By George Aine
Last year, Esther Kalenzi, the founder of 40 Days Over 40 Smiles, a youth organization that offers entrepreneurship skills in Uganda, did the unthinkable; she was able to raise $5,057 through fundraising through internet sources and friends.
What Kalenzi did is known as crowdfunding the practice of funding a project or venture by raising small amounts of money from a large number of people, typically via the Internet.
With access to capital being one of the challenges most business in sub-Saharan Africa face, analysts believe crowdfunding services have a role to play in helping to tackle this problem.
Whereas crowd funding has been successfully used to raise money in education, health, religion and NGOs, analysts have urged technology startups to embrace the model to gain capital.
According to Joseph Mukasa, an IT specialist, without this model, Ugandan startups will never take off. Mukasa says although the number of technology-savvy people is increasing, many of their ideas do not see the light of day because the existing financiers are too risk-averse to consider financing technology.
“Hundreds of startup founders can’t access credit from banks and other financial institutions. People all over the world with some disposable income are about to see how they can deploy their funds to better use,” he says.
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Mukasa says in the west, the crowd-funding model that has already proven popular through online services such as Kickstarter, Indiegogo, GoFundMe and others.
He says for Ugandan startups to effectively raise money using the model, they need to tread carefully, warning that it is not easy in Uganda.
“You need to convince people to give you money for something that they won’t receive for months (and possible longer),” says Mukasa.
The IT specialist adds that because such funding comes from people’s goodwill, it is necessary to always break down different stages of the project to show how much will be spent on each stage so as to win people’s trust.
“Potential backers are usually unsure of proponents’ abilities and do not know whether proponents are trustable…Therefore, considerations of quality and trustworthiness are important when deciding to support a project,” he says.
“Specify how much money will be attributed to each aspect of your project. When you provide those financial breakouts and roadmaps, potential donors are more likely to fund your project,” Mukasa adds.
He urges those raising funds to publicize the identity of all donors, saying people donate because they want other people to perceive them as compassionate.
“What really drives their behaviour is the need to be seen to care. And they want to be seen displaying compassion because they want to be loved themselves,” Mukasa says.
Crowfunding sites in Uganda
One is Akabbo whose objective is to help individuals and entrepreneurs to raise money for specific causes, activities, ideas and/or events.
To use the platform, individuals must write a brief campaign description, add a photo or video, add target amount and deadline date.
“You are then advised to tell as many friends about the campaign by tweeting, Facebooking and emailing them. On the deadline date or once the campaign succeeds, the funds are electronically forwarded to organizer on a pre-approved account,” information the website shows.
Support for listed causes need not come from Ugandans themselves. The platform allows individuals from across the world to donate by accepting globally recognised payment methods, charging 7 per cent of the total amount collected on a successful campaign. Akabbo also charges 7 per cent of whatever is collected on a campaign that does not refund contributions if it doesn’t hit its target.
FriendsFund is an online crowdfunding and fundraising platform which supports Ugandan shillings and other currencies. Individuals or entities can now raise money to meet their needs easily.
A study commissioned by London-based analytics firm Allied Crowds Ltd in 2016 shows East Africa is emerging as a hub for crowdfunding. The online platforms — which also offer grants, endowments, debt and equity — raised $37.2 million in 2015 in Kenya, Rwanda, Tanzania and Uganda.
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