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How does Crowdfunding Work in India?

    How Does Crowdfunding Work in India?

    Think back to your childhood, those days of wide-eyed wonder and boundless enthusiasm. Remember how, armed with little more than a bright smile and a simple collection box, you would eagerly hop from one neighbour’s doorstep to another? 

    It was a time when you, along with friends and perhaps siblings, were on a heartfelt mission to make a difference. You’d stand there, cheeks flushed with excitement, sharing your dreams and a cause dear to your heart, be it helping a neighbour in need or supporting your school’s latest project. 

    The spare change and crumpled bills you collected represented not just money but also the hope and goodwill of your community; all pooled together to bring about change.

    Fast-forward to today and the spirit of those childhood days lives on in crowdfunding, a modern-day practice that allows people who want to help connect with those who need help monetarily. In this article, we’ll delve deeper into crowdfunding, types and how it works in India.


    What is Crowdfunding?

    As mentioned previously, crowdfunding is a practice where an individual, a corporation, or an NGO can raise funds for a specific purpose. The purpose may be related to business, social purpose, economic reasons, or anything else. It fulfils the fund requirement of the beneficiary who receives the money. 

    It is operated online on a crowdfunding website that allows people to post their needs, conduct a campaign, and collect money for their specific cause. You may have heard of the quote, ‘every drop makes an ocean’. Crowdfunding epitomises the saying. 

    In crowdfunding, a group of people come together to fund a particular goal amount. The donors contribute whatever monetary resources they can and help the fundraising individual or NGO meet a larger goal.

    A fundraiser typically involves three stakeholders- the beneficiary, a crowdfunding platform, and donors. The beneficiary is the one who starts the campaign and needs the money. Often, a non-profit or another individual can create a crowdfunding campaign on behalf of a beneficiary/beneficiaries. 

    A crowdfunding platform, such as Ketto, hosts the campaign. The donors are those who contribute to the cause through the platform.


    What are the types of Legal Crowdfunding options in India?

    Crowdfunding in India is regulated by the Securities and Exchange Board of India (SEBI), which regulates India’s securities market. According to SEBI rules in India, there are three types of Crowdfunding available for people. They are as follows:

    • Donation-based Crowdfunding: It is the most famous Crowdfunding for social causes. For any social problem or medical problem that requires a donation, one can raise for donation-based Crowdfunding.

    • Reward-based Crowdfunding: It is a type of Crowdfunding through which the donor receives a reward in the corporation he is investing in. The donors are hopeful of getting returns from their funding.

    • Peer-to-peer crowdfunding: It is funding in which the donor gets the interest for their funds once the purpose of raising funds is fulfilled.

    In India, one can crowdfund for limited purposes; for instance, one can use it for medical emergencies, real-estate projects, start-ups, or loans. India has specific rules about which purpose can be involved in crowdfunding activities.

    There are crowdfunding platforms in India that help people post about their specific reason for Crowdfunding, and then the website allows them to campaign about it. Once the campaign is completed and the goal amount is collected, the beneficiary can withdraw the amount. So, this is the simple procedure of Crowdfunding in India.


    How can you Crowdfund for a cause of your choice online?

    1. Identify your goal and decide the amount you want to raise. Whom will it benefit? How will it help them? Write the answers to these questions down.

    2. Choose a crowdfunding platform that is compatible with your goals and budget. Ask yourself what help you need in running your campaign and how the platform can help you with that.

    3. Crowdfunding platforms charge individual fees for hosting and facilitating donations. They can have a hosting fee, transaction fee, and a fee for any other service that they may provide. It is essential to consider these fees when zeroing in on your target fundraiser amount.

    4. Have a basic idea of how long you wish to run the campaign. Will it be ten days or 100 days? Would you want to extend your fundraiser if goals exceed their initial timeframe? These are questions you need to consider before your campaign goes live.

    5. What is the story you want to tell about the beneficiary? Your crowdfunding campaign must give some information and facts about the beneficiary to help the audience understand why they should donate to your cause.

    6. It should make them feel like they can effect change. If you are looking for capital funding, then write about your product or service and how it is different from other ideas out there. Make your potential donor/funder feel invested. You can add pictures, videos, and links of your work to the story to add credibility and uniqueness.

    7. Update your campaign with details of milestones. Have you reached half your goal amount? Or have you got over 50 donations? Post an update about every milestone no matter how minuscule. Show other campaign visitors that there are people who believe in your cause and wish to help. This may encourage more people to donate.

    8. Non-profits host a majority of the crowdfunding campaigns. If you are a non-profit with an 80G certificate, then remember to inform your donors that they will receive tax benefits. This can help incentivise donating!

    9. Depending on the type of platform you have chosen, you will be able to withdraw funds along the way before your campaign ends, or you will receive them at the end of the campaign.


    Conclusion:

    In the ever-connected world we live in today, crowdfunding has emerged as a powerful and accessible means to bring about positive change. 

    It harnesses the collective goodwill of individuals and the digital platforms that unite them, offering a lifeline to those in need and a beacon of hope for creators and innovators. Whether it’s supporting social causes, backing innovative projects, or aiding in times of crisis, crowdfunding stands as a testament to the spirit of unity and the shared belief in the potential for small contributions to make a big difference. 

    As India continues to embrace this transformative approach to fundraising, it’s essential for both campaigners and contributors to be aware of the various types, regulations, and best practices that guide this innovative ecosystem. 

    With the right combination of passion, purpose, and the support of a kind-hearted donor community, crowdfunding and crowdfunding platforms like Ketto are changing lives and shaping dreams for the better.

    Christopher
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