UPSC Prelims 2026 Question:

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: 

 

Answer: 3

Explanation:  

As per the Securities and Exchange Board of India (SEBI) Crowdfunding refers to the solicitation of small  amounts of funds from multiple investors through a web-based platform or social networking site for a specific  project, business venture, or social cause. So, statement 1 is correct  

• Small and Medium Enterprises (SMEs) can raise funds through crowdfunding at a lower cost of capital without undergoing the rigorous procedures associated with traditional financing channels such as bank  loans or public issue mechanisms. So, statement 2 is correct  
• It reduces dependence on traditional financing channels and helps them access funds at comparatively  lower cost and with less rigorous procedures than conventional capital market routes such as IPOs or  institutional financing.  

Therefore, option (3) is the correct answer.