A diary of an experiment in social entrepreneurship

Can Small Gifts Create Epic Change?

At the invitation of Campaign Consultation, I had the honor this week of collaborating with DonorsChoose to present an e-seminar on small gifts & micro-loans for an audience of national service volunteers (e.g., Americorps VISTA, etc.)  DonorsChoose is one of my favorite philanthropic models, and it’s been very successful, so to say I was excited to have been offered this opportunity would be an understatement. Slides from the presentation are below; Epic Change content begins on slide 16.

h/t to Beth Kanter as her brilliant presentation “Giving Good Poke” provided so many of the insights incorporated into this deck.

As we moved through the materials, I couldn’t help but reflect on the fact that the vast majority of micro-funded initiatives (i.e., projects funded through small donations) seem to focus on micro-investment as well (i.e., small grants or small loans, usually under $1K); normally, too, implementation (and repayment, as applicable) are short-term.  Obviously, this type of investment at scale can offer substantive results; DonorsChoose & Kiva are great examples. The approach also appeals to donors who can feel as though they’ve made a substantive impact, and can have nearly instant feedback about that impact.

I read this quote in an article in TIME magazine about 2 years ago:

Unfortunately with so much money flowing into microfinance, many donors have lost patience with investing in long-term development infrastructure. [Northeastern University law professor & microfinance expert Rashmi] Dyal-Chand estimates that at least half of development aid has been diverted to microlending over the past two decades. “There’s nothing sexy about hospitals, schools, roads, sanitation projects,” she says. “But those are all the things the truly poor desperately need.”

At Epic Change, we believe micro-giving can fund to these important types of projects.  Instead of using small gifts to make small investments, we’re aggregating small contributions (over 80% of our nearly 1,000 donors have given $40 or less) to make larger investments we call “mezzo-loans”; to date, we’ve loaned over $65,000 to a single borrower over a period of about 18 months.  For many like Mama Lucy, a micro-loan (normally under $1,000) is simply insufficient to make substantive progress toward her vision…and building a school, and raising necessary funds, takes time. So, to sustain donor patience, we’re experimenting with lessons learned from very successful micro-philanthropic initiatives. In particular:

  • Discrete Milestones: While the entire school may cost $150K – $200K to build, and may take 3 years to complete, we’ve divided the project into smaller, shorter-term initiatives, like land, classrooms, solar power, technology lab, library, etc. – and we celebrate the accomplishment of each rather than postponing success until the end.
  • Donor Engagement: Like KIVA, which provides updates from borrowers, and DonorsChoose, which provides thank-you notes from classrooms, we give consistent updates from the project site, engage donors with creative expressions of gratitude (like these Flickr photos, and the YouTube video and photo of Twitter handles painted on walls below), and offer opportunities for our donor community to engage directly with the school in Tanzania (e.g., Mama Lucy’s blog entries, song dedications, YouTube videos, etc.)

A few questions:

  1. Are there other ways to sustain donor patience so that capital projects like schools, clinics, hospice facilities, orphanages and other larger-scale initiatives can be funded through “micro-collaborative” efforts?
  2. Of course, extending donor patience is only half the equation; we’re also investigating ways to “speed up” the influx of small gifts so that we can deliver results more quickly – with crowdsourced events like TweetsGiving.  Do you have any ideas for inspiring small gifts?  How do you decide where to invest your microphilanthropic contributions?
  3. At Epic Change, we admittedly originally adopted a P2P, micro-philanthropic approach out of necessity, but, in retrospect, I believe there may be significant benefits to funding projects in this way – what do you see as the benefits, challenges and, if relevant, potential pitfalls, of funding larger projects (say, $25K – $250K) by aggregating small gifts/loans from microphilanthropists & micro-lenders?

