Crowdfunding and Growth of Agricultural Small Medium Enterprises in Bura Irrigation Scheme, Kenya

Abstract

The growth of SMEs in Africa is impeded by two significant factors: capital accessibility and affordability. The accessibility factor is contributed by the fact that most SMEs in Sub-Saharan Africa are informal and not registered, making it difficult for banks to risk investing in them. This study aimed to examine the effect that crowdfunding platforms had on the growth of Agri SME with a unique look at a platform that funded farmers in the Bura Irrigation scheme. The study looked at three elements of crowdfunding: legitimacy, value for value and supporter’s interaction. On the growth of SMEs, the study measured four indicators: revenue growth, competitive position, market expansion, and innovation influence the Agri-SME will receive as a result of its interaction with the crowdfunding platform. Since studies on crowdfunding elements are relatively new in Kenya, the study adopted a descriptive design. The design helped the study analyze the patterns of the targeted population and, in the process, quickly discover underlying relationships and associations on the researched variables. Agri-SMEs in the Bura Irrigation scheme were selected because of ease of access and the fact that the platform was a startup. The study conducted a mixed method study on a sample of 33 respondents who were randomly selected using a simple random sampling technique. The study findings show legitimacy to have the strongest correlation with Agri-SME growth. Trust formed between investors, farmers, and campaign creators largely determined the legitimacy and success the platform would tend to achieve. The study showed that this trust is built by the quality of communication achieved and the experience or brand of the platform – a factor that makes it difficult for a startup platform to succeed. The trust that the platform yields tends to affect both the trust yielded to the creator, who in this case was the campaign creator, and the project itself. The ability to reveal clear and relevant information that could be easily interpreted by the receiving party can help overcome information asymmetry and build confidence among investors. The findings of the study show that, indeed, access to credit is an impetus to the growth of Agri-SMEs. Even though crowdfunding provides an alternative source of financing, the challenge of the investors harbouring most of the risks and the lack of clear accountability makes most investors sceptical about this model of investing.