Attempt this previous-year question. The correct option stays hidden until you choose.
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 :
Pick an option to check yourself.
Approach: *Understand crowdfunding as a disruptive financial mechanism that bypasses traditional banking intermediaries by leveraging digital connectivity to pool micro-investments.*
- **Correct Answer:** (c) Both 1 and 2
- **Statement 1 is correct:** Crowdfunding is a method of raising capital through the collective effort of friends, family, customers, and individual investors. This approach taps into the collective efforts of a large pool of individuals—primarily online via social media and crowdfunding platforms—to fund a specific venture or project.
- **Statement 2 is correct:** For SMEs and startups, crowdfunding serves as an alternative to traditional bank loans or venture capital. It allows these entities to raise funds more efficiently, often with lower transaction costs and less stringent regulatory compliance compared to the rigorous processes required for public offerings or institutional debt financing.
- **Key Takeaway:** Crowdfunding democratizes access to capital, allowing small businesses to validate their ideas and secure funding directly from the market, thereby reducing dependency on traditional financial intermediaries.
Attempt Prelims MCQs or open Mains questions by paper — then continue the same bank inside the app with visual decks.
GyanGram