Role of Social Networks in Crowdfunding Performance During the COVID-19 Pandemic in Africa

Abstract

The COVID-19 pandemic made it more difficult for entrepreneurs to obtain capital finance from banks. As a result of disruptions caused by the COVID-19 pandemic, entrepreneurs found alternative means of obtaining capital finance in the form of crowdfunding. Crowdfunding has the potential to help entrepreneurs get access to finance. The prevalence of crowdfunding campaigns in Africa is relatively low compared to most developed economies around the world. The objective of the study was to determine the role of social networks on crowdfunding performance during the COVID-19 pandemic in Africa. A total of 859 crowdfunding projects in Africa were analysed in the study. The ordinary least squares (OLS) and probit models were estimated in the analysis. The duration, comments, and target amount variables were found to be negatively and significantly associated with crowdfunding success in Africa. Conversely, the presence of videos, updates and backer’s variables were positively and significantly associated with the success of crowdfunding campaigns. The study contributes to new knowledge by revealing the influence of the COVID-19 pandemic and the role of social networks on crowdfunding performance in Africa. Furthermore, the study makes a policy recommendation to African governments on the need to craft policy instruments that will foster the development of crowdfunding sources which will ultimately mitigate the problem of credit rationing by banks which curtail the growth of entrepreneurs.