Micro-Giving: A New Era in Fundraising

Thirty years ago, a young economics professor named Muhammad Yunus started a new kind of banking in Bangladesh -- tiny loans to small entrepreneurs. Few thought these dreamers in a dirt-poor country would ever repay. But most did --- and in 2006, Yunus won the Nobel Peace Prize.

Micro-lending has changed lives, built communities and created unlikely leaders.

Now a wave of friends and "loose ties" within the social media community are bringing the micro-lending concept and applying it to charitable giving.

Call it "Micro-giving".

Late last week Laura Fitton of Pistachio Consulting launched a new kind of fundraising drive: an effort to raise $25,000 for a nonprofit called charity: water, a cause that works to bring clean, safe water to developing countries. She chose Twitter as her platform for financial pledges. And because she was aware of the bleak economy bearing down on her friends, she didn't want to lean on them for significant contributions. "I asked for $25,000," she says, "which would be just $2 for each reader I have on Twitter."

In four days, @wellwishes had raised over $5,000. Average pledge size has been $8.50, the median is $2. And the beneficiary has taken notice. "I see micro-giving as the next stage of online fund raising," says Scott Harrison, founder and president of charity: water. "The idea of thousands of $2 gifts adding up to wells in Africa that impact thousands of lives is something everybody can get behind."

Though reminiscent of the Obama campaign's decentralized funding, @wellwishes is a whole new model because it incorporates convenient, tiny donations made right on Twitter -- the word-of-mouth powered social network and microblogging platform. Using payment service from a company called Tipjoy, it's both simple and social to give. Your pledge shows up on Twitter as "p $2 @wellwishes for charity: water to save lives" (This is shorthand for "pay $2 to the Charity organization whose user name on Twitter is wellwishes.") And that message goes -- instantly -- to all of the people who follow you on Twitter.

Laura Fitton (her Twitter user name is Pistachio) kicked off the campaign with an announcement of the experiment:

p $2 @wellwishes just to practice my hand at using micropayments on @tipjoy

In a later Tweet, she made her appeal:

I want something TOTALLY insane for Christmas: 12,500 people each to donate $2 for clean water @wellwishes.

And many did. Okay, these are pledges, not donations. But just as poor people pay their micro-loans, so micro-donors make good on their pledges -- so far, an astonishing 86% have come through.

And then there's the fact that the request gets personalized as people pass it on. Some add just a phrase: "very cool". Others say the same thing, but with more characters: "small bits via Twitter + big audience = good xmas".

The message is as important as the medium --- using Twitter/Tipjoy, everyone who participates is both a donor and a broadcaster.

That suggests we're entering a new era in fundraising and perhaps other social/political causes. What's new? Virtual tribes -- networks of caring people with more commitment than cash.

And that's what excites us about micro-giving: It takes so little. You might not have much to spare, but you've got a penny jar -- and we all know that if you reach in and remove a handful of change, you'll feel no pain. What's great about the new, frictionless online giving we're testing here is that, if you've got a good cause, you no longer need to spend a fortune on real-world marketing. Online, with word of mouth and simple technology, pennies can become serious money.

Muhammad Yunus says that we can create a poverty-free world "if we collectively believe in it." That's a lot of belief. It will be easier to create that world if good causes have adequate funding --- and if they can get that funding a few pennies at a time.

That, it seems to us, is a "very cool" idea. So give it a whirl. Give here and support charity: water, and be among the first to try what we hope is a new way to give online --- micro-giving. For which you get large thanks.

Maybe we should call it change for Change? Sorry, couldn't resist.

John Borthwick is CEO of betaworks, and Kenneth Lerer is Vice Chairman of betaworks (and Co-Founder & Chairman of the Huffington Post). (betaworks is an investor in Twitter and Tipjoy. Tipjoy waived all fees for this effort, and, with betaworks, is making a matching gift.)

Comments

[zarle]

Times are tough for everyone including those who want to help. It's encouraging to see that the giving spirit is still alive. In an effort to do our part, we are creating a new way for people with a little extra help families without enough. A way people can make their small donations do some very big things.

SmallCanBeBig.org is a new online venture launching in January to help families extend their philanthropic efforts beyond the holidays. On SmallCanBeBig.org, people can help families in danger of losing their homes -- families carefully selected by experienced case managers from well-regarded charitable agencies. 100% of all donations made on www.SmallCanBeBig.org go directly to landlords or utility companies to help pay specific urgent expense for families working hard to stay in their homes this winter. We hope our efforts help facilitate microgiving in 2009.

[SaulZ]

John and Kenneth:

This is an eye opener for me. I consider myself to be fortunate enough to be able to help others financially. This is a creative way to participate that I did not know about.

If this has not been pointed out about Muhammad Yunus in one of the comments, please note that his micro lending was primarily for the women, as analysis suggested that the default rates associated with females is much lower than those with males.

I was trekking in a remote national park of a 3rd world country where I found the same principle being adopted by WWF to make the villagers stakeholders in management of the park and wildlife. It was a win-win situation. The concept you have introduced us to is also a win-win solution.