Posted: April 24th, 2009 under The Foundry.
Comments: 2

Comments

Comment from Tori Tuncan
Time: May 1, 2009, 12:51 pm

Hey Stacey! I love the “mezzo-loan” term (heard it from you first) and believe it’s a fantastic model. As you know, at Lend4Health, we’re doing the smaller micro-loans, and one of my concerns is that a small loan for health pursuits in most situations will not solve the problem; it can only be seen as one tool in a larger toolbox. But with Lend4Health we also have the problem of being able to pay back the loan; if our loans were much larger, people would have a harder time paying them back. I think you’re onto something with the mezzo-loans, especially since you then partner with the recipient to help them pay it back.

I have heard that Kiva is coming to the US for micro-lending, but that a “micro-loan” in U.S. terms would be $10,000 as opposed to the current $1,500 or so on Kiva.org.

I would *love* to see you consider your next project being a health clinic. I was sent a video clip of Pres Clinton and Bill Gates discussing the need to blend microfinance and health/clinic building somehow; and at first I thought Clinton was speaking to me (although he didn’t know it!) and now I think he was speaking to YOU! I will get you the clip and you will see what I mean.

In terms of question #2, I think you could become a Social Actions platform so that your actionable items are getting out across the web very easily, at virtually no cost to you.

I love seeing you getting “out there” with EpicChange. Your increased visibility will help #2 as well.

I know I hardly answered your questions. Just had to respond because you know I’m a big fan :)

Tori
Founder, Lend4Health.org

Comment from Christy McCarthy
Time: May 27, 2009, 3:21 am

We are HUGE fans of micro-donations – the Footprints Network has gathered over 230,000 of them to raise $650K and fund over 37 projects globally. This post just makes me light up to see others finding the same issues and successes that we’ve had so far.

We’ve learnt a lot about how to make microdonations really work – both for charities and for donors over the past 4 years. Just a few thoughts – particularly as they relate to Question #3:

Make it tangible: The donation rate goes up considerably when you can articulate clearly what the $ are for. We got a 70% donation rate when we said ‘Give $2 to XXX charity’, but this went up to 90% when we said ‘Give $2 to Build a primary school in Tial village, Cambodia’.

Make it easy and small: We’ve found a sweet spot with $2 donations (or 2 euro, 2 GBP etc). In our case, the donations are added onto other online purchases that people are making – their credit card is already on the table – it’s easy to add a little bit on top. Asking people to go to a special website, get their card out, fill in all the details etc etc, just to give a microdonation is too hard for many.

Engage people: Technology makes it possible to really engage people online, provide detailed information about the causes/projects, give real time feed back on fundraising status and keep them informed of the outcome of their donation. We’ve had amazing responses to emailing donors and saying, ‘Hey, your $2 did make a difference – here’s a project report’.

As for funding larger projects, this is the direction we’ve been heading in for a while. We thought that funding a $500 project was where it was at in terms of grassroots change. However, there’s a lot of due diligence involved to assess each project and we’ve found it easier to aim for $20-$40K projects as it’s the same amount of paperwork. (Less admin costs for more impact).

Additionally, you can change outcomes for whole villages and communities with larger sums, not just an individual or their family. (I personally love the fact that the *whole* village of Khati in the Himalaya has solar lights that enable them to study, work, live & socialise through our funding: http://bit.ly/PLkX8)

Footprints also funds areas of extreme poverty – people who are struggling with the most basic needs like clean water and food security. These issues are not often addressed well by grassroots-level projects. If infrastructure or a training program is required, micro-finance to a few entrepreneurs may not be the answer.

And finally (thanks for hanging in there!), the big challenge for us is not around the projects and issues, but around the fact that the world of global e-commerce is borderless. Our microphilanthropists & micro-lenders live in different tax jurisdictions all over the world. And our projects are also spread far and wide. What kind of organisational structure works best to manage and implement our activities, stay legal and tax-savvy? There are no clear answers on this and my thoughts would ramble for pages.

Thanks for writing this post on the power of ’small’. I think there’s a great future ahead for everyone playing in this field!

Christy McCarthy,
Co-Founder of http://footprintsnetwork.org
http://twitter.com/footprintsntwk

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