What Can Digital Fundraising Platforms Learn from Harambees?

Technology has become central to many financial solutions, and while digital fundraising is becoming more popular, there is a lot that these platforms could learn from traditional giving like harambees in Kenya, suggests new Consultative Group Assist the Poor (CGAP) research.

CGAP in partnership with Busara Center for Behavioral Economic and M-Changa – two examples of digital fundraising in Kenya – sought to better comprehend the motivating factors that drive low-income people into charitable giving.

According to the research, while many cultures have different forms of charitable giving, their deep-rooted traditional customs could benefit financial technology (FinTechs) and other financial service providers.

In harambees, for instance, people come together to contribute for a cause. Be it for medical expenses, school fees, small-scale businesses, to name a few, these people pool resources to help each other out. The benefits and the cause are conspicuous, but what are the motivating factors?

From a series of experiments featuring 664 individuals from Kibera slum showed that there are three major reasons why people contribute; trust, reciprocity, and altruism. Trust is when a person contributes as a form of insurance for the future, that is, he or she expects the recipient to reciprocate the gesture when they are in need. Reciprocity in this context means repaying an act of charitable contribution. Giving without expecting a payback is altruism.

CGAP also found out that people contribute when they feel they have something in common with the other party when they believe they are a part of a social group if one is a part of an existing social platform, and more when their friends contribute higher amounts than themselves.

Family members also tend to contribute more as opposed to strangers, and of course, the strongest fundraisers are women. Another factor that enhanced better giving is communication as it builds trust.

Now, where does digital fundraising platforms stand amidst all this?

For one, if a platform banked on the three key factors that motivate traditional giving, they will receive more. Something that inspires reciprocity, say “Give today, receive tomorrow” or leaning on messages that give people a sense of success in their future contribution goes a long way in ensuring seamless and generous contributions.

Community in a fundraising platform is mandatory. The use of the service will increase, particularly if users are permitted to reveal their affiliations: SACCO, chamas, or universities, and to form online interest-based groups. Rewarding the highest contributor and displaying to all the users the ranking of those who contributed is another way to better fundraising. Message boards or chat rooms will also foster good communication that enhances trust.

Emulating M-Changa, for example, ensures the effectiveness of a fundraising platform. This digital fundraiser allows a trusted member of a community to collect money from several members before contributing the amount. Leveraging peer effects, or recognizing the power of shared social identities, and applying matched funds, mobilizes others and motivates users to give more.

If fintechs and financial service providers could incorporate these traditional elements of giving, they will reduce costs, expand their reach, and deliver products that match the customer preferences.