How crowdfunding has emerged as a major funding source for NGOs, helping the underprivileged in recent years?

- Sneha Padmanaban

Mark Dharmani, a fisherman's son born with dwarfism known as "Achondroplasia," is now an international para-badminton player and World No. 3 in Men's doubles and Mixed doubles. Along with his sheer courage and endurance, the concept of crowdfunding enabled him to overcome society's prejudice towards people with disabilities. During the early stages of his career, he did not have sufficient resources to fund his coaching, travel, etc. It was the crowdfunding campaign on "Fuel A Dream" that helped him raise more than Rs 8 lakh, which garnered him publicity through print and social media. The "can't-put-me-down" attitude he exhibited inspired many, leading to an invitation to give a TED talk in Hyderabad. He did a television commercial for Brooke Bond and was also selected for ASIAD.

Crowdfunding has made a significant impact on lives around the world. As a result, patients can focus on their recovery and not on the hospital fees, athletes can dream of victory without worrying about their lack of resources, and students can accomplish their goals without financial and resource barriers. 

Today, most people think crowdfunding is a relatively new concept. It is, however, an ancient one with roots dating back to the 1700s.

In the 1700s, Ireland had a series of famines. To combat this, the Irish Loan Fund launched by Jonathan Swift created a way for people to help those who were struggling with food supplies. The fund flourished and led to several imitations. More prosperous citizens, who saw it as a way of helping and donating sympathetically to the unfortunate, supported it. Famines, wars, and pandemics require a lot of resources on the part of governments and non-profit organizations to cope with the aftermath. The goal-achieving method of crowdfunding was certainly one of the best during hazardous events.

By definition, crowdfunding is the process of raising money from large numbers of people for a specific project or venture. Following independence, India's first Prime Minister, Jawaharlal Nehru, started the biggest crowdfunding campaign. When the war with China seemed inevitable in 1962, Nehru appealed to the citizens to help in the war effort. Without thousands of people, especially women, donating jewellery and money, a 15-year-old nation wouldn’t be able to support a war with an overpowering neighbour. Nehru reportedly collected over $220,000 in cash and gold.

Crowdfunding comprises four types, each of which receives money from donors. The following is a breakdown of each:

Donation: Donation-based crowdfunding occurs when people donate money to a campaign, company, or individual expecting nothing in return. Take the example of a crowdfunding campaign meant to improve the welfare of your street dogs. You receive money from individuals who are supportive of your social cause and nothing else. 

Rewards: This is when donors receive something in return for their donations. Depending on how much money the participant donates, they may receive a T-shirt, a product, or a service at a discount.

Debt-based donations: The idea of debt-based donations is peer-to-peer (P2P) lending, which is a form of crowdfunding. Debt-based donations occur when backers pledge money that must be repaid with interest within a limited period.

Meerim, a young ambitious girl from Kyrgyzstan, a country plagued by political instability and poverty, attended an international school with the aid of the debt-based crowdfunding platform, Kiva, to fulfil her dream of pursuing diplomatic studies.

Equity: Equity-based crowdfunding allows small businesses and startups to give away a share of their firm in exchange for investment. Donations are treated as investments, with participants receiving shares in the company based on their contributions.

Knightscope, an IT security company, is a perfect example of what equity crowdfunding can offer. Knightscope raised $150k in just 7 days, grew quickly by scaling, and came back to the table 6 months later to raise $1.1 million.

History of Crowdfunding

One of the first successful online crowdfunding campaigns took place in 1997 when a British rock band used online donations to fund their reunion tour. In 2000, ArtistShare became the first dedicated crowdfunding platform after being inspired by this innovative method of funding. Crowdfunding platforms sprung up shortly thereafter, and the market has grown each year.

Since non-profit organizations operate in various domains, they have always looked for traditional ways of obtaining funding. Many of them, however, have been successful at migrating to online crowdfunding. Through this groundbreaking funding model, NGOs have been able to collect a lot of resources in a short period. In India, social media is contributing to a rise in the culture of asking and giving. NGOs are at the forefront of this trend, and crowdfunding is an excellent way for them to utilize it. The success of any crowdfunding campaign greatly increases with effective communication. NGOs often take advantage of premium content and marketing services offered by crowdfunding platforms.

The public's attitude toward organized charity is largely influenced by how trustworthy it appears. Thus, individuals tend to donate to campaigns that have causes that match their viewpoints. Online crowdfunding platforms, facilitated by technology, enable a highly transparent exchange of funds between the donor and the beneficiary. By using crowdfunding platforms, NGOs can reach a broader audience and market their initiatives. Furthermore, offering donors a variety of payment methods and currencies to choose from increases the reach of campaigns. The majority of crowdfunding platforms can also connect donors with foreign funds and provide tax benefits. 

During this pandemic, the concept of crowdfunding contributed significantly to improving the lives of the underprivileged. The nation saw the launch of a wide range of online campaigns on various crowdfunding platforms. Crowdfunding platforms, through which individuals can raise money for a cause by receiving small donations from a large number of people, have seen an increase in donations for COVID-19-related campaigns. A record two donations per minute have been made for such campaigns, compared to about one donation every two minutes for other fundraising efforts.

One of the most famous campaigns is the Prime Minister's Citizen Assistance and Relief in Emergency Situations Fund (PM CARES Fund). They created it on 27 March 2020 after the COVID-19 pandemic hit India. This fund was dedicated to combating and containing coronavirus outbreaks, as well as assisting in decontamination efforts in the future. Although there has been no official information released regarding the fund's structure, the Indian Government has revealed that the country’s PM, Narendra Modi is its chairman. It had a corpus of Rs 3,076 crore as of March 31 alone, of which Rs 3,075.85 crore was accounted for as "voluntary contributions". 

Let us look at some of the major crowdfunding platforms in India.

Ketto -

Ketto is a crowdfunding platform that allows people to fundraise for causes that are close to their hearts. With the power of technology, it enables people who are trying to make a positive difference in the world to contribute easily with no hassle and barriers to trust. It was founded in December 2012 by Varun Sheth, Kunal Kapoor, and Zaheer Adenwala. Being a donation-based peer-to-peer crowdfunding platform, Ketto is the first of its kind in India. Ketto embodies the founders' mission to bring about change and connect people to healthcare and happiness with the vision “Healthcare for all”. The network boasts 5.5 million donors who have funded more than 200 thousand online fundraisers. Since its launch in 2012, Ketto has raised more than $11 billion in online donations.

Milaap -  Milaap has also been an effective crowdfunding platform for social causes and personal causes, raising almost INR 330Cr so far. Milaap was started by Saurabh Sharma, Mayukh Chaudhary, and Anuj Vishwanathan to support rural communities. The platform helps people whose wages are less than two dollars per day. In addition to working on hygiene, water, education, energy, and health-related projects, Milaap has also worked on environmental projects. Through this platform, several NGOs have successfully raised funds. Milaap hosted one of the successful crowdfunding campaigns during the early stages of the pandemic in India. Equivi - a new, charitable group in Mumbai formed by a group of young filmmakers who wanted to provide two weeks' worth of food rations, masks, soap and sanitary napkins to the families of over 500 migrant workers in Mumbai. The group estimated that the project would cost about 500,000 rupees (€6,000, $6,600). Milaap enabled the group to complete its mission.

Crowdera -  Crowdera is a free of cost fundraiser founded in the year 0f 2014 by two Indians based in California. Over the years, Crowdera has assisted NGOs, private citizens, disaster relief initiatives, etc. In just three years since its inception, it raised $537,000 and continues to grow at a staggering rate. Crowdera believes the act of doing good shouldn't be penalized and thus keeps the service free. 

An effective marketing campaign requires meticulous planning. A successful campaign depends on the timing and length of the campaign. The organizations should focus on their communication based on the strategy - decide on a theme, develop engaging content with images and graphics based on their target audience. The majority of crowdfunding platforms will assist in this process. In the case of an underperforming campaign, necessary changes should be made from the start and also adding a touch of creativity can increase the appeal. 

Despite all the benefits, there are also disadvantages. 

One of them is the lack of accountability. There's no guarantee that the project will be successful, which could hinder the progress of the cause. Another disadvantage is that it can be difficult to post updates to keep backers up-to-date on progress, especially when you're running a campaign with a small budget. Countless campaigns fail due to unforeseen events such as floods and war taking priority in the allocation of funds.

In conclusion, crowdfunding is one of the best ways to contribute to a cause or enhance an individual's livelihood. Regardless of our geographic location, we can each contribute our part to causes near and dear to our hearts within a short period.