[loria]

SaulZ,
Not only are the default rates very low with women, (many programs have a repayment rate in the high 90%), women use the money at a much higher rate to feed and care for their families. Men tend to use a larger percentage on themselves. Further, girls are often the last to be educated (since education isn't free, if a child does go to school it is usually the boys). Yet, just an extra year in school results in the woman having fewer children. This is a win for everyone when families are struggling to feed their children, and women are dying leaving their children orphans.
Childbirth is often a dangerous prospect because of lack of access to hospitals and doctors. Studies show that when a woman dies her infant children often don't live to their second birthday. So, there are many benefits to focusing on women as we help those in developing countries.

[Evelyn]

Stephanie Pearl-McPhee has a wildly popular blog called The Yarn Harlot on which she writes about her knitting (really!). She has raised half a million and has a new goal of $1 million for Doctors Without Borders. http://www.yarnharlot.ca/blog/tsffaq.html

[loria]

Evelyn,
Thank you. It is so great to see the difference one person can make. It struck me that Stephanie began after the tsunami . One thing I learned as Dining for Women funded a program working with women living in the fishing villages devasted by the tsunami, was just how desperate their situation was. Stephanie talks of how we, don't live in the dire sitution that many around the world do. When you question why to give internationally, consider that in Jan.07, 150 women from India donated their kidneys to feed their children. To me that is a clear examply of the extreme desparity between those who have little and those who have so much. I fall somewhere in between, and like Stephanie, am not extremely wealthy by US standards. But, by global standards, I am.

I often see resistence to giving internationally because there is a great need at home too. I would encourage people to do both if they can. If you give to programs in developing countries your small donation can make a difference between whether someone lives or dies. It also empowers the person who receives the donation. Studies show that women are more likely to use the money to feed their family, etc. which is why many organizaitons work with women. As they contribute to their families and villages through their efforts, they are able to stand up in this rigid cultures where women submit to the will of the men. Generational change begins.

[loria]

Micro-loans have made a huge difference around the world, as has a realtively new form of philanthropy called "giving circles". Giving circles join together and pool their money for a cause. That cause could be local or global. Dining for Women, which began in 2003, seeks to change world poverty one dinner at a time as members gather for "chapter" dinners (potlucks) across the country. Currently there are about 150 chapters, many meet monthly.

DFW uses a simple concept. Women meet for a potluck dinner and donate what they would otherwise have spent had they gone out to dinner. Donations of $10, $20 or $30 grow to a colllective donation of $14,000 to $16,000 each month. Those donations are sent to grass-roots organizations working with women and children around the world. DFW does a great deal of research into the organizations they support (each has a US based affiliate so that there are tax records to monitor the use of donations). The programs work with women living in extreme poverty to help them foster good health, education, economic independence (often through the use of micro-loans). At the same time, DFW educates its members about the program, the culture, and the plight of the women supported in that particular month. 100% of the money collected at the dinners is donated to the programs. This year we were able to donate over $150,000 to various programs aroung the world.

Check it out at

http://www.diningforwomen.org/index.php.

[Mixpixlix]

Hmmm.

Just a few days ago I contacted a charity I've contributed to for years. I recieve a donation request and I thought they were asking for too much up front as well as an ongoing committment.

I replied via e-mail saying that should reconsider their fund raising approach and allow people to contribute what the can, whenever they can. Too many people feel shut out when they can't meet the suggested amount.

I got an e-mail back saying the organization would consider my suggestion at their next fund raising strategy meeting.

A decade or so ago NYC school children proved pennies added up to thousands of dollars. They'd collect for various underfunded school activies and brought in substantial amounts of cash.

Since the 90s only BIG MONEY seems to have mattered. Well, look where that got us.

Micro-giving is a wonderful idea and one that I hope will become a stratgedy used by many.

[loria]

Mixpixlix,

I know what you mean. Often we feel overwhelmed by what is asked of us when we get involved in a charitable organization (money or time). We want to give, but can't give at a level where we feel we can make a difference. I have found a great organization that works with women and children in developing countries, where a small donation can make a huge difference in the life of that woman and her family. We meet for a potluck and donate what we would have spent had we gone out to dinner. My small donation is pooled with the other donations (DFW hasabout 150 chapters all over the country) and we are able to donate around $15,000 to grass-roots programs, making a huge impact on the lives of the women we support.

This is a giving circle. With DFW there is no time or monetary commitment. Some members come once. Others come most months. They donate what they can. There is also an educational component where we learn about the program, the villiage, the culture, etc of the organization we support (the program supported changes each month, as we move around the world working with women in really dire situations). DFW gives internationally, but other giving circles have a local focus. I love the idea of a giving circle. It gives me the change to meet like-minded women.

Check out DFW at:
http://www.diningforwomen.org/index.php

[bermanator]

At my local Masonic Lodge, members go around and collect the little tabs from aluminum cans. The tabs are then melted down into literally THOUSANDS of dollars worth of aluminum. The proceeds then go to a few different Masonic philanthropic organizations, like Shriners' Burn Hospital and the HELP program. It's extremely effective and probably the ultimate form of micro-giving, as the can tabs are essentially useless otherwise.

