Financial Inclusion | McKinsey and Company


One of the Themes that McKinsey on Society focuses on is financial inclusion. In there archive we found and interactive that was put together a few years ago but is still valid and thought provoking today. The original article can be found here.

Crowdfunding is revolutionizing everything from philanthropy to microlending by allowing many small donors or lenders to pool their resources online to support a common goal. Two of the most innovative new organizations in the space are CrowdRise, a charity fundraising site, and Zidisha, which connects microfinance lenders directly with global borrowers. Actor Edward Norton and Robert Wolfe, co-founders of CrowdRise, Julia Kurnia, director of Zidisha, and Robert Schiff, a Partner of McKinsey, share their thoughts on how the sector is evolving.


Online crowdfunding, which allows many donors to join together to fund a project, has taken off in recent years. Nearly 500 sites raised $1.5 billion in 2011 — a figure expected to double this year, according to

CrowdRise and Zidisha are two of the most innovative new players in the space. CrowdRise’s approach lets anyone raise money for any cause, either their own or someone else’s, by creating a personalized fundraising site with just a few clicks. Zidisha cuts out the middleman by allowing direct peer-to-peer global lending, which capitalizes on the expanding mobile-banking sector in emerging markets.

ROBERT S: The ability to pick your own project to fund, nurture a personal connection with the people behind it, and help something new get off the ground have all made crowdfunding an exciting, dynamic space.

EDWARD: Event planning and producing has got to be one of the most inefficient ways to both raise money and communicate a message that an organization could possibly pursue. That’s why we say, “Rubber-chicken dinners suck and crowdfunding is awesome.”

ROBERT W: We describe CrowdRise as an engaged fundraising platform. We try to make it fun for the fundraisers. That’s our intention. We started by researching the philanthropic space and concluded that no one was making it fun. It wasn’t cool. And the tools were somewhat antiquated.

EDWARD: Despite the dynamism of many nonprofit organizations, and the sophistication of their strategic models, they are not necessarily effectively using contemporary Web-based social-networking tools to enhance their grassroots fund-raising and constituency-building efforts in a meaningful way.

ROBERT S: I think it’s also fair to say that crowdfunding is at the leading edge of the trend toward people becoming more global in their interests. People are more connected — whether through social networks, the proliferation of mobile phones, or broader media. The world feels like a smaller and smaller place. Crowdfunding is one way that we can feel more connected on an individual level in our giving, even to people on the other side of the world.

JULIA: Zidisha focuses on providing microloans to small businesses in African locations that don’t have electricity and where a bank branch is over a day’s journey away. The cost of getting a small loan through traditional microfinance organizations in those areas is exorbitant — the average interest rate for a microfinance loan is over 35 percent worldwide. We use crowdfunding to raise money; individuals who want to lend can go on our site and read proposals by borrowers explaining how they will use a loan.

ROBERT W: We think that if fundraising is fun for donors, they will do a better job of it. They’ll raise more money, and they’ll do it over and over again. We also believe the easier we make it to contribute or sponsor a fundraiser, the more likely people are to participate. I’m pretty sure we’re the only site that has a crazy fast “Join the Team” functionality, which we think is really awesome. Look at any “Grassroots Soccer” fundraising page. Grassroots Soccer is an organization that Ethan Zohn, a professional soccer player and amazing philanthropist, created to raise money to fight HIV/AIDS in Africa. You can go to a Grassroots Soccer page, click a button that says “Create your own fund-raising page” and a CrowdRise page will be created from which you can raise funds directly for Grassroots Soccer through your own networks. Literally, it takes three seconds.

JULIA: Unlike traditional microfinance sites, which use financial intermediaries to transfer funds to the borrowers, Zidisha’s lenders send them money directly in what’s known as “peer-to-peer lending.” That cuts out the inefficiency and cost that comes from arranging a loan through a bank or other intermediary. Peer-to-peer lending links people who have capital with people who need capital. I think that’s where the future is. The windfall from eliminating traditional local intermediaries is just huge. The borrowers receive a dramatically less expensive loan. With Zidisha, the average interest rate charged is about 8 percent.

ROBERT W: We run competitions or challenges on the site to get people involved. The reason is simple: competition works. There’s no reason that it should exist everywhere except philanthropy. And the incentives to donate can be really silly and nonsensical. So for an individual to email their friends and say, “Donate $25 to my fund-raiser and you’ll be signed up to win a bag of combs or a Mexican salsa fiesta party,” that’s notable. It’s different. It’s something that resonates on Facebook and Twitter. If you’re still in 1950s charity mode, you need to look at that.

ROBERT S: Crowdfunding gives people a chance to fund projects and develop relationships all over the world. That’s probably going to change the sections of the newspapers they read, the places where they pause when flicking through the channels on their TV, or the things that they talk about with their friends. That’s exciting.


Crowdfunding was born and has grown up with the Internet. Social networks and mobile technology allow funders to pull together to raise money and create viral campaigns that span the globe.

