Nonprofits in Nepal largely depend on grants provided by international development agencies and the government to fund their programs. Increase in the number of nonprofits has increased competition for limited grants. Financial sustainability is therefore a persistent strategic concern for nonprofit executives and finance directors. Considering the lack of funds, increase in internet penetration; digital awareness; and development of e-commerce actors like digital payment platforms, the prospects of crowdfunding for nonprofits of Nepal seem real.
Power of crowdfunding: Inspiration from global crowdfunding platforms
As reported, crowdfunding generated more than $34 billion in donations, equity funding and peer-to-peer lending in 2015, with an estimated $17 billion generated from North America. According to Pew Research Center, 22% of American adults have contributed to a “crowdsourced online fundraising project”. Crowdfunding funding platforms like Kiva, Go Fund Me and Indiegogo explain the power of internet, innovation and impact, combined.
Case: Lindiwe produces homemade juice and soda for customers in rural Zimbabwe. With a $500 loan crowdfunded by 11 lenders at Kiva, she was able to increase production by 10 times to 200 liters per week. Currently, Lindiwe has three businesses: a poultry, a small shop and Lee Juice. Kiva’s field partner Camfed’s unique lending model allows Lindiwe to volunteer as a mentor for other women in the community in exchange of zero interests on loans.
Kiva is a global crowdfunding platform that uses peer-to-peer micro-lending model to transform lives. It collaborates with field partners to administer loans, secure payments and increase the impact by educating community members. Kiva’s loan repayment rate is at 96.9% and lenders have options to relend the repaid principal amount. Since 2006, it has transformed lives in 86 countries by providing $1.1 billion in loans to 2.6 million borrowers like Lindiwe.
Similarly, Indiegogo combines the crowdfunding with online marketplace. It is popular among entrepreneurs and innovators working on a product idea, as well as for nonprofits seeking to fund their project or expand their current level of funding.
Case: In 2017, the Global Learning Prize (GLX) was able to raise $942,223 in Indiegogo, 88% more than their initial goal of $500,000. GLX is a $15 million innovation competition to build open source software to teach children to read, write and perform arithmetic independently without the help of a teacher. Despite the financial backup of Tesla founder Elon Musk, GLX used Indiegogo to expand its financial resources.
Crowdfunding for Nepali Nonprofits
Crowdfunding is not a completely new concept for Nepal. Over the years, Nepalis have used the power of internet to raise funds for disaster relief, healthcare, medical emergencies and development initiatives like building schools and libraries. Crowdfunding campaigns after the Gorkha Earthquake exhibited the promise of online fundraising for disaster relief. Within two months from the earthquake, more than $20 million was raised through various crowdfunding platforms including GlobalGiving – which helped 77 nonprofits raise $4.23 million for relief works.
For most crowdfunding campaigns executed by nonprofits of Nepal, collaborating with a nonprofit registered as a 501(c)(3) tax-exempt organisation in the United States or other similar international organisations added credibility and facilitated easy transfer of funds. It also provided opportunities to reach out to the Nepali diaspora living abroad to contribute for programs in Nepal.
Case: Nepal Innovation Center (NIC) collaborated with the Deerwalk Foundation to raise $21,118 from 381 donors in 21 months using GoFundMe. Envisioning a hub for Nepali innovators, the 2007 Ramon Magsaysay award winning social entrepreneur and innovator, Mahabir Pun established NIC center in 2012. Deerwalk Foundation is a nonprofit organisation registered as a 501(c)(3) organisation in the US and a tax exempted social welfare organisation in Nepal.
However, finding partners might be a challenge for nonprofits and the lure of globally sourced resources might force some nonprofit organisations to modify their programs for their partners. While Nepali nonprofits should continue using global crowdfunding platforms, a national crowdfunding platform would help organisations raise funds from individuals locally.
Evaluating Nepal’s readiness for a national crowdfunding platform
Crowdfunding engages large number of donors who donate relatively small amount towards the fundraising goal. It is inexpensive, less time consuming and efficient. According to Gore and DiGiammarino, nonprofits can use crowdfunding to promote meaningful engagement, spread their messages and expand their donor base to increase financial resources and impact. Boeuf, Darveau and Legoux identified three actors of crowdfunding: the person or organisation that is seeking funding, internet users who support the project by pledging (the ‘crowd’) and the internet platform.
Nepal’s readiness for a national crowdfunding platform can be evaluated by assessing these actors:
• According to the Management Information Systems (MIS) report published by Nepal Telecommunication Authority in July 2017, 16.18 million people in Nepal had access to internet/data services, an increment by 2.4 million within a year. Over 6,581 new users got connected to internet every day. In seven years, the internet penetration rate had grown from 8% to 60%.
• Nepal has accepted, experimented and embraced e-commerce over the years. Developments in local and international ecommerce platforms including Alibaba’s acquisition of Daraz; a South Asian e-commerce business that had a strong presence in the Nepali market, and the growth of digital payment systems like eSewa and Khalti can only support the crowdfunding platform.
• Nepal is primarily a cash-based economy. According to the United Nations Conference on Trade Development (UNCTAD), 85% of the e-commerce purchases are cash-on-delivery orders, while only 4% of them are paid through bank or card.
• The government has been highly conservative in its policies about digital payments. In April 2018, the Central Bank of Nepal issued a circular to limit thresholds for online transfers. Under the internet banking payment facility, users could make payments for only up to Rs 100,000 per day and Rs 500,000 per month. Mobile payment would be limited to up to Rs 10,000 per day and Rs 50,000 per month. Similarly, payments through agents and sub-agents like digital wallets were limited to Rs 5,000 per transaction, Rs 15,000 per day and Rs 25,000 per month.
Although legal limitations for international fund transfers ignores the prospect of connecting to the strong and ever-expanding community of Nepalis abroad and the transaction limits set by the Central Bank restricts large transfers, Nepal’s national crowdfunding platform can thrive by drawing inspiration from the success of existing e-commerce modules. Nepal’s first crowdfunding platform can adopt three approaches moving forward:
• Starting as a web portal with a collection of projects for donors to evaluate before making a pledge. After receiving pledges, organisations can use the ‘cash-on-delivery’ module to apportion staff members to collect the donation. Setting minimum transaction limits for such collections might ease operations.
• Collaborating with digital payment partners to facilitate transfers of funds. As crowdfunding is about relatively smaller donations from a larger number of people, it might be the right approach.
• Using both the approaches.
Kaushal Raj Sapkota is a graduate student of Nonprofit Management at the University of Oregon, USA and a non-resident graduate research fellow at King’s College Kathmandu. His areas of interests include branding, education, non-profit brand development, story based fundraising, social entrepreneurship and photography. He can be reached at firstname.lastname@example.org