Wednesday, June 17, 2015

The Sharing Economy and Emerging Market Development

Jane Donor went trekking in Nepal a few years ago, and the place left a magical impression. After the recent earthquake, she kept thinking of all the wonderful people she met - guides, inn-keepers, market vendors - who must be struggling to rebuild. She wants to help with the rebuilding effort, but wants to be sure her donation will be used for a targeted, lean, effective relief program in Nepal (rather than a bloated general fund). Jane has been a member of the sharing economy for years; she finds lodging on Airbnb, summons rides through Uber, and supports startups on Indiegogo. So, she does what she normally does to find resources and solve problems nowadays - she whips out her smartphone.

Within minutes, she finds a long list of organizations working in Nepal. After digging into their mobile website, she weighs the merits of each program and a few criteria begin to crystalize. There has to be solid evidence that the organization is doing meaningful, long-term work in Nepal. (Some websites seem to use the disaster as a landing-page hook, but provide little information about their actual work in country.) She wants a clear understanding of how much of her donation will actually go to the specific relief program. It takes money to run an organization; a portion for overhead is acceptable, but how big is that portion? She eventually sends a donation (through PayPal) to an NGO with rich data on their medical equipment deliveries to government-run clinics in several of the villages she visited during her trip.

New tech-enabled models are making it easier for the Jane Donors of the world to participate directly in a wide range of development efforts - from disaster relief, to small business loans, to "no-strings" cash infusions. Comparatively, small innovative organizations like Kiva, MyC4, Bondora, and GiveDirectly are taking advantage of leaner, platform-based models that challenge traditional development financing, long dominated by foundations, NGOs, banks, and MFIs. It?s unlikely that these new web-enabled technologies will completely replace the standard model of development funding. Sometimes, it takes a big organization with a sizeable general fund to steer healthcare systems, regulatory environments, infrastructure policies, and other big ships. But development organizations would benefit from integrating crowdfunding and peer-to-peer transactions into their own funding models. One option is to support an existing (or nascent) P2P funding tool that is already infiltrating higher-income groups in developing countries and regions. With guidance and investment, such a tool could be extended to poorer segments of the population. Another option is to create such a system internally, and support it with data-rich, mobile-friendly marketing. This would involve many activities NGOs already perform - awareness-raising, education, localization, record-keeping, partnerships. Would Jane Donor be more inclined to donate to an NGO that offered an in-house P2P donation service? Maybe, but if they don't adapt their operational model to this kind of funding, they may have lost Jane Donor forever.