Financial Sustainability of African Small-to-Medium Enterprises during the COVID-19 Pandemic: Determinants of Crowdfunding Success

Abstract

The purpose of this study was to establish the determinants of crowdfunding campaign successes of African small-to-medium enterprises (SMEs) during the COVID-19 pandemic. The study utilised cross-sectional data, which were collected from TheCrowdDataCentre database. This consisted of 215 crowdfunding projects in Africa during the COVID-19 pandemic. The logistic and ordinary least squares (OLS) regression models were specified to test the research questions of the study. The results of the study documented that the average pledged amount and number of backers variables were positively and significantly related to crowdfunding success. This accords with the signalling theory. Many backers and higher amount pledges signal investor confidence in the project. The results of the study also show that a crowdfunding campaign’s success was positively related to the number of updates. This is consistent with the information asymmetry theory, as frequent updates symptomize transparency; hence, backers will have more information, which will spur them to invest more in the project. These results provide guidelines to practitioners and entrepreneurs on the factors that are important in harnessing crowdfunding resources from crowdfunding sources to ensure the financial sustainability of SMEs as the world emerges from the COVID-19 pandemic.