Social Financing – An Alternate Financing

Jul 29, 2009 by Anurag Bansal    2 Comments    Posted under: News & Opinion

I was going through an interesting article on BigThink today. There is no doubt, the culture is shifting towards ‘Social Financing’. Some call it as ‘Crowd Funding’.

Crowd funding, inspired by crowd sourcing, describes the collective cooperation, attention and trust by people who network and pool their money together, usually via the Internet, in order to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes, from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns.

[via Crowd funding Wiki]

You may get loans from any stranger for your business.  People like you and me fund the project by contributing small amounts which finally turns into a big money for the project in question.  Small investors can also fund the projects so that you have to just worry about completing your project and not the finance.

“An interesting extension of social networking, the micro-lending trend could prove to have a greater influence in the third world, where there basically is no credit. This has been best-demonstrated by Kiva.org, the very first micro-lending web site which was extending credit to entrepreneurs in the third world long before the credit crunch hit in the west. With a number of westerners feeling the financial pinch, it looks like this could become a prominent global alternative without the use of a large bank.”

[via Bigthink]

Earlier also I wrote about Micro-payments. How twitter can be used as a medium to pay and receive payment from anyone? The same concept is extended by some other organizations.

Kiva.org for example lets you lend small funds to people in need in South Africa and other parts of the world. Some of the salient feature of Kiva.org are:

• Kiva is the world’s first person-to-person micro-lending website, empowering individuals to lend directly to unique entrepreneurs around the globe.
• The people you lend on Kiva’s site are real individuals in need of funding.
• You can track your payments and the progress of the entrepreneur you supported.  Usually in 6-12 months you may expect to get your money back.
• Kiva partners with expert microfinance institutions to gain access to outstanding entrepreneurs who are short on funds.
• Kiva provides a data rich and transparent lending platform.

Kickstarter is another similar concept created by 5 guys from New York.  They say, it is a “new way to fund ideas and endeavors”.  Kickstarter is a funding platform for artists, designers, film-makers, musician, journalists, inventors, bloggers and explorers etc.

How Kickstarter works?

• It’s a new way to fund ideas. A large group of people can support a good project and can be a valuable source of money and encouragement.
• It is not an investment mechanism, so the people using it keep 100% ownership and control.
• In return, project creators can offer products, service or other benefits to inspire people to support them.  People who pledge receive access to all project updates.
• Money (called as pledge) is collected only if a project reaches or exceeds its funding goal before time expires. If a project’s funding goal is $5,000 and only $4,999 is pledged when time expires, no money is collected.
• You can learn more about Kickstarter here…

Similarly you may use any of the previously mentioned services like Twitpay and Tipjoy for fund raising, donations, charity and other purposes.  Obviously the entire concept is based on the altruist nature of human being.

Social Financing is an alternate financing – Financing from people around the globe.

I am sure there are many other services out there which are not covered here.  I would request you to please add any of those services in the comments.  I will study and update this article with the information.

Also, I would like to know your views about micro-payments and social financing. What do you think about such a concept?  Would you be interested in providing small funds to people in need using Kiva.org or any other similar organization and help them lift themselves out of poverty.

Got anything to say? Go ahead and leave a comment!