Micro-giving seems to work well - just look at Wikipedia. A lot of poor students like myself would love to donate but even giving away $20 can be too much, so being able to donate $5 to wikipedia over Paypal really is excellent, and as you said, it doesn't make the rest of us feel shut out from the process of giving.

Ahhh, progress.

[yodaveg]

This is an interesting and worthy concept. The Internet has brought a whole new fundraising economy of scale. In a traditional solicitation, we are asked to give $50 or $100. But to be asked for $2, and to believe it can make a difference, is a new way of thinking. Bravo.

[MC1031]

I agree that kiva.org is a great giving opportunity. And it comes back to you so you can help others as well!!

[SADWING]

My cousin has been doing this stuff for 20 years. www.100friends.org He's been to over 70 countries and has helped some of the poorest people on the planet. I'm lucky to have gone on a couple journeys with him and just plain lucky to know him. His name is Marc Gold and his project is called 100 Friends.

It's awesome that these kinds of stories are getting more coverage. I just hope that there is more and more to come...

[Marguerite Manteau-Rao - Huffpost Blogger]

Thanks for broadcasting your efforts. You have inspired me be to expand a bit, to include other channels such as Facebook Causes, and also newcomer Involver:

http://lamarguerite.wordpress.com/2008/12/25/tis-the-season-for-micro-funding/

[karmical]

Random tip to anyone soliciting donations/fundraising online -- accept payments by Paypal. It makes me infinitely more inclined to give spontaneously.

[bermanator]

Absolutely.

[erinaceus]

I strongly second this motion. Paypal, definitely.

[Alvarask]

This is so true. I am much more inclined to donate if I see the PayPal logo.

[canawler]

(Just curious - I posted the following comment earlier this morning and it then appeared in the comments section, but when I went back to it a few minutes ago, it was gone. Any reason?)

Reminds me when of when I was ten years old and got the idea of going house to house and asking each person for a dime. I calculated that if I made 1000 stops I'd have "earned" $100, a fortune for a little kid in the late 1950's. Of course, I hoped that the idea wouldn't spread, because then you'd have a thousand kids knocking on the same 1000 doors and the community might not be able to afford $100,000. Another scenario - the 1000 doors became 1000 donors who each give $100 for one purpose, a project that they had thoroughly discussed as a community and collectively agreed upon - like improved recreational facilities for the community - which also required committing some sweat equity. Might the 1000 kids (and thousands to follow) benefit more from this deliberative, collective use of limited resources?

Being timid as a mouse at age ten, my alternative to knocking on doors was to mow lawns. I had two customers that summer @ $2.00 a lawn and by the end of the year I had earned the $100.

I hope that in addition to clicking the mouse and writing a $2.00 check that the givers of the new era will also find time to work in their neighbor's garden.

[canawler]

Reminds me when of when I was ten years old and got the idea of going house to house and asking each person for a dime. I calculated that if I made 1000 stops I'd have "earned" $100, a fortune for a little kid in the late 1950's. Of course, I hoped that the idea wouldn't spread, because then you'd have a thousand kids knocking on the same 1000 doors and the community might not be able to afford $100,000. Another scenario - the 1000 doors became 1000 donors who each give $100 for one purpose, a project that they had thoroughly discussed as a community and collectively agreed upon - like improved recreational facilities for the community - which also required committing some sweat equity. Might the 1000 kids (and thousands to follow) benefit more from this deliberative, collective use of limited resources?
Being timid as a mouse at age ten, my alternative to knocking on doors was to mow lawns. I had two customers that summer @ $2.00 a lawn and by the end of the year I had earned the $100.
I hope that in addition to clicking the mouse and writing a $2.00 check that the givers of the new era will also find time to work in their neighbor's garden.

[marinade]

FINCA is another microfinance organization. Since this concept has been around for so long, it makes me wonder why we've only been hearing about it in the past couple of years.

http://www.villagebanking.org/site/c.erKPI2PCIoE/b.2603941/k.BBB2/Mission_and_Vision.htm

[Stephen C. Rose - Huffpost Blogger]

While direct giving will always be an aspect of "charity" the loan model is a better one, I think. In particular, Kiva.org creates the basis for a "gift" that continually recycles, while having none of the deleterious aspects of charitable giving. And the admin at kiva is a modest and voluntary 10 percent of your loan. Happy Holidays! http://stephencrose.wordpress.com

[melpol]

Giving directly to the needy is making sure your dollar is not chipped away by administation costs. A good example is set by going into the public park and placing a donation into the hand of a bum sleeping on the ground.

[gorideabike]

Let me gently point out that the person also is in great need of acknowledgement that he or she is still part of our little family, the family of mankind. A good word can help too.
There are homeless shelters and food kirchens and community aid organizations that can serve as a direct conduit to the needy, and afford you the opportunity to associate with them. Very rewarding work if you can find the time. Do not be afraid of the homeless.
Best wishes for the New Year to all.

[gorideabike]

P.S. Even an hour or two of your time will be appreciated.