Is crowdfunding the future of fundraising in India? Find out
What's the story
In India, people looking to raise money for their passion projects are often torn between new-age crowdfunding platforms and traditional investment routes like the Public Provident Fund (PPF).
Both come with their own benefits and drawbacks.
This article explores the key differences between crowdfunding and PPF, providing insights to help creators and entrepreneurs make the right choice for funding their dreams.
Crowdfunding
Crowdfunding: A modern approach
Crowdfunding, via platforms like Kickstarter and Indiegogo, has emerged as a trendy alternative to traditional fundraising.
It enables creators to present their concepts to a worldwide audience and secure financial backing in return for rewards.
This approach can rapidly mobilize substantial capital if the project resonates with the masses.
That said, not all projects are successful in reaching their funding goal, and success rates can fluctuate.
PPF
Public Provident Fund: A traditional safe haven
The Public Provident Fund (PPF) is a long-term savings scheme backed by the Government of India, offering tax-free returns. At present, the interest rate is around 7-8%.
While PPF is one of the safest investment options with guaranteed returns, it doesn't provide the flexibility needed for immediate project funding due to its 15-year lock-in period.
It's an excellent tool for long-term financial planning, but not for short-term project financing.
Risks vs returns
Evaluating risks and returns
When weighing crowdfunding against PPF, it's important to consider risks versus returns.
Crowdfunding can provide immediate access to funds if successful but offers no guarantees. Projects may not reach full funding or face unexpected obstacles during development.
Conversely, PPF investments accumulate steadily over time with minimal risk but remain inaccessible for immediate needs or short-term projects.
Access
Flexibility and accessibility
Crowdfunding platforms provide unmatched flexibility for raising funds quickly and connecting directly with supporters.
This approach enables creators to fine-tune their strategies based on immediate feedback from backers.
On the other hand, withdrawing funds from your PPF account before maturity comes with strict conditions and penalties, making it less practical for meeting urgent funding needs.
Decision making
Making an informed choice
The choice between crowdfunding and PPF depends on the project type, risk tolerance, and financial goals.
Crowdfunding is ideal for short-term projects that require immediate funds without the need to repay.
For a secure, long-term savings option and a financial safety net for future projects or retirement, investing in PPF is recommended.