Empathy Driven Funding: New Frontier of Financing Small Businesses

This report describes some innovative financing products for micro, small and medium enterprises (MSMEs) and entrepreneurs, with a special focus on “micro investment crowdfunding,” in Japan where a law enacted in 2014 prioritized a more active use of micro investment crowdfunding. The main objective of the report is to assess the potential of micro investment crowdfunding as a financial infrastructure, especially for MSMEs that operate in towns or villages with relatively small local economies and/or a limited financial infrastructure compared to metropolitan areas. Based on the findings of a detailed analysis of such new financing mechanisms, the report studies the potential for replicability in Latin America and the Caribbean (LAC) region. The report identifies the necessary conditions for making micro investment crowdfunding effectively work, points the direction for legal framework development, and lists the requirements on each of the stakeholders and the potential obstacles in the LAC region.