Crowdfunding originated in the west and made its mark in India, especially during the pandemic Covid-19. People have realized the importance of crowdfunding platforms. Concerning its legality, people are still unsure. In this blog, we will study varied types of crowdfunding and learn about their legality in India.
Th current results show how crowdfunding has become a rich source of medical fundraising. Though venture capitals, bank loans, and corporate investments exist as the source of finance, the crowdfunding role cannot be neglected because it is the simplest and safest means to gain funds through people who value your cause.
Crowdfunding can be an excellent source to support various causes and meet emergency financial needs.
Crowdfunding legality in India
Suppose you are enquiring whether crowdfunding is legal in India or not. The answer is yes. In India, both online fundraising and online crowdfunding are legal.
Raising funds could be for any of the purposes below :
- Fulfill the medical emergencies
- Meet the costly hospital bills
- Support education for the poor
- Crises were raised during the global pandemic as covid-19
- Support NGOs
What kind of crowdfunding are legal in India?
Fundraising for social causes:
In this kind of fundraising, the donors contribute funds to meet a social cause; however, they do not expect anything in return.
Education crowdfunding :
Education crowdfunding can be availed by the teachers, students, parents, and non-teaching staff to fulfill the education requirements.
Education crowdfunding is gaining much applause as it effectively reaches a vast student base in less time. The funds will help to have classroom essentials, build toilets or take the children to field trips. Also, these funds help meet the daily meals, enhance the school infrastructure, create a good play area, and renovate the classroom.
In this fundraising option, the donors contribute to a campaign to meet an individual’s or general medical needs.
Medical bills are a burden to some families who can financially afford them. Usually, the chemotherapy routines of cancer treatment cost huge. Treatment and other medical expenses cause a hard time for common people. Insurance plans cannot cover the complete funding essentials.
In this fundraising, the cancer patients, their friends, or family can start a campaign using O-Bless to raise funds for the costly cancer treatment.
Cancer is caused due to malfunctioning of genes within the cells of our body. As a result, the cells grow and divide without any control. Such cells lead to cancer.
Illegal crowdfunding in India
Equity-based fundraising is considered illegal in India. The process involves raising funds for the business ideas by giving investors equity interest online in exchange for the funds offered.
Securities and Exchange Board of India(SEBI) considers equity fundraising illegal with the view that every investor might not be mature enough to know the risks involved. In case of any regulation absence, a small investor’s life can turn risky.
The crowdfunding model
Three crucial people act up the crowdfunding model: the first person initiates the idea or a project to be funded; the second one is the individual or group who favors the idea; the third person is the moderator or the platform that brings both of them together.
The Securities & Exchange Board of India (SEBI) has identified the brand new potential of the crowdfunding market in India. Under proper regulation, crowdfunding can become a magnificent funding source for startups or any other social cause.
Crowdfunding is still in its early stages, and its future is encouraging. SEBI and RBI have collaborated to build a regulatory framework to manage crowdfunding impact and express its legal implications. More enhanced policies and regulations can transform the way crowdfunding works.