JULIA: Peer-to-peer lending to the developing world would not have been possible ten years ago. People are adopting mobile technology very quickly in sub-Saharan Africa. Mobile-money penetration in Kenya is the highest in the world. They don’t even have to leave their village to get a loan and make repayments.

ROBERT S: Technology is clearly the big enabler. And not just technology in general, but the widespread use of mobile phones in particular. This includes facilitating the connectivity between people in the developed and the developing worlds — people taking and posting photos of what they’re doing— and the ability to make an investment — a loan or payment right from your phone.

JULIA: Facebook has become hugely popular in a lot of developing countries. It’s often the first thing people do online. We deliberately designed our Web site to be reasonably similar to Facebook, so the people who’ve learned it can use Zidisha very easily.

ROBERT W: On CrowdRise, we try to make all forms of social outreach as easy as possible. Embracing other social networks is huge, and they’re so incredibly easy to use that we try to make it super, super easy. Because, at the end of the day, we think “by any means possible.” Sometimes people just need the “click here” button. They want to participate, but they don’t know how.

EDWARD: Younger people are clearly adopting these new tools very fervently and they’re learning to use them in more and more substantive ways – going beyond mere socializing and make these tools extremely productive. The maturation taking place in the sphere of social networking is very exciting.

ROBERT W: CrowdRise sits very nicely in the middle of the technology spectrum. There’s enough social networking that you are a part of a community; you’ll get random people you don’t know donating to your event and fundraising for you. But we also have really kick-ass tools so that someone can go to the site, create a fundraiser, message their friends, and that will be it for the day.

EDWARD: People who quickly dismissed the growing social network as ‘a waste of time’ or ‘just social chatter’ are going to miss out on the next wave of how people interact with each other and get things done.


“If you don’t give back, no one will like you.”

That slogan, featured prominently on the CrowdRise Web site, neatly captures one critical aspect of crowdfunding: far more than with traditional philanthropy, crowdfunding donors and lenders tend to be motivated by their personal connection to a cause or to the friends who have asked them for help.

EDWARD: The most successful platforms, like Facebook, are all about a place to develop your personal narrative. Our conviction was that people who are proactively trying to do good things in the world want (and need) a platform specific to that part of their life — one that lets them track their impact and has diverse utility, as well as a community where lots of ideas are being exchanged.

ROBERT W: People, especially young people, care about having a charitable story. It reflects well on them and people like them more because of it. In addition to talking about how much beer pong they played the night before, they want to talk about their volunteerism and how they give back.

JULIA: Most people who come on to Zidisha lend $10 or $20. They can earn interest or they can choose not to receive interest, which a lot of lenders do as well. Most lenders don’t participate to make a profit. They do it to help people in developing countries get a fair-priced chance to grow their business.

ROBERT S: In some ways, crowdfunding is playing on the same emotions around individual connections that I remember as a kid, when I would ask my parents to give a dollar a day to the programs that let you exchange letters with a poor child in another country. Of course, I think there’s a lot more transparency and flexibility with technology today than we had then. But crowdfunding is in large part tapping into the same very human emotions.

ROBERT W: Ultimately, I think “friends giving to friends” works. And organizations that aren’t embracing it should really rethink their strategy since this can be so much more effective than just emailing their supporters and asking for donations. On CrowdRise, you give to a friend who is fundraising for a charity, rather than to the charity directly. A person starts a fundraiser and reaches out to friends and family and says “Donate to my campaign.” It’s just cooler to reward people who are doing something awesome. It’s so much more personal. And it’s so much better at converting people into donors.

EDWARD: People don’t want to raise a little money, and then just drop the whole thing or have it evaporate. They want a way to take pride in it.

JULIA: We’ve seen a lot of instances on Zidisha where there’s been a dialogue, or questions back and forth between the borrower and lender. The borrower actually writes updates and comments on how the business is going. The lenders can ask questions.

ROBERT W: At the end of the day, CrowdRise is a do-it-yourself site. So if someone goes out and says they’re going to shave their head when they raise ten thousand dollars, you know, they’re the ones saying that, not us. But we think the energy and character of the site embraces people’s ideas and allows them to be crazy and fun with their campaigns.

EDWARD: We’ve tried very hard to go beyond the rudimentary platforms and tools that we ourselves tried to use within this space: platforms that are functional, with the basic engineering to allow a person to collect money on behalf of a charity, but very dry and utilitarian and utterly insufficient if a person is interested in a platform from which to stage and track their long-term, ongoing life as an activist.

ROBERT W: In 2009, I was running the New York Marathon. The organizers have official charities, but they also encourage you to raise money for a cause that you care about. My dad died of cancer. He had been treated at a hospital in Detroit called the Barbara Ann Karmanos Cancer Institute. I thought it would be great to run on their behalf since I had that personal connection. CrowdRise provides the mechanism to do that.


