In 1997, modern-day crowdfunding gained global traction as British rock band Marillion funded their U.S. tour entirely through fan donations. Since then, crowdfunding has transformed into a global market. It is capable of financing aid projects, resource distribution and business ventures. Thus, crowdfunding is reducing poverty in developing countries, as proven around the world.
What is Crowdfunding?
Crowdfunding is a fundraising method performed on the internet. Investors contribute small amounts of capital to finance an idea or aid individuals. Using social media networks, crowdfunding works to draw people’s attention to situations of need. Moreover, it creates an opportunity within which anyone with money can invest.
Crowdfunding is typically performed through loans and donations. The loan system helps businesses that are developing a product or resolving a conflict. In this regard, crowdfunding is reducing poverty by giving investors an incentive to have a stake in a business’s success. Additionally, donations are a way for individuals to raise money after being impacted by natural disasters or medical expenses. In both ways, crowdfunding improves fundraising accessibility on a global scale.
Crowdfunding’s Growing Popularity
Crowdfunding became a popular option for entrepreneurs at the turn of the 21st century. Sites such as Kickstarter and GoFundMe have expanded globally. Revenue increased “from $530 million in 2009 to $1.5 billion in 2011,” contributing to economic growth. Not only does crowdfunding allow individuals to invest in campaigns directly but it also brings attention to causes around the world as a catalyst for poverty reduction.
According to the World Bank, crowdfunding’s popularity is spreading from developed to developing countries. In order to boost profitability, global poverty reduction legislation has created an opportunity for crowdfunding to thrive. Due to advancements in income equality and job growth, there are up to 344 million households that can contribute small investments to crowdfunding platforms. This means that by 2025, nearly $96 billion can be raised just through crowdfunding alone.
Thus, crowdfunding is reducing poverty through its ability to connect people around the world. When observing diaspora remittances, education and housing funding, crowdfunding has the potential to increase capital by 25% more in developing countries. As such, in emerging economies that struggle to provide adequate healthcare, crowdfunding can alleviate some of that pressure.
Crowdfunding and Health
A 2018 study by the British Medical Journal studied poverty in India. The Journal found that 38 million people went into poverty as a result of self-financing healthcare bills. The second wave of COVID-19 hit India hard, and as such, many citizens relied on crowdfunding instead of insurance coverage. Through crowdfunding, nearly $1.6 billion was raised from more than 2.7 million donors. Thus, while developed countries have adopted crowdfunding as a method to support innovative business ideas, the developing world is seeing money channeled into small projects or helping others afford medical bills.
Leading by Example
As crowdfunding has gained popularity, several platforms are working to help those in need. Kiva is a loan-based platform that started in 2005. This website allows people to crowdfund loans that support more than 1.7 billion people who are unable to access essential financial services. Kiva’s work spans 77 countries, funding female-led businesses, youth education and medical expenses. In total, Kiva has supported $1.63 billion worth of loans.
A forerunner for crowdfunding sites in India, Milaap, offers investors the opportunity to contribute donations for causes they are passionate about without incurring any fees. Started in 2010, Milaap’s team has been a pioneer in providing funding to rural areas and small businesses. Now, crowdfunding is reducing poverty in healthcare, making Milaap the go-to platform to raise money for treatments and operations.
Similarly, Transparent Hands is the largest crowdfunding platform in Pakistan, which also assists the health sector. Those who are in extreme poverty can rely on donations made by people around the world to help cover the costs of surgery.
Overall, crowdfunding is an emerging resource that is positively affecting the scope of global poverty. Its potential to provide funding to low-income groups is an important step toward solving inequality.
– Nicole Yaroslavsky