How can NGOs raise funding by implementing blockchain technology?

During the coronavirus (COVID-19) crisis, non-governmental organizations, or NGOs, worldwide have played a pivotal role in global philanthropy. But according to a survey by International Development Charities Network, 77 percent of charities surveyed agreed that COVID-19 had affected their finances.

Even in the pre-pandemic era, lack of trust and transparency in the operations of NGOs has been an issue. Often, NGOs are under the spotlight for not being completely transparent about donation inflows and how money is spent on projects.

But most NGOs want to make a genuine difference in the world by raising funds for the needy and other social causes. This lack of trust has had a negative impact on NGOs that are engaging in good faith and doing their part in philanthropy. 

So, how can NGOs showcase sufficient transparency in their operations in order to raise funds they need? The answer is through blockchain technology.

Problems with current NGO operations

NGOs lack a transparent system where the internal operations, such as the inflow of donations, the management of funds, and the projects where the donations are spent, are open for the public to view.

Real cases where donations made to NGOs have been put to illegitimate use has caused a level of mistrust amongst donors who would naturally like to have proof of whether their money is spent on legitimate and genuinely helpful projects. And the ultimate sufferer in such situations are those in need of direct NGO support.

To combat this mistrust, having a more transparent system in place where all the donations and funds are managed transparently is essential. This will ultimately help us contribute towards a better future and genuinely make a difference globally, especially during these tough times.

How can blockchain raise funding and solve problems for NGOs?

Implementing blockchain technology as a part of NGOs’ operations is an effective way to eliminate the common problems faced by NGOs, as mentioned in the previous section. An integrated blockchain system will bring transparency and immutability into the operations of NGOs.

If we look at any NGO or NPO’s value chain, we’ll find that a blockchain-enabled system could bring about this transparency at every step of the chain. This has proven to have positive effects on fundraising.

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Let’s look at the different ways in which blockchain technology can help NGOs to raise funding.

Build trust amongst donors

As mentioned before, blockchain has the power to bring security and complete transparency in any system, because in a public blockchain system, transparency is featured in every monetary transaction made as a part of their fundraising operations.

Through a blockchain system, everyone gets to have a complete picture of the NGOs’ internal processes—donors, recipients, and internal stakeholders. 

Donors will be able to trace their donations and ensure that their contributions are being used for the intended purposes, not to mention it can also be done using social media, email disclaimer, whitepapers, and so on, hence, NGOs will be able to build more and more trust with donors and thus raise more funds with confidence.

Avoid misuse and mismanagement of funds

Blockchain makes data immutable. This means there is no way of tampering with the transactions and other data. Thus any fraudulent transactions or corrupt activities will never go unnoticed. This, again, helps NGOs build trust with donors.

Blockchain technology can help NGOs accept donations in the form of crypto funding, and this can be boosted further using crypto portfolio rebalancing tools.

Improve efficiency of internal processes

Another advantage of a blockchain-powered system is that it helps to improve the efficiency of internal processes. Thanks to smart contracts, internal operations can be managed much more efficiently through such a system.

For example, smart contracts can help conduct transaction audits in real-time. Furthermore, the process of validating transactions will turn effortless after implementing a blockchain system. 

All these factors lead to the higher efficiency of operations for NGOs, thus helping them focus on raising funds from donors and using them for a good cause.

Reduce transaction costs

With the help of smart contracts, blockchain helps in reducing the execution time of transactions. Faster execution of transactions results in lowered transaction costs for NGOs.

Moreover, the cost of validating transactions can be very high and thus can be further reduced through the traceability of blockchain-powered transactions in NGOs. This further reduces operational costs, resulting in better savings of funds to be used for the intended cause.

How nonprofits can start using blockchain technology

By now you understand how blockchain technology can impact nonprofits. No wonder charities such as World Food Program, Unicef Australia, BitGive donation project, the Alice crowdfunding platform, etc., have successfully implemented blockchain solutions.

If you’re looking to implement a similar blockchain solution for your nonprofit as well, consider investing in blockchain development companies such as Openledger, Aetsoft, or Blockchain Simplified that specialize in developing tailored blockchain solutions for nonprofits.

Final thoughts

Blockchain technology may be the solution to the current problems faced by NGOs worldwide. Damaged reputation and high levels of mistrust are common issues faced by NGOs, ultimately affecting society as a whole.

Blockchain brings in more traceability, security, and efficiency in NGOs’ fundraising operations. It is high time that NGOs start taking measures to adopt blockchain-powered systems.

Please see Candid’s knowledge base article on NGOs for more information on non-governmental organizations, as well as our recent blog post on NGOs.