Ordered a car via Uber? Signed an Avaaz petition? Crowdfunded a solar lighting project in India? You may not realize it, but you are using “disintermediation” — using ICT to cut out the middleman or “mediator.”
As the use of disintermediation gathers pace, how will the phenomenon affect the capacity of international nongovernmental organizations to fundraise and advocate?
In terms of fundraising, new technology has narrowed the gap between those on the ground and individual donors, bringing with it new ways to connect and lower transaction costs.
According to Tom Guiney, head of futures at Bond — the umbrella group for U.K. NGOs — this can only be positive as it gives donors “more choice, ownership and empowerment, enabling them to find the charity that fits their values.” It appeals, he said, to people who want to be more engaged and have a closer relationship with a local project.
This new approach to giving has spawned organizations like Kiva, which specializes in microfinance loans, or GiveDirectly, which identifies very poor households in Africa and asks individuals to donate money on a one-off or regular basis. By cutting out the middleman, GiveDirectly passes 91 cents of every $1 to the family concerned.
At the same time, some well-established INGOs are adapting. CARE International, for example, has created its own direct funding model — Lendwithcare — based on microfinance. Ajaz Ahmed Khan, CARE’s senior microfinance adviser, described how the nonprofit observed back in 2008 a U.S.-led trend, where “more and more options [are] becoming available for donors to choose where their support was going and to see the impact directly.”
Khan feels using loans means that in contrast to a one-time only gift, CARE can go back to donors every month to remind them of their positive action and seek further funding. An important element of the tool is the associated nonfinancial services its partners offer. Its Ecuadorian partner, for example, helps clients improve their nutrition, addresses issues such as domestic violence, and supports families whose members have disabilities.
One concern for direct donors could be the scope for fraud, but this does not appear to be a problem. GiveDirectly has a reputation for good audit and risk methods, checking with communities beforehand that the money is properly targeted. CARE requires its in country microfinance institution partners to demonstrate their commitment to its code of conduct, and projects begin with a six-month pilot phase. CARE undertakes regular in-country visits to check how the finance has been used, and the MFIs are subject to independent annual audits and are often also regulated by the central banking authority.
The credibility CARE offers based on its long-term reputation also demonstrates the important role the “big guns” in the development world will continue to play. Their history of expertise and competence means donors are confident their money is being well-spent, whether through direct giving or more conventional fundraising.
“Even the most established charities are using social media platforms like Facebook and Twitter to raise funding and awareness and be creative in engaging with the public,” Guiney said. “This serves the lion’s share of people who want to contribute to good causes, but want to pass on responsibility to those they trust to do the due diligence to make sure it is properly used.”
So is the disintermediation process, with its lower transaction costs and more immediate effects, likely to be a challenge for organizations like Oxfam, which have traditionally played a role between U.K. donors and communities on the ground?
Tim Hunter, Oxfam GB’s fundraising director, thinks not, pointing to the fact that the INGOs remit is to attack the elements that keep people poor, rather than concentrating on one-to-one funding. Oxfam looked at crowdfunding, he said, and concluded that it was more useful for very specific projects — for example, building a sanitation system — than for generating funds for systemic change or rebalancing the ownership of “public goods,” which is Oxfam’s remit.
It may look as if Oxfam too has gone down the one-to-one fundraising aisle with “Oxfam Unwrapped,” which asks donors to buy animals — sheep, goats, chickens — for poor families. However, Hunter clarified that “these are not individual goats going to people, but a symbol of work in the area of economic sustainability.” Supporters of the Oxfam system argue that restricting funds to the purchase of defined gifts reduces the actual value of the donations by a third.
There are some, however, who argue that one-to-one funding can bring about systemic change, pointing out how it can reach into whole communities that cannot access formal financial structures — either because banks won’t take the risk, or because people are not financially literate. Some communities have been given access to microfinance, raising money for the entire community and putting power back into its hands.
Driving change from the bottom up
Another important aspect of disintermediation is building up advocacy from the grass roots, which Bond’s Guiney described as a “potential force for democracy, driving local communities to use technology in an innovative way, bringing change from the bottom.”
Younger activists are intensive users of technology and direct messaging. High-profile movements such as #BringBackOurGirls in Nigeria, following the kidnapping of about 300 Chibok girls in April 2014, have raised awareness among millions of young people, while acting as “signposts” to other campaigns.
Oxfam’s Hunter does not share this overall enthusiasm about the ability of disintermediation to steer people to movements for systemic change, describing movements such as Change.org or Avaaz as based around a particular cause, as opposed to Oxfam’s long-term aim for broader social change. He is optimistic, however, that these organizations are about “creating ways in which people can network — campaigning in an era of social media.”
With July’s third International Financing for Development Conference in Addis Ababa, Ethiopia, fast approaching, the role and scale of alternative forms of financing will be brought firmly into focus. So will disintermediation be the talk of the town in Addis — and potentially be the next “disruptor” for the global development financing landscape?
“We need to see what this looks like,” Hunter said, “and what sort of revolutionary movement it is likely to cause over the next few years.”
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