Back in October, the World Bank issued a formal report on the potential impact of crowdfunding in the developing world. That report presented an optimistic vision of effective, democratic funding which could help remedy some of the greatest hurdles that developing nations face.
The most obvious comparison to be drawn in the area of development is between crowdfunding and more traditional microfinance.
Microfinance is really more of an umbrella term — referring to any funding strategy that involves extending financial services (generally low-interest loans) to individual entrepreneurs. While this can be accomplished in a variety of ways, the commitment to socially-conscious distribution of capital which forms the core of microfinance applies just as well to non-profit crowdfunding.
Some organization, including Kiva – which was founded all the way back in 2005 — essentially combine the two, using crowdfunding to gather funds which they then distribute as microloans to support entrepreneurs and social innovators in the developing world. Kiva has emerged as the leader in this space, having distributed over $578 million in loans sourced from over one million investors.
What the World Bank was talking about, however, was something slightly different.
That model of crowdfunding in which the World Bank sees so much potential isn’t meant as a new avenue for foreign aid, but as a means for local communities to invest in their own projects and innovations. In that sense, the community-development projects that the World Bank has in mind are hardly different from the projects that pop up on crowdfunding platforms in the most developed parts of the world.
Crowdfunding has shown itself to be incredibly effective at honing local support into real, tangible change — a tactic that the World Bank believes will translate just as well in El Salvador or Pakistan as it does in Boston or Los Angeles.
If you’re interested, learn more about how white-label crowdfunding solutions from Launcht can help you create a platform for community initiative in your own backyard or around the globe.