- Pros: Extremely effective fundraising methodology. Enables marketers to reduce complicated development challenges down to the face of one child. Long-term, residual donors contribute $35/month ($420/year) for average of 8-years. Typical donor is woman, aged 35-55.
- Cons: Extremely inefficient by 2012 technology standards. Infrequent updates. Off-the-shelf donor management solutions do not support field program updates. Does not support social fundraising options.
- Examples of Sponsorship 1.0: World Vision, Compassion International, Save the Children and many others.
- Social fundraising connections (one-to-one, many-to-one, many-to-many).
- Group giving. A donor can create a group and invite his friends, family and colleagues to sponsor one or more needs. For example, a family can sponsor a child.
- Group needs. Needs (beneficiaries, projects) can be sponsored individually or in groups. For example, a small group of donors could sponsor a small group of micro-finance borrowers.
- Integration with social networking platforms, such as Facebook. This allows sponsorship opportunities and updates to be posted on Facebook updates.
- Program management software, that enables program staff to enter sponsorship opportunities directly. The ultimate goal is to provide field management software that helps program development staff manage their programs and simultaneously provides all the data that the donors require with no additional work required by the field staff. This feature alone would save an estimated 35% of sponsorship management costs.
- Pros: Effectively turns donors into fundraisers. Real-time updates from the field. Field program software that begins to level the capabilities between fundraising and field program software.
- Cons: Current donor management platforms cannot handle the social relationships (i.e. many-to-one, many-to-many) that are required with Sponsorship 2.0. No current integration available with program software, such as micro-finance banking software. Many
- Examples of 2.0: Based on my definition above, no current NGO has achieved the full 2.0 status, however, www.Kiva.org is the closest example of Sponsorship 2.0 because they enable all of the social fundraising options, plus they enable program staff to enter funding opportunities (i.e. micro-finance borrowers seeking funds) into their platform.
- The donor owns his own giving portfolio. His data is owned by the donors, not the NGO. This concept is similar to the Health industry’s move toward Personal Health Records (PHR) that integrate with industry-standard Electronic Health Record systems. Today, your health records are located in every doctor, hospital, insurance company and pharmacy that you have visited. The PHR attempts to provide a central location for your personal health record. The Donor Portfolio attempts to bring the giving & impact to a central location controlled by the donor themselves.
- The beneficiary owns his own mobile financial services, enabling him to participate in various programs with a single ID system, instead of a separate ID system for every program/NGO, they have an ID that crosses all programs.
- Mobile financial services is fully integrated into field programming. This includes mobile money, electronic vouchers, electronic gift cards, insurance, etc.
- Dynamic sponsorship opportunity management. Sponsorship opportunities can be funded by beneficiaries friends, family or anonymous donors. For example, a beneficiary can opt-in to a education scholarship. That scholarship/sponsorship opportunity can be posted to his family via phone number, or to a donor group, or NGO. This opens up sponsorship opportunities to the widest available donor market, enabling efficient matching of donors & beneficiaries.
- Mobile. Everything in the 3.0 ecosystem is enhanced with mobile technology.
- Direct. The broker concept is to enable the beneficiaries and serving organizations to post needs immediately and have those needs seen by Diaspora family & friends, and potential donors.
Problems Sponsorship 3.0 will attempt to solve:
- There is no way for an individual or group to consolidate their giving records or assess their impact. Every charity has their own giving engine. Yet, I can buy anything on iTunes and its all managed for me in the cloud, regardless of the type or author of the content.
- For the most part, I don’t get feedback on the need that I donated to. I get feedback inundated with promotional material about other stuff from the charity.
- I can’t give anonymously. I need a broker who can give me full credit for my donation and get me feedback from the charity about my specific need, but that’s it.
- Charities don’t have a mobile giving platform.
- Charities don’t have a mobile field needs platform–a way to post needs from the field and get them in front of charities.
- I don’t have an easy way to get my friends, family, groups involved with giving.
- Value-added connections. Proving to donors that each part of the giving ecosystem is adding value, not adding overhead, to the donation.
Catalysts to Sponsorship 3.0
- International remittances. Today, a person can top-up another person’s pre-paid phone with minutes anywhere in the world. Those minutes can only be spent on telecom-related purchases such as making phone calls and sending text messages. Why can’t the Diaspora (family & friends living outside their native country) ”top-up” a health account, pay an education bill, send a gift card electronically? They can and will. This means direct donor-to-beneficiary sponsorship that crosses all International boundaries and requires no intervention on the part of the NGO.
- Mobile transactions. Mobile money will become the default mechanism for sending, receiving, and paying for items. Your mobile wallet will organize all of your credit cards, loyalty cards, discounts, etc. into your smart phone.
- Giving networks. Like setting up a FaceBook List or Google+ Circle, you will be able to setup a giving network that can immediately react to your sponsorship opportunities. This could just be family or include friends and colleagues. For example, Apple’s new mobile wallet patent will enable a parent to manage multiple spending wallets for himself and his family members. This could take the form of an electronic gift card that could be limited to iTunes purchases and the redemption of the card could be tracked. This eGift card could be sent directly to his child via his smart phone, or directly to a family member living in a foreign country, or donated to a complete stranger via an NGO.
- Mobile marketing. You see a need, you scan the QR code, you watch a video to explain the need further, you click one-button and its introduced to your giving network and neatly categorized in your giving portfolio for further follow-up.
Challenges to Sponsorship 3.0
- Regulatory. More specifically, International Remittance, Anti-Money-Laundering and Terrorist Funding regulations. Right now, NGO programs that are closed-loop (not available to the public) are excluded from these regulations. Also, gift cards that cannot be redeemed for cash are also excluded. Over time, the Central Bankers from each country will publish clear guidelines that will add free up international resources across, eliminating borders, decreasing the friction of cash transfers, and getting money efficiently to where it needs to be. Mobile money can be made extremely transparent and fast, which will dramatically impact the visibility of of the gift and giver. NGO’s will continue to play a broker role, ensuring that the donor and beneficiary remain as connected or anonymous as they desire, and providing oversight to make sure that the donor promise is fulfilled. However, Sponsorship 3.0 eliminates the need
- KYC. The key to International Remittance is called KYC, or Know Your Customer. It is what banks need to verify before setting up a bank account, performing a wire transfer, or any other financial transaction. The KYC record is your identity and usually includes your government issues ID (i.e. social securty number), address, name, photo or photocopy of your ID, occupation, etc.). The better your KYC, the higher transaction limits and balances you can perform. This KYC is a key factor in financal inclusion, since many of the poor do not have proper ID, there are an increasing number of levels of financial inclusion depending on the quality of your KYC records, including the use of a mini-wallet for people that only have a phone number and no physical address or national ID.
- Identity. Each individual in the system will need an ID. There is dramatic activity in this area going on today. For example, many websites are offering new user the ability to register with their Facebook ID, rather than create a new ID on the service. The same is true for Apple iTunes and Google Android ID’s. For example, when you sign up for an Android phone, you register with a Gmail address. This address is your key to an amazing amount of your data. If you lose your phone, you can get a new phone, log in with your Gmail account, and all of your data is back. You can switch phone numbers, change carriers and your data stays with you in the cloud. So, Google, Facebook and Apple are becoming the keepers of your data. This identity system will eventually be available worldwide, enabling authorized brokers to facilitate connections between donors and beneficiaries with user-defined privacy (i.e. anonymous, via NGO, direct, etc.)
- Taxes. In the US, the IRS wants donations to go through a registered non-profit. If a “gift” is made to a specific relative/friend of the donor, it’s not an acceptable donation. The software would need to deal with these situations to be fully supportive of tax regulations. In addition, the broker would need to be a non-profit if it were to issue tax receipts on behalf of donors who wish to remain anonymous.
Pros & Cons of Sponsorship 3.0:
- Pros. Once communications and financial services become universal and cheap, it gets easier to move resources efficiently during a disaster. For example, immediately after a food crisis in Kenya, the Diaspora were able to send money directly to their affected families via mobile money. Once suppliers knew that people had the resources to buy, they sent supplies where needed. By the time the government and NGO’s showed up, the free market was already solving the problem. This would have been impossible prior to mobile financial services.
- Cons. NGO’s will feel their branding threatened if donors can make direct connections to beneficiaries. NGO’s that fill the broker role, like www.Kiva.org and www.CharityWater.org will thrive in this 3.0 environment.