Crowdfunding: Harnessing the power of social networking to raise money (Part 3 of 3)
Colleen Burns 120000C4RP firstname.lastname@example.org | | Tags:  crowdfunding ibm_redbooks social_business holly_nielsen social
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Parts 1 and 2 of this crowdfunding blog series look at some successful crowdfunding platforms for creative projects in the United States and the rest of the world. Part 3 looks at two additional crowdfunding uses: microlending and charitable causes.
Crowdfunding for microlending
Investopedia defines microfinance as:
A type of banking service that is provided to unemployed or low-income individuals or groups who would otherwise have no other means of gaining financial services. Ultimately, the goal of microfinance is to give low income people an opportunity to become self-sufficient by providing a means of saving money, borrowing money and insurance.
Microfinancing is based on the old adage, "Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime." Crowdfunding has simplified microfinancing by using social networking to more easily connect the lenders and the borrowers.
One of the most well known crowdfunding microlenders on the scene, Kiva, summarizes its purpose as: "We are a non-profit organization with a mission to connect people through lending to alleviate poverty. Leveraging the internet and a worldwide network of microfinance institutions, Kiva lets individuals lend as little as $25 to help create opportunity around the world."
And their statistics are impressive. As recently reported by MicroCapital.org, "Kiva has released its annual report for 2011, indicating that its loans to microfinance institutions increased from USD 71 million in 2010 to USD 89.5 million in 2011. The number of individual lenders who fund these loans increased from approximately 371,000 in 2010 to 457,000 in 2011. Kiva reported 26 new field partners who joined its network in 2011."
MicroCapital.org also states, "Since its inception in 2005, Kiva has loaned a total of USD 313 million, which came from approximately 765,000 lenders and was disbursed via field partners to 782,000 borrowers. The average loan repayment rate is reported to be 98.9 percent."
As with the other crowdfunding ventures, if the full amount, in this case a loan, isn't fully funded, it does not happen.
I'm helping finance two separate entrepreneurs with Kiva, and it's a gratifying experience that I'll continue funding. My first loan was part of a total $3,000 loan to a woman in Armenia, who wanted to purchase cows and develop her business, which will help her get more income and cover her family's daily costs, plus one day start her own family. She has paid back 34% of this loan on a 24 month payback schedule.
The amount I have invested in Kiva is small, but I enjoy getting updates on the two entrepreneurs I'm helping.
Crowdfunding for charitable causes
Although crowdfunding for creative projects is fun and exciting, crowdfunding for charitable causes is near and dear to my heart. As a concept, it's been around longer than the other variations of crowdfunding. Organizations such as Lymphoma & Leukemia's Team in Training (TNT) and Avon Walk for Breast Cancer create fundraising pages on their websites for their participants, who turn to their social networks to raise money for these charities. TNT, for instance, has raised over $1.2 billion to fund lifesaving cancer research.
Other sites such as Just Giving, a British fundraising website, enable charities to create fundraising pages on the Just Giving site, instead of having to host their own pages and handle the donation taking and distribution of funds. Using Just Giving's website, 21 million people have helped raise £1 billion for charity since its inception in 2000.
I've shared a few examples of crowdfunding, but you can see it's clearly a growing trend. I'm always a little shocked by those who think that social networking is a fad that will fade away in the next two or three years. It's clearly a paradigm shift in our communications with each other, and will continue to evolve as our mobile devices become faster and even more ubiquitous.
Holly Nielsen is the Social Media Manager and webmaster for the Human Ability and Accessibility Center, IBM Research. Located in sunny Northern California, Holly manages the IBM Accessibility social media program and the www.ibm.com/able website. She is passionate about accessibility and social networking, and frequently blogs about social networking trends and assorted topics that spark her interest. You can follow her on Twitter, @hollynielsen.
Holly is an IBM Redbooks Thought Leader