The correct option is both 1 and 2. Crowdfunding, as defined, involves the collection of small amounts of capital from a large number of people, usually through online platforms, facilitating access to funds for diverse projects or ventures without the need for traditional financing methods. This process greatly benefits Small and Medium Enterprises (SMEs) by providing an avenue to raise funds with reduced costs and bureaucratic hurdles, aligning with the broader goals of promoting entrepreneurship and innovation, which are often emphasized in economic development discussions relevant to UPSC Prelims GS Paper I.