Crowdfunding for Youth Entrepreneurship in Tanzania

Abstract:

The importance for countries, regions, and sectors of all kinds of having a healthy entrepreneurial ecosystem is widely recognized –UN’s Sustainable Development Goals (no. 9). The importance of access of entrepreneurs to capital through financial services is equally obvious. Bank lending is the most common source of external finance for many SMEs and entrepreneurs, which are often heavily reliant on straight debt to fulfill their start-up, cash flow and investment needs. However, due to such start-up’s inability to demonstrate value ex-ante, their association with high risk, and their low level of collateral, these small ventures often have a difficult time obtaining financing from conventional sources such as banks (Cosh et al. 2005).Accordingly, the literature highlights some of the limitation of traditional debt financing for responding to the different financing needs that youth entrepreneurs encounter along their life cycles. Among the key challenges for youth entrepreneurship after having good business ideas is availability of and access to finance. Funding becomes a matter of friends and family, and local dealers all representing limited and expensive means of entrepreneurial finances. This raises the question of alternative and innovative approaches to financing entrepreneurs and start-ups.