Question
GSEasyPrelims 2026Economy

Which of the following statements about Crowdfunding is/are correct ?

  1. Crowdfunding is solicitation of funds (small amount) from multiple investors through a web-based platform or social networking site for a specific project.
  2. Small and Medium Enterprises (SMEs) are able to raise funds at lower cost of capital without undergoing rigorous procedures.

Select the answer using the code given below :

Explanation

Statement 1 is Correct: According to the Securities and Exchange Board of India (SEBI), Crowdfunding is officially defined as the solicitation of funds (usually small amounts) from multiple investors through a web-based platform or social networking site for a specific project, business venture, or social cause. It democratizes capital raising by bypassing traditional financial intermediaries and directly connecting entrepreneurs with a large pool of individual backers online.

Statement 2 is Correct: Crowdfunding provides an alternative financing route for Small and Medium Enterprises (SMEs) and startups. It allows them to raise funds at a lower cost of capital compared to high-interest traditional loans or giving up massive equity stakes to institutional investors. Furthermore, it enables them to secure funding without undergoing the rigorous, time-consuming procedures, strict collateral requirements, and heavy compliance associated with traditional bank lending or formal stock exchange listings.

Since both statements are correct, the correct option is C.

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