Personal stories are the heart of crowdfunding’s appeal. The model surfaces individual stories like never before, and funders gravitate toward those that resonate with them. This puts a newly significant emphasis on how fundraisers and borrowers craft their narratives in order to stand out from a crowded field. The most effective storytellers, in many cases, are the most effective fundraisers.

ROBERT S: You don’t often go to dinner with your friends and hear them say, “Hey, I made a donation to some big, established charity.” But I have certainly been to dinner with friends and heard them say, “Hey, I made a loan to this woman who’s a poor farmer in Kenya, she needed $500 so that she could invest in better tools and double her productivity.” And they’re excited about it. People get real energy out of it.

JULIA: Zidisha’s lenders can browse the borrowers’ profiles and read their stories about how they’ll use the loan. They can review business plans, photos, and past credit history to decide who they want to lend to. Borrowers can go to a cybercafé and interact directly with the lenders.

ROBERT W: The documentary Half the Sky tells stories about organizations that help oppressed women around the world. We contacted the filmmakers and said, “There may be people who want to help, right? And you have no means for them to do so. So, at a minimum, let’s create a page for you.” They got into it, and by the middle of October, they’d raised over $98,000. And this is in small donations — people are giving $20, $25 each. It’s turning into something awesome.

ROBERT S: It’s one thing to be told you’ve been part of an effort that has changed the lives of a hundred people, or a thousand. It’s another altogether to hear stories about a specific person — how things were hard for someone and how a specific project I supported made things better. It’s very hard to beat that feeling.

ROBERT W:, the number-one online wedding planning destination, had been encouraging people to go out and raise money for charity when they get married, in addition to getting gifts. But they had no idea how much was being raised. But with CrowdRise, individuals will be able to create a charity page for their wedding.

JULIA: In many cases, our borrowers and lenders communicate back and forth with each other. One lady in Kenya, Recheal Wairimu, supports her family buying large bales of secondhand clothing that she sorts through, looking for high-quality products to sell. On her loan profile, she said one of her biggest challenges is that many bales contain lots of low-quality items that can’t be resold. A lender in Atlanta told her about the American tradition of converting old clothing into quilts and suggested she try something similar. A month after getting that suggestion, Ms. Wairimu emailed back her thanks. She’d had a tailor convert the unsalable clothing into small bags for schoolchildren that were readily sold. Thanks to that dialogue, little is going to waste.

ROBERT S: Over the last decade, there’s been a real movement to introduce more quantitative measurement around the impact of philanthropic or development activities. That’s clearly important because you want to know what’s working — what to do more and what to do less. But it’s not enough. You can have amazing numbers, but if you can’t tell stories, I think you end up losing people. There are limits to how much you can apply fairly cold and rational language when discussing philanthropy and development without losing some of what’s special.


One reason crowdfunding has grown rapidly is its transparency: donors and lenders can see exactly what they’ve raised and how their money is being put to work.

JULIA: With Zidisha’s peer-to-peer lending, you can see the direct impact of how a small amount of money is changing someone’s life. It’s exciting to see someone’s idea being funded and invested, and become a reality. It works. Zidisha’s loan repayment rate is 97.7 percent.

ROBERT W: We had a charity on the site called Random Acts that needed to raise money to build an orphanage in Haiti and they also needed volunteers to go do it. Instead of bifurcating the message — raising money first and then looking for volunteers — they said: “The next 30 people to raise $5,000 get to come with us to help us build this orphanage.” They completely flipped it: Now they have 30 people saying: “I want to go build this orphanage. Will you help me raise the money?”

ROBERT S: For some people, crowdfunding is a way to introduce greater accountability into their charitable life. They can say, “I know exactly where my money is going.”

JULIA: Our first borrower, Ndeye Bineta Sarr, was in Senegal. Her extended family of 30 lives in three rooms. She had three children. Her husband was unemployed and she was struggling to put the kids through school. So she sewed dresses — beautiful dresses — you can see them on our Web site. They were in demand, but her production was limited by the amount of capital she could get. The interest rate in Dakar was 40 percent and she didn’t have collateral. So she couldn’t grow. It was doubtful her kids would stay in school past the primary grades.

ROBERT S: Microfinance is a place where borrowers often ask for some simple tools so they can take actions to improve their own lives. It’s pretty hard not to get behind that and be excited about it. That’s probably one of the reasons why microfinance took off as one of the early platforms for crowdfunding. It’s a hopeful story and the concepts are pretty intuitive — even if delivering on that potential can be hard at times.

EDWARD: When we started CrowdRise, a significant driver was the feeling that fund-raising is a field that needs specialization and focus. If fund-raising can be made much cheaper and outsourced to supporters, clearly that’s better, too

ROBERT W: Big organizations like The Nature Conservancy and Stand Up To Cancer are starting to embrace this model. They see that it works and that it’s a way to reach a younger demographic in the language that they speak. It’s a much better way to communicate with your audience.

ROBERT S: Investing in small businesses that are a size or two up from the microenterprises that receive microfinance