Crowdfunding is a process through which a lot of people pay small amounts of money in order to raise a large amount usually geared towards a cause. Crowdfunding has become popular in the last few years. The popularity of crowdfunding is indeed related to various other causes. These include the recession, liberalization of the economy in various parts of the country, increased medical costs and many others. The causes for the popularity of crowdfunding vary, depending on their area. The only constant is the popularity of fundraising in all major e-economies of the world.
Some American crowdfunding sites, like Indiegogo, are as old as 2007. Kickstarter, another popular crowdfunding site has been around since 2009. Crowdfunding is at least ten years old and it has survived and even been fuelled by the recession. In 2012, President Barack Obama signed the JOBS Act which made it easier for small businesses to access investments online. Thus, business crowdfunding became popular in the United States post-recession.
Crowdfunding in India has depended largely on donations and rewards-based models. A donations-based campaign implies that people “donate” a small amount of money to you for your cause. You are responsible for using it wisely and for updating them about the usage of the money. Rewards based crowdfunding takes donations-based crowdfunding a step further. In return for the donations, the campaigner gives a small reward to the contributor. Donations and rewards-based crowdfunding are common in the medical crowdfunding and NGO crowdfunding sector respectively.
Why these two?
Part of the reason fundraising in India depends so heavily on these two kinds of crowdfunding is the socio-economic situation prevailing in the country. These are perfect for medical and NGO crowdfunding, two extremely important areas where little money is pumped. More importantly, equity crowdfunding is illegal in India. Crowdfunding in India is still a budding phenomenon and governments are in the process of figuring out rules to regulate it and limit cheating. Meanwhile, the Sahara scam, which unfolded in 2012, involved the scammers using equity crowdfunding to launder money. Therefore, it became even more important to regulate the sector. Following this, SEBI came up with a regulation that made equity crowdfunding illegal.
What good has crowdfunding done?
Towards the end of the last decade, the Indian crowdfunding sector gained popularity. In 2010, Milaap was launched. Indiegogo too started doing business in India. Moreover, with increased access to the internet, crowdfunding became a viable option for many middle class and lower middle class people who had found themselves at a loss without insurances. Crowdfunding does not have good regulations in place but even without those it is thriving. The sector may be budding but it is also expected to grow in the next two decades. It might even give stiff competition to the medical insurance business. This in turn might bring change in the way insurance companies work. Therefore, a lot of things are expected to happen with the advent of crowdfunding in the next couple of decades.
There are plenty of hopeful stories on the internet about how crowdfunding has made change happen and saved lives. Impact Guru’s site speaks of the story of Puja Bhatnagar, a woman who was able to get a liver transplant only because of the excellent crowdfunding services she availed from the site. Little Riaa Kulkarni’s is another case where crowdfunding has been able to raise money for the treatment of a child. Riaa, a child suffering from brain cancer, is undergoing treatment for which her parents need Rs 60,00,000. So far, Impact Guru has been able to raise more than Rs 51,00,000.
These are not the only stories. Slowly but surely, crowdfunding is growing in India and making a lot of positive change.