There are many aspects of digital currency that make it a unique development in payment systems. The idea of an international currency in itself is revolutionary. Digital currency is poised to make significant and long lasting impacts on many aspects of ecommerce, but one area that deserves a spotlight is non-profit fundraising.
If there’s one thing that any nonprofit professional will tell you, it’s that every penny counts. when credit card transaction fees cut into donations, nonprofits feel the pain. Our team member, Laura, had first hand experience with this when she helped launch an organization for sarcoma research. “Every dollar, every quarter we raised made a difference,” she recalls. “In order to have fundraising events and put together a campaign, we needed starting capital. That would inherently detract from the amount of money we could donate to our affiliated organization. When we would receive larger donations or sell tickets online for our events, processing fees cut a chunk out every time. We spent as much time trying to figure out how to save money as we did developing our programs.”
Laura’s experience was not unique in the slightest. Credit card processing fees typically run 2-3%, which eats away at any donation made through things like ticket sales and traditional online donations. Digital currency adoption would decrease that transaction fee dramatically, furthering the utility of every dollar donated. The money saved from minimizing fees could go a long way to improving the quality of life of the employees that run the show, while maintaining (or increasing!) the resources available for active programs.
Lowering or eliminating transaction fees would greatly improve the efficiency of any nonprofit. However, digital currency holds even greater promise for the world of international microfinance. Micropayments are already quite common in the Dogecoin and Bitcoin communities. Tips are sent for interesting or provocative content, to support good writing and other creative ventures. This behavior feeds naturally into microfinance, the act of providing small loans to disadvantaged businesspeople in order to promote grassroots development and long term sustainability. While traditional humanitarian aid is vital during emergency situations, it does little to create long-term solutions for communities that face a consistent lack of resources and economic support. In an article with the Harvard School of Public Health, Michael VanRooyen, director of the Harvard Humanitarian Initiative explains the shortcomings of traditional aid:
“When the NGO machine steps into a large-scale humanitarian emergency, it quickly provides water and sanitation services, food aid, health care, housing, and security. Most organizations don’t effectively prepare for long-term sustainability…In many ways, the NGO community creates an alternate economy, and much of the money is spent on the delivery of emergency services. So it’s a valid complaint from local residents: “Where did all the money go?”
Microfinance actively combats this problem by giving community members access to the capital resources they need to spur their own growth and develop their own economies. By stimulating grassroots economic activity, microfinance loans can have a long-term community impact, and lift disadvantaged individuals out of poverty.
Digital currency solves two big problems that exist with microfinance: International remittance fees, and reliance on pre-existing banks. While there are some opportunities for microfinance within the united states, most microloans are made to individuals overseas, in Africa, Asia, and South America. Typically, individuals receiving microloans do not have access to traditional banking systems. Traditional banking can be prohibitively expensive for individuals in poverty, with fees and balance minimums rising far beyond a rural worker’s income. Furthermore, banks require a credit history to provide loans, and rarely provide loans small enough for this population’s needs. International microfinance solves these issues. And yet, like any other international money transfer, there are fees for donors and international remittance charges that decrease the potential of any international microloan.
Digital currency transfers could eliminate all of these barriers for those in need. Today, people donate money to organizations like Kiva.org, who then transfer the money to partners in impoverished areas, who ultimately distribute the microloan to the individual in need. Transactions like that take time to clear, and every step of the way, there is a piece of the initial donation eaten by transaction fees an international money transfer fees. With digital currency, a donation could be sent nearly instantaneously, across borders, without costing the donor or recipient extra for banking or transfer fees. If Tim donated bitcoin to a microfinance nonprofit, the nonprofit could pass on the bitcoin to their international partner, who would exchange the bitcoin for local currency. One day, Tim might even be able to make a digital currency microloan directly to someone in need anywhere in the world. Quickly and easily, the money would be in the hands of those who need it most. Implementing a digital currency donation system could revolutionize microfinance, and would make microfinancing initiatives even more successful than they already are.
Places to donate bitcoin:
For Further reading: