Crowdfunding: What’s in it for Development?

Betterplace.org

Picture taken from betterplace.org

Crowdfunding – another example of the globalized world we are living in. No matter where you are from and where I am from, no matter how far we are apart and what status or ethnicity we were born into, no matter if we know each other or not – we can support one another financially by just one klick.

Crowdfunding knows no borders or nationalities, no paper work and bureaucratic hurdles. Crowdfunding is the one-klick-solution to help business take off and find ground on the market. Without further explanation and academic dwelling, let’s take a look at its advantages and disadvantages.

PROS

  • “Crowdfunding allows for innovations for development to be realized.“ (Rajagopal, 2015)
  • “funding more entrepreneurs in more places around the world“ – Steve Case (Vota, 2015)
  • „helping made easy“: instant and easy investment
  • direct engagement between backers and funded strengthens personal identification with the project
  • direct engagement between backer and funded strengthens transparency

CONS

  • Investment requires trust – how do we trust someone we don’t know?
  • klick for relief: Online donation does not necessarily create engagement / real interest in development cooperation projects: Just one klick and my bad conscious about being privileged may be relieved
  • “Crowdfunding could become an excuse to leave basic services up to the crowd.“ (Moskowitz, 2016)

When I am trying to understand something, pro and con lists have always been a first step for me to build understanding. My research apparently revealed that crowdfunding offers more advantages than disadvantages. Feel free to add pros and cons in the comment section below.

My online research also shows that crowdfunding is on the agenda of development policy. According to Glencorse (2016) $34bn were globally raised last year by the crowdfunding industry. This makes the concept highly attractive for governments’ and politicians’ support – after all, more private investment means less public spending. The World Bank’s InfoDev Program launched a report in 2013, motivating crowdfunding for development organizations as they believe that „crowdfund investing may offer a new path for developing countries that wish to support early stage, high-growth entrepreneurship and innovation.“ (p. 50).

Moskowitz is critical of crowd-funding’s popularity, though. He examines that it also asks financial support in areas (e.g. schooling) where official bodies should be care-taking thus letting them of the hook from their responsibilities.

I found Glencorse’s vision interesting: He proposes a „demand-driven“ model in which crowdfunding is used in its most democratic function: Citizens deliver ideas and vote what’s most beneficial for them, governments and aid organizations manage, overview and evaluate the project. Sounds like an ideal project plan in an ideal world. I am sceptic of several issues in such an undertaking, though no project is guarded from fraud and mismanagement. And despite concerns and pitfalls it cannot be neglected that crowdfunding creates possibilities that we have not seen before as it enables potential, regardless of one’s economic situation.

However, as with any topic on digital advancement and development we have to note the digital divide brake: Crowdfunding does not reach countries where internet use is low or countries that are small (Nesta, 2013). This is not necessarily a disadvantage of the system itself but emphasizes that, despite the high hopes connected to crowdfunding, it is by far not a panacea for all development projects lacking financial resource.

REFERENCES

betterplace.org

Glencorse, B. (2016). Crowdfunding development aid would direct funds where they are needed most. Retrieved from https://www.theguardian.com/global-development/2016/sep/13/crowdfunding-development-aid-funds-globalgiving-kickstarter

infoDev / The World Bank (2013). Crowdfunding’s Potential for the Developing World. Retrieved from http://www.infodev.org/infodev-files/infodev_crowdfunding_study_0.pdf

Moskowitz, P. (2016). Crowdfunding for the Public Good Is Evil. Retrieved from https://www.wired.com/2016/03/crowdfunding-is-evil/

Nesta (2016). Five market trends in crowdfunding for development. Retrieved from  http://www.nesta.org.uk/blog/five-market-trends-crowdfunding-development

Rajagopal, M. (2015). Crowdfunding for Development. Retrieved from http://borgenproject.org/crowdfunding-development/

Vota, W. (2015). Can Crowdfunding work for Developing World Projects? Retrieved from http://www.ictworks.org/2015/10/19/can-crowdfunding-work-for-developing-world-projects/

This entry was posted in Policy, Social media and tagged , . Bookmark the permalink.

4 Responses to Crowdfunding: What’s in it for Development?

  1. Manuela says:

    Very interesting article Annika and I can see both sides of the coin. So, as with anything, it is how you use the tool that can make it more or less beneficial. However I agree that there is a potential danger when financial support is sought for areas that should be funded by the state.

  2. Charlene says:

    Having not thought about crowd funding and its benefits and disadvantages, I appreciated reading this post which does a fair and even review of crowd funding. I agree with you on the criticisms and reservations and would only add that this digital divide may perpetuate the Westernization of development where it is primarily audiences in the developed world with good and easy access to internet to determine what projects receive funding.

  3. Angelica Farzaneh-Far says:

    I think crowd funding reaches a certain group of donors. Just like with everything else we all have different preferences. When it comes to charitable giving there are people who are willing to give a lot but they want to control where their money goes. This is one of the most obvious differences that I have seen moving from Sweden to the USA. I feel like the culture here in the US is geared towards choice. You should be able to choose pretty much everything for yourself and what is then apparent in charity is that you see different kinds of asking. The example is my children’s schools. Yes they are publicly funded but we live in a big city so the school is heavily under funded. Our teachers all have go-fund-me pages and the school has two yearly fundraisers. The schools with a very active parent teacher organization can raise a lot of money from parents and businesses. People are willing to support the teachers they know and the businesses want to show that they are engaged in their local school. Of course there are people who will not give simply based on the fact that it is a public school and the government should step up and do their job. Similarly, crowd funding for a project far away with people you don’t know will work for some and not for others. Some people will feel that their money is going to something concrete rather than potentially paying for the salary of a big charity organization. They will feel that they skipped the middle hand, while others might not trust that the money is actually going where it claims to.

  4. Maxi says:

    Annika, this is such an interesting angle to the crowdfunding issue. I am wondering whether or not local non-Western development projects may be able to ‘compete’ (for lack of better word) with projects based and conceptualised in the majority world? Crowdfunding campaigns usually thrive on good networks and to some extent, great rewards.

Leave a Reply