Isoenzima 5b de la TRAP

In the last couple of years crowdfunding is an upcoming phenomenon. In principle crowdfunding is a method whereby people are asked either to donate or lend money to initiatives. Often internet is an important communication tool to reach potential donors. More recently crowdfunding has also been coming up in the water sector. In the Netherlands a number of crowdfunding platforms have been established such as Pifworld, Get it Done, 1% Club, World of Crowdfunding etc. Only several crowdfunding companies such as 1% Club Crowdfunding have been raising funds for a number of smaller water projects in Africa.

Crowdfunding can take several forms: as donations of the public to initiatives or as credits. In the water sector the main instrument is donations. Initiatives are disseminated through the

crowdfunding company through internet and other media to the wider public. The crowdfunding company serves as the matchmaker, project assessor, organizer and communicator. Crowdfunding by itself is often more than only a financing instrument. The companies try to get more engagement to good causes and organize the communication and marketing both for fundraising but also for accountability to the public. Crowdfunding is suitable for well communicable and small sized (up to 50.000 euro) projects. The promoters get about 60 days time to reach their budget by

crowdfunding. Often within 30 days it is already clear if the promoter will be able to reach its goal. Often the crowdfunding companies are for profit institutions and ask a fee (either as a % of the amount, either as membership fees). The commission fees can vary between 6-12% of the amount reached or even of the amount of donations.

Below an example is presented of a water project financed by crowdfunding. Overall lessons:

- NGOs do normally not have the capacities to manage lending schemes in a commercial way and have high overhead costs;

- Selection of the right implementing partner is crucial;

- Micro-finance capacity building is often necessary, also for banks and community MFIs/ SACCOs. For banks risks are often high (not interested), community financial organisations need more capacity development but are better connected to the community;

- Sanitation market building (with low costs latrines) and firms platforms should go hand in hand with the micro-finance scheme;

- Use as much as possible market interest rates (avoid guarantees and such);

- Promotion to and capacity building of lenders is crucial (preferably not to be conducted by NGO but by the financing partner who stays).

Crowdfunding: Safe water in Umuonye, Southeast Nigeria Introduction and objectives

Bruce Cerew from the Ray of Light Foundation has recently finished two successful crowdfunding campaigns at 1%Club. The first campaign run by Bruce focused on the assurance of safe drinking water in the village Umuonye, Nigeria. With a total amount of €5000 crowdfunded they will build a new water borehole. 10 women of the village will become ‘the water committee’. Together they are responsible for the use of the borehole.

Concept

The concept of 1% club is funding selected initiatives in a number of days through donations from donors through the crowdfunding platform. Communication (Internet and social media) play an important role in reaching potential donors. 1% club also broadens with being responsible for communication, linking up to corporate social responsibility (CSR) and working with companies and their staff based upon CSR to implement projects.

Main sponsor and stakeholders

Bruce funded the project via the crowdfunding platform 1%Club. 1%Club is the do-good crowdfunding platform that works with a donation-based model. Bruce combined online fundraising with offline fundraising events like festivals. The main stakeholders are the villagers of Umuonye, Nigeria.

Scale and specifics regarding the business model, financing model

Bruce fully funded his campaign with a target amount of €5000. Budget breakdown:

Electrical pole, cables and other accessories €1000

Supply and deliver to site ½ trip of ½ rice gravel €500

20 ft x 16 x 6 inch pressure PVC €500

Water Storage Tanks 4 nos, 2000 gallons €1050

Steel Stanchions for overhead support, accessories and installation €950

Drilling geophysical water survey €1000

Crowdfunding period: 100 days

Success factors

Main success factors are the do good character and small size (non complexity) of the project. The project serves practical needs of a small community and is easy to communicate.

Constraints and applicability

Basically crowdfunding is suitable for do good, easy to communicate small and non complex projects. For larger size more complex projects crowdfunding might not work.

Lessons learned:

• Incentives could be broadened to grants and credits (credits especially for rising income farmers);

• Transaction costs could be decreased by more incentive payment schemes to implementation;

• Contributions of buyers now voluntary, these could be made more sustainable based upon fixed levy on products;

• Scheme could be extended to other sectors such as tourism etc.

65 Innovative financing and positioning of the water sector

From this case it can be concluded that crowdfunding can play a limited, but complementary role in the water sector, mainly for small do good projects which are easy to communicate to a wider audience.