enabling conditions are required beyond the digital infrastructure needed for crowdfunding and a robust and trusted entity to initiate and implement the project.

Instrument benefits

• Crowdfunding can help finance climate-related projects that may be important to a local community but are not attractive to commercial investors due to their small volume.
• Crowdfunding for climate finance also can help ‘democratise’ climate financing by increasing awareness and encouraging public participation.

Challenges and risks to implementation

• Project ownership and continued responsibility for maintenance of a funded asset must be addressed from the outset.

References

Case studies

GROVE: forest smart ledger (FSL) for crowdfunded payment for ecosystems services for mangroves in India