While relief efforts are being created to rebound, it is high time to explore innovative policy options to ease the humanitarian and development crisis.

 

As COVID-19 escalates across the globe, leading to human tragedy and economic disruptions, countries are now faced with heightened and unparalleled uncertainty while trying to restart the economy in the middle of this pandemic. Likewise, Mauritius has not been left unaffected. The deterioration in the international environment has frozen most parts of the Mauritian domestic economy.

Our tourism sector, regarded as the engine of growth fuelling business opportunities for many years, has slumped. Behavioural changes in consumption patterns have compelled local companies to assess the feasibility and resilience of their supply chains. Small and Medium Enterprises (SMEs) are finding it difficult to cope with operational stress and sustain their competitiveness. In addition, there is growing anxiety within the labour force resulting from future unknown macroeconomic shocks and cyclical unemployment. The problem is urgent; but the situation is not entirely hopeless, at least, not yet.

While relief efforts are being created to rebound, it is high time to explore innovative policy options to ease the humanitarian and development crisis.  One possible solution in Mauritius is to explore the potential of Crowdfunding, a funding technique which is aligned with the United Nations SDG 17 Partnerships for the Goals.

A Collaborative Economy

Crowdfunding is a project-based form of financing by which capital from a multitude of donors is raised within a predetermined period. Considered as a component of the collaborative economy, crowdfunding is comprised of at least four basic models: (i) Reward-based: where donors receive support and visibility in exchange, (ii) Donation-based: Provision of resources to projects or organisation without any exchange (iii) Debt-based: Also known as Peer-to-Peer. Lending money to projects initiators with future expected repayments and interest, and lastly, (iv) Equity-based: Involves the sales of securities.

Fundraising for socio-economic actions has always been a challenge when the gap between requirements and resources expand. Across the world, although there has been generous support in the aid provided by donor countries, financial needs still outpace incoming support. Therefore, the UNDP has supported countries like Bosnia, Turkey, and Uzbekistan to mitigate the risks associated with COVID-19 and help vulnerable communities, through crowdfunding initiatives. Based on data gathered by Finanso.se in March 2020, the Global Crowdfunding Market (GCM), which reported worth of $5.3 Billion in 2018, is expected to reach $8.5 Billion in transaction value this year. Furthermore, the World Bank estimates that the GCM will surpass the threshold of US$100 billion by 2025.

According to the report “Crowdfunding for Emergencies,” issued in 2016 by The United Nations Office for the Coordination of Humanitarian Affairs (OCHA) Policy and Studies Series, a hybrid solution between reward-based and donation-based crowdfunding approach is recommended for emergency response. These models act as an effective fundraising tool for NGOs to leverage grants towards social and environmental projects. With a robust hybrid crowdfunding platform that includes public recognition to mobilise resources, UNDP in Mauritius can contribute to social cohesion at the community level and encourage Corporate Social Responsibility (CSR) while assisting with development initiatives.

The prolific growth of blockchain technologies, using Crowdfunding, will lead to digital literacy amongst beneficiaries and more opportunities, such as access to more capital for new ventures.

 

Crowdfunding for Social Good

The following are programming options for which UNDP Mauritius can further explore the use of   crowdfunding mechanisms to support the socio-economic recovery in the context of the COVID-19 pandemic:

1.      Building Partnerships and Networks

During the SDG Decade of Action, development organisations are faced with increasing commitments to leave no one behind.  The use of trending crowdfunding platforms, such as KickstarterIndiegogoGoFundMe, could be used to introduce campaigns to strengthen partnerships and build networks; and draw public attention to key development challenges. This may attract stakeholders like project investors, accelerators, and entrepreneurial hubs who wish to support the sustainable development goals. Furthermore, market penetration through crowdfunding can also enable better environmental and social standards within organisations; and promote financial and technical literacy amongst entrepreneurs.

2.     Empowerment and Innovation

A crowdfunding mechanism may also be used to encourage female and young citizens to design and experiment with projects which align with the United Nations Sustainable Development Goals (SDGs)  and encourage digital transformation by using virtual “hackathons”.  The online platforms can serve to generate support and pledges for resources. For instance, the UNDP in Barbados and Eastern Caribbean, and the Republic of North Macedonia have taken initiatives to create strategic innovative online “hackathons” programmes, which not only reactivate the economy in the aftermath of the crisis but are also income-generating and help to identify pathways for emerging business ideas. By enabling an integrated and collective network, UNDP is likely to empower groups of people with ideas, with a multiplier effect in the attainment of the SDGs.  The UNDP may collaborate with sister agencies to serve as a verification mechanism for proposed quick impact projects within the affected community.

3.     Support SMEs

The latest survey carried out by Statistics Mauritius in November 2017 shows that 99% of the companies in Mauritius are classified as SMEs and account for 35% of Gross Value Added (GVA).  The economic downturn following COVID-19 is likely to have a negative impact on the Liquidity Ratios of both micro-enterprises and SMEs. The UNDP Mauritius can mobilise catalytic resources through crowdfunding and provide micro-grants and technical advisory support to these businesses. In the 21st century, if development is not green, blue, or gender-responsive, sustainable growth becomes questionable. By selecting SMEs based on their thematic areas, such as organic farming, clean energy, blue economy, sustainable digital solutions, and women protection, UNDP Mauritius can work to addressing the multidimensional challenges to development. In addition, by facilitating access to finance for SMEs through crowdfunding, jobs can further be secured.

4.     Creation of Blockchain

Blockchain is considered as the future disruptive technology to accelerate development since its social impact is substantial. Projects using blockchain technologies tend to be more successful, given that it prioritises due diligence, endorses transparency, and cost-effectiveness. Hence, Crowdfunding can be used to finance such blockchain initiatives.

UNICEF has supported 20 blockchain companies by allocating seeds money to Innovation Fund, which amounts to $25 million. Moreover, further to the sustained increase in imported fuel prices, the UNDP in Moldova, in partnership with The Sun Exchange, has allowed improved access to renewable energy for rural communities by financing solar power using blockchains. People can produce their own electricity, sell at a profit, provide back-up to the main grid, or even lease them to public institutions.

Similarly, the UNDP in Mauritius could use Crowdfunding to invest in blockchain technologies and help the primary sectors in Mauritius, which includes agriculture, fisheries, and solar energy. Given the uncertainty in the recovery of the tourism sector, technological advancements in these key areas will bring transformative solutions to social and economic problems. Blockchain will help to track and manage data of the supply chain management in agriculture and fisheries, which will improve operations and food safety. The prolific growth of blockchain technologies, using Crowdfunding, will lead to digital literacy amongst beneficiaries and more opportunities, such as access to more capital for new ventures.

Conclusion

Flexibility in resource mobilisation allows for coherent and immediate response to emergencies, like the COVID-19 pandemic. By establishing funding systems that promote partnerships and enable a collection of donors, at both national and international levels, UNDP can better support a small and developing state, like Mauritius. However, the limitations of crowdfunding must clearly be specified to all parties and regular reporting to funding recipients and donors must be ensured to increase transparency, accountability, and establishing trust. It is crucial to have legal, financial, and political harmonisation between UNDP and Mauritius before proceeding with such an innovative funding technique.

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