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Is Crowdfunding Charities' Friend Or Foe?

12/10/2015 02:41 EST | Updated 12/10/2016 05:12 EST
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Signpost with Crowd Funding wording

In the last several years, crowdfunding has become a huge force to raise money for a variety of causes globally -- and especially in North America.

In 2014, North American crowdfunding raised US$9.46 billion, a sum representing more than 59 per cent of all funds raised around the world that year. According to the Crowdfunding Centre in the UK, in March 2014 alone US$60,000 was collected globally every hour, and close to 500 crowdfunding campaigns were launched daily.

So-called person-to-person communication is a mass phenomenon resulting from the advance and ubiquity of social media and emerging Internet technologies that have ushered in a new world of lateral influence of unprecedented scale and speed. It has triggered significant political and social change and enabled the sharing and democratization of access to information. This process, which in some ways has only begun, promises to even more fundamentally shake up entrenched hierarchical structures.

Crowdfunding, embraced particularly by younger generations, appears to have an influential future as a fundraising strategy for millennials, who have grown up in the peer-to-peer vs. top-down influence framework.

Crowdfunding is an enormously lucrative business that has created a huge market in a very a short time -- like a gold rush, it has attracted countless entrants eager to grab a piece. A few top ones such as Kickstarter and Indiegogo lead a long trail of lesser known ones. It is estimated that there were 375 crowdfunding platforms in North America in 2014 and more than 1,250 globally. Crowdfunding platforms charge commission on the funds raised, anywhere from five per cent and up, with credit card fees and transaction fees on top. People are often unaware of this commercial side, which feels somewhat at odds with its do-good nature and marketing. Many people are surprised to hear about the charges, having assumed that all the funds go to those for who campaigns are for. But this highly profitable business is unregulated -- in most cases, there is no assurance that the money goes where it's supposed to. Crowdfunding, like so much of the social media world, is very much based on trust; it has a dark side that includes many scams, some well known -- for example, the Iowa woman who raised thousands through GoFundMe to pay for her daughter's cancer treatments, when in fact the child was healthy.

Along with business startups, crowdfunding raises money for all sorts of things from charities to "misery philanthrophy" campaigns to assist people financially impacted by illness or in need of funds for some other reasons. Among the numerous examples of charities that have successfully employed crowdfunding is the #IceBucketChallenge for ALS. Overall in 2013, it is estimated that charities were the recipients of 25 to 30 per cent of funds thus raised, but the overwhelming majority went to individuals or causes not connected with a registered charity.

There is something incredibly empowering and immediately gratifying about the directness of giving money through crowdfunding -- knowing exactly how it makes a difference and to whom; we become benefactors who see the faces of our beneficiaries and know their stories. Proponents of crowdfunding regard it as a more efficient way to help, far from the perceived bureaucracy and slowness of charities. But crowdfunding has also stirred some profound questions about the nature of charity and philanthropy, of what it means to give, and how best to measure the impact of our giving.

From my viewpoint, the reactivity of crowdfunding has value in its instant reward and the feeling that "we're doing something," but it's probably not the best way to engage in charity.

Why? Because as much as these platforms are democratizing, they are also elitist in a paradoxical way. What we really need is systems change, which is not going to happen through giving to individual cases, however noble and irresistible that route is. Not every homeless person will be lucky enough to have a life-altering crowdfunding campaign launched on his or her behalf. How about others?

When we support one person with a particular challenge, we don't support everyone with the same condition. To change the system for all is a Sisyphean labour, ungratifying and frustrating, requiring a steadfast hold on the hope for a more egalitarian future -- and this is what occupies most charities day in and day out. Charities try to intervene on a systems level, in addition to servicing those in need, so that better conditions can be achieved for all.

I would love to see crowdfunding used more strategically -- its enormous power has the potential to fund solutions to our shared long-term problems. However great it feels to directly support a person next door facing hardship, we must be mindful of the countless others who also need help.

Although I am inspired and heartened by people's generosity evident in billions of dollars raised through crowdfunding, I am also worried that through reactive rather than intentional and broadly conceived giving we are weakening the very social systems that can ensure problem-solving and societal change for everyone.

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