In 2019, Raihan Miah secured admission to the University of Dhaka with a high score in the admissions test. He wanted to study law.
But he came from a poor family and did not have a father or any sibling to support him, so he could not afford the admission fee of Tk14,000.
But Raihan did not give up, and instead thought of crowdfunding to collect the money. He sent a proposal to the crowdfunding platform Oporajoy and within two months managed to raise the money to get enrolled at the University of Dhaka.
Crowdfunding is an age-old method of collecting money for a cause. But now it mainly refers to Internet-mediated registries and is one of the fintech models that use internet-based communication technologies.
Oporajoy Founder Monjurul Islam said that although crowdfunding is an age-old method of collecting money, internet-based crowdfunding is comparatively new for us.
While doing his post-graduate degree in the US in 2015, Monjurul Islam came up with the idea of Oporajoy. He said, "While studying there, I saw people organising crowdfunding campaigns to even celebrate their pet's birthday. Then it occurred to me that so many people in Bangladesh are hungry, or cannot afford basic education and healthcare. Why not crowdfund it ?"
Returning home in 2017, Monjurul started Oporajoy. But it was not easy. As crowdfunding was a new thing, they had to apply for the limited company licence and a trade licence from the Finance Ministry with an initial deposit of Tk 75,000.
All these took almost two years and in 2019, Oporajoy finally took flight.
But the real problems started after that. Monjurul Islam said, "People here have no clear idea about crowdfunding. Many people call us or even come to our office asking for funding, as if we offer money. Once a cancer patient came to our office and asked whether we fund people's treatment."
And when they learn that we keep a percentage of the money raised, they become suspicious and compare us with MLM companies.
Currently, Oporajoy is working on developing its website and structure to make it more user-friendly.
The idea of online crowdfunding
The idea of modern online crowdfunding is comparatively new from a global perspective as well. It was first used in 1997 by the fans of the British rock band Marillion. They raised $60,000 through an Internet campaign to fund an entire US tour. Later The band also used this method to fund their studio albums.
In modern times, crowdfunding is carried out primarily online via social media or crowdfunding platforms all over the world like Smartcrowd, Kickstarter, Indiegogo, Realty Mogul, etc.
In 2017 a Bangladeshi movie named 'Akjon Kabir Mrittu' was also produced through a crowdfunding campaign, where the producer of that film got funded by regular people.
But still, Bangladeshi people are reluctant to accept the idea and fund businesses through crowdfunding.
Why is that? Monjurul Islam said, "To understand this, we need to explain the crowdfunding models. There are mainly four popular crowdfunding models that use a web-based platform. These are credit-based, equity-based, reward-based, and charity-based crowdfunding.
When entrepreneurs, especially new entrepreneurs, start a campaign to collect funds for their businesses, that would be called credit or investment-based crowdfunding."
Oporajoy is a donation or charity-based crowdfunding platform. Here in Bangladesh, capital or investment-based crowdfunding is a bit challenging. Monjurul Islam explains that "Because of a history of many MLM company frauds, people are scared to invest in businesses they do not know or give their money to people they cannot see."
On the other hand, charity-based crowdfunding is more popular among Bangladeshis as people here are more religious and God-fearing. They prefer to donate or help people.
How does a crowd-funding campaign work?
Generally, there are three types of actors in a crowdfunding campaign - the project initiator who proposes the idea or project to be funded, individuals or groups who support the idea, and a moderating organisation (the "platform") that brings the parties together to launch the idea.
In a crowdfunding platform, an entrepreneur initially has to write details of his project and post it, stating how much money he or she needs for the project. Community members and well-wishers can then contribute to the project based on their ability and interest.
Raihan approached Oporajoy with a proposal. But it was not accepted or posted on the website instantly. Monjurul said, "We have volunteers who dispatch people in different districts to investigate people and their proposals. And when we are assured about its authenticity, we post it on our website".
Individuals or organisations can invest in or donate to crowdfunded projects in return for a potential profit or reward.
Monjurul emphasised the fact that it is not a non-profit organisation. The money transaction is done by the SSL Commerce, which keeps two percent of the money sent by the donors. Half of that money is used for the smooth operation of the website.
There are many projects where the full money necessary cannot be raised. In that case, whatever has been collected is sent to the person who applied for it.
In a credit-based crowdfunding platform, if the required amount is not raised, the money is supposed to be returned to the investors.
Dr Shahadat Hossain, an associate professor of Finance at the University of Chittagong talked about the challenges of crowdfunding in one of his articles. He said, "First, we have a low level of financial literacy on digital financial services development as the relevant policy-making bodies such as Bangladesh Bank, IT-related ministries have not developed any guidelines or initiatives to disseminate fintech innovations.
Second, trust in technology-based financing is very low in our country due to a few incidents of illegal multi-level marketing (MLM) companies in the past."
Shawkat Hossain, the general secretary of the Venture Capital and Private Equity Association of Bangladesh (VCPEAB) said, "due to lack of policy benefits, the issue has not yet found an institutional basis in Bangladesh. It is important to create a crowdfunding framework in the country now."
He thinks to make such platforms successful, people need not sacrifice too much. It just requires changing the mindset of the people.
Publicity is another key issue here according to Monjurul Islam. For example, Raihan was able to collect the fund in such a short time because he shared his link with his family and friends who donated for his admission.
Monjurul Islam said, "Publicity and good-will are very important here". He compares Bangladesh with India. Bangladesh has a more stable economy than India. But still, crowdfunding is a more successful venture there. He mentioned an Indian crowdfunding platform ketto.org that was joined by Bollywood actor Kunal Kapoor. During the COVID-19 period alone, this platform raised 100 crore rupees.
Beyond India, according to the Global crowdfunding statistics 2020 report, an individual campaign also raises an average of $568 via crowdfunding platforms. By 2030, the global crowdfunding market is estimated to be about $300 billion.
Monjurul is hopeful about the potential for crowdfunding in Bangladesh. He thinks crowdfunding has a huge potential in our country because our next generation is going to be more tech-savvy and want more personalised products and services.
Again, more and more people are getting interested in starting small and medium enterprises. Women are starting their own businesses from home. If crowdfunding gets a chance, our SMEs and businesses can fly high.