By Amanda Ellen Nicola Jojo
In this era of digitalisation and the network effect of the internet, businesses particularly small to medium enterprises (SMEs) are in a position to weigh alternative sources of funding such as crowdfunding. The Entrepreneurial Magazine Editor Amanda-Ellen Jojo (AJ) had an exclusive with Co-Founder and Chief Technology Officer of Lloyd Crowdfunding (LCF), Gift Gana (GG) who shared his insights on the significance of crowdfunding.
Below are the excerpts of the interview
AJ: What is Crowdfunding?
GG: For businesses, crowdfunding is the online offering of a private company’s financial securities (equity, debt instruments, etc.) to a group of people for investment. Crowdfunding leverages the easy accessibility of vast networks of people through social media and crowdfunding websites to bring investors and entrepreneurs together. The crowdfunding system has generally been used for charity and personal fundraising efforts. SMEs in several African countries (e.g., Mauritius, South Africa, Morocco, Tunisia, Cote d’Ivoire, Senegal, etc.) have, however, successfully managed to raise capital for business start-up and growth through crowdfunding.
AJ: Kindly give us a background on Lloyd Crowdfunding, for instance, who founded it.
GG: Lloyd Crowdfunding is a subsidiary of Lloyd Corporate Capital that has been providing human, equity, and debt capital and training and advisory services to businesses in Southern Africa for over 15 years. Lloyd Crowdfunding started operations in May 2022 when it became the first crowdfunding platform to be approved by the Regulator in Zimbabwe. The company was founded by Mr. Bekithemba Nkomo, a seasoned business leader with vast business experience and has sat on many boards of directors of listed companies, together with Mr. Gift Gana, a technologist expert with many years of experience and several technology-driven achievements.
AJ: What do we need to know about this platform?
GG: Lloyd Crowdfunding facilitates the funding and growth of Small-medium sized Enterprises by providing a platform for business promoters and investors to interact. The business owners get access to capital, technical skills, and markets, giving them a chance to grow their businesses at a reasonable cost. The financiers get exposed to a wider pool of investment opportunities vetted and ranked through a rigorous process. In return, the investors are appropriately rewarded for their investment. The platform seeks to assist the many SMEs, especially women and the youth, that are failing to get the much-needed funding, e.g., because they do not have adequate collateral to obtain financing from traditional channels. The operating requirements under the Sandbox and our adoption of industry best practices, e.g., from the African Crowdfunding Association (ACfA), will guide us to ensure that investors are exposed to well-vetted investment opportunities and that the platform is protected from fraudsters.
AJ: What are the benefits of joining Lloyd Crowdfunding?
GG: Lloyd Crowdfunding has a pool of investors ready to provide funding to businesses, which, combined with a fast-vetting process, means the turnaround time on getting funded is very quick.
Borrowers on the LCF platform can access loans with interest rates lower than they could obtain from traditional lenders.
There is no requirement to provide any collateral, so Lloyd Crowdfunding opens investment doors for promoters who are disqualified in other types of borrowing.
The application process is quick and easy, allowing promoters to access funds in a shorter period.
AJ: Who is eligible to join?
GG: All SMEs operating as registered legal persona, are ZIMRA registered and have been operational for at least 2 years. The businesses need to have bankable projects,
AJ: What is your vision?
GG: To be the preferred capital raising partner for small and medium businesses in Zimbabwe.
AJ: What are some of the risks associated with crowdfunding and how do you intend to curb them?
GG: The operating requirements under the Fintech Regulatory Sandbox and our adoption of industry best practices, e.g., from the African Crowdfunding Association (ACfA) will guide us to ensure that investors are exposed to well-vetted investment opportunities and the platform is protected from fraudsters.
To protect our investors in cases like incapacitation of the promoter, there is insurance taken on debt products which will be used to reimburse lenders should the promoter fail to pay back their debt.
AJ: What form of funding does your company offer?
GG: The promoters can raise financing on the platform in several ways, including equity, debt, quasi-equity, and a combination of equity and debt. Under equity, SMEs can get funding in exchange for giving up a portion of shareholding in the business.
Under the debt option, businesses can obtain a loan that will carry a market-related risk-driven interest rate. The loan tenure will be for a minimum of 6 months and a maximum of 3 years.
Quasi-equity is a type of financing that ranks between equity and debt, having a lower risk than senior debt and higher risk than common equity. This includes preference shares and debentures and can have any of the features that come with such an instrument (convertible, redeemable, cumulative, participating, etc.).
Under the equity-debt combination, a business can raise capital through the combinations of the above in different proportions depending on the project being financed.
AJ: How has been the reception of Lloyd Crowdfunding by key stakeholders?
GG: The reception has been quite well so far. We have received enquiries from both the promoters and the financiers. Our team is currently vetting the first batch of promoters who came through and they should be ready for listing anytime soon.