Section II: Chapter Nine "Crowd funding"

Chapter Nine discusses how the idea of crowdsourcing has transferred into the area of finance, where individuals pool their money together known as crowd funding, social banking, and micro-financing or micro-lending.

What Crowd Funding Does:

• Those who are in need of money or a loan are directly connected to a donor. For example, one micro-finance charity, Kiva allows donors to pay for the amount a poverty-stricken business owner in Africa to fund their business. The majority of these micro loans are around $250, but this allows the individual to usually cut out the middle man who charges an extoritionate amount.


• Creates a direct link to the giver and reciever, which is more successful than other aid, because it gives the exact amount the individual needs that they can only spend on their business.


• This connection creates more interaction between both parties involved which increases satisfaction and results on both sides. The recipients of the loan also feel more personally responsible and are more likely to payback the loan in full.

Examples of Crowd Funding:

• Kiva/Grameen Bank: Two similar ideas that use direct links between the donor and recipeint to help boost business in poverty stricken areas. Instead of donors, the Grameen Bank uses other local business owners that pool in their money to finance loans to those in need. Both create a local bridge between the money, which puts more personal responsibility that the individual uses the loan properly, and pays it back promptly.


• Sellaband: Allows artists to post profile sites in hopes of finding investors who will donate money in hopes of recieving more rewards if the band becomes famous. The money the band recieves goes towards traveling fees, instruments, or venue fees, but the more investors they have, the more likely the band will be able to afford to go places they weren't able to before and increase the chances of becoming successful. This cuts out the middleman of production costs and record labels, allowing the band and the investors to earn more. These investors are much more personally involved and help promote PR of the band by telling family and friends to listen to the band.

Benefits of Crowd Funding:

• "It shifts the organization of an exsisting field" by giving more power to the consumers. pg. 217


• Shifts heirachery to horizontal, where individuals are directly connected to those needing the money.


• Those the receive loans are more likely to pay back loan and even give loans to others, as seen in Kiva where many gave back to the program once they were financially stable.


• This is better than aid as it helps boost the local economy and teach proper techniques to managing business. In the Kiva program, 68% of loan recipients were able to get out of poverty which is much higher than any other aid program.

Thus, the success of crowd sourcing in the area of finance can transform the idea of lending and provide assistance to more of those in need than ever.