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The flip side of crowdfunding

The flip side of crowdfunding
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The flip side of crowdfunding 

Highlights

Recently, two youngsters from Hyderabad were arrested over an alleged crowdfunding fraud

Recently, two youngsters from Hyderabad were arrested over an alleged crowdfunding fraud. The duo had started a Facebook page in order to help people collect funds for medical emergencies. Later, it was found that a post that had gone viral on the page had managed to raise over three times the required funds. Moreover, the two owners of the page and the relative whose bank account was shared for donations had split the funds among themselves, scamming people of an amount of over Rs.30 Lakh.

The act of giving directly to a beneficiary in need may seem like the safest way while offering help online, but the absence of a third party may make your kindness more vulnerable to exploitation than you think. Crowdfunding platforms exist in order to address this gap in giving. Most platforms today make the fundraising process as organised, democratised and transparent as possible, and ensure funds collected are transferred only for the said cause, against valid documents and bills. Here are a few things to watch out in order to keep your trust safe while giving to people online:

Fund transfer: Emergencies are tough situations that often come with a lot of associated costs. For a family in the heart of crises, it would be all the more difficult to keep stock of money coming in and going out.

This, with the added hassle of managing ancillary expenses like commute, food, lodging and additional medications could be an extra burden on them. A verified third party could act as a custodian of funds, disbursing amounts as per requirement, against valid documents helps account for each penny. A great practice followed by most crowdfunding platforms today is that of transferring funds directly to the hospital against bills. This way, the patient and their family can be spared of the extra burden.

Live status of funds raised: In case of the Hyderabad page, the funds collected were over thrice the funds actually needed. Unfortunately, there was no way for donors to know about this. A live ticker showing the funds required and the amount collected so far keep the process transparent, letting people know when they can stop contributing to a said cause.

Ability to report the fundraiser: Most good crowdfunding platforms would give you an ability to report/flag a fundraiser that you believe is suspicious. In case a fundraiser is reported for a genuine cause/concern, it undergoes an additional layer of verification. It has been observed that for any fundraiser to perform well online, it must receive strong support from the closest circle/network of the campaign organizer (CO). Incidentally, this is also the best network to vouch for the legitimacy of a need. This is also a feature that makes any platform's verification process absolutely water-tight: by relying on the intelligence of the crowd.

Updates: Another great practice followed by trusted platforms today is that they mandate sharing an update with donors, particularly at the time of each withdrawal. Despite the withdrawals being verified through invoices and bills. This means that you are donating, not only because you trust the third party to be accountable, but also because you are actually in the loop of the amount collected and spent at all times.

Fixed and transparent pricing and structure: Crowdfunding platforms have transparent and fixed pricing and processes in place for each activity. There would never be a commission or a system of splitting any amount with the beneficiaries. In most cases, there is a nominal fee (recently waived off to 0% in Milaap's case) for using the platform, and fixed additional percentage charges/rates for additional services from their end. In any case, the greatest thing to watch out for while approaching a third party platform to help you fundraise is overall transparency.

All information must be public and shared with donors, beneficiaries and CO's alike. There is never a separate deal/understanding created between any two parties, isolating the third. The will to help a person in need is precious, but so is the trust of the giver. This makes it critical to have a system in place to protect this trust. Platforms like Milaap exist to make this world a place where kindness can flow as rapidly and smoothly while keeping up with the pace of our digital lives.

(The author is the president and co-founder of South Asia's largest crowdfunding platform Milaap.)

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