For the financing of a project, a large number of individuals are involved in the various transactions without going through the traditional actors: this is the basis of participatory financing or crowdfunding. First of all, it is essential to know what participatory financing really is, so that we can then move on to its foundations. To finally know how it works.

Participatory financing: what is it?

Participatory financing is a method of financing based on the exchange of funds between people in order to contribute to the realization of a project. This does not fall within the traditional financial framework. The project can touch several areas such as humanitarian, cultural or economic. Indeed, one can find projects of all kinds in crowdfunding for example the foundation of a charity, the creation of a musical, the creation of a company or even the financing of a union through marriage.

Financial contributions are collected using an online funding platform. The form of financing can be a capital investment, a donation, or even an interest-free loan. Participatory financing or crowd financing is opposed to bank financing because it is autonomous and is done by a large number of people. Everyone can decide whether or not to contribute to the project. To find out in detail how participatory financing works, click here.

Participatory financing: what are its foundations?

According to his possibilities, the person who contributes to a participatory financing makes his proposal. For the financing of a project, participatory financing is based on the collection of sums of money. It is therefore a solidarity-based economy. The participants are not motivated by profits but rather by the idea of participating in a project that is of interest to them. Companies as well as private individuals can contribute to a crowdfunding.

There are several types of crowdfunding. You can participate for example through a donation that you make for an associative project that is dear to you. You will be satisfied when the project comes to fruition thanks to your contributions. You can also make your contribution in the form of a reward. If it is a project for the development of a product in the new technology, with your participation, it is possible that a prototype will be delivered to you. Loan and investment are two classic types of participation in a participatory project. In both cases, if the project expands, the contributor receives a return according to the level of his or her participation.

Participatory financing: how does it work?

Participatory project finance is launched on a web-based financing platform. Project leaders and potential funders can meet each other via the net. The operation takes place as follows: the person who initiates the project opens an account on this platform and puts on it detailed descriptions of his project, without forgetting the total amount of the project and the sum he wishes to have, the forms of financing for his project. Then the person who wants to contribute to the project opens an account via the same platform and ticks a choice of how he wants to contribute. This form of soliciting contributions is very advantageous for the project leader. The investments are very broad and this facilitates access to funds. Participatory financing is also excellent for the promotion of his project even by word of mouth between investors. It highlights the entrepreneurial spirit that can reach a wide audience.

However, it should be noted that if the desired amount is not reached at the end of the financing period, the funds are not transferred to the project holder. But as soon as the fund is raised, the project leader can recover it for the realization of his work. And he has a duty to report regularly on progress to those who have contributed to the realization of his work. The development of participatory financing platforms has multiplied in recent years on the net. It is generally classified as a specialized activity. So, registrations depend on the vision of the project leader. This mode of financing has become very widespread. Its breakthrough has come in various forms, and that is very gratifying.