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.
- “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
- 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.
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/