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Mexico, crowdfunding leader in the region

A study conducted by the Multilateral Investment Fund highlights the opportunities that crowdfunding offers towards the financial democratization of small and medium entrepreneurs in the region. Mexico stands out in adopting this collective financing mechanism.

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Published by ConnectAmericas

The results from the first crowdfunding study conducted in Mexico reveal that in recent years new technologies have generated a great number of innovative ventures and business opportunities. The study conducted by the Multilateral Investment Fund (MIF) of the Inter-American Development Bank (IDB) reveals that entrepreneurs are using innovative tools such as online portals to channel funds for testing and developing products, expanding operations, charitable projects and other collective financing initiatives. 

According to the report called  “Crowdfunding in Mexico: the power of digital technologies to transform innovation, entrepreneurship and economic inclusion”, a huge market, better access to technologies, sophisticated investors, growing entrepreneurship culture and the dynamic supply of crowdfunding platforms create an ideal climate for the success of this mechanism in the country.

Future challenges

The study indicates that entrepreneurs and micro, small and medium enterprises (MSMEs) in Mexico are in considerable need of financing. In contrast to micro enterprises, SMEs are usually formally registered and are easier to supervise and regulate. 

Experts explain that while the crowdfunding ecosystem is under development, feasible opportunities will increasingly arise and incentives will improve so that they can join the formal economy. On the one hand, this fosters the regularization of companies and on the other hand, entrepreneurs will have better access to financing. The authors affirm that this will help improve the quality and competitiveness of the entire sector. 

Researchers reveal that in Mexico there are both domestic initiatives and subsidiary initiatives with platforms based in other countries. Notable aspects that drive the generation of a positive environment for crowdfunding include:   the proximity to U.S. capital markets, the country’s entrepreneurship culture and the technology infrastructure. 

The report affirms that Mexico is advancing as crowdfunding leader in the region and is helping to pave the way for its extension to the rest of Latin America and the Caribbean. However, in order to increase its adoption and reliability experts recommend the continuous improvement of Internet access, availability of credit cards and other on-line payment mechanisms in addition to promoting the use of social networks.  

Researchers have developed a series of recommendations to promote the adoption of crowdfunding in Mexico and in the rest of the region. Among others, in order for this initiative to become feasible they recommend expanding the network of professionals involved as well as improving legislation on the use of new online technologies and adequate intellectual property protection.  

Researchers highlight the importance of having current laws and regulations in place and the support of institutions with efficient supervisory and compliance controls. These elements will improve the legal and regulatory framework required to support the crowdfunding ecosystem in Mexico and in the rest of the countries in the region.

To access the full research document, click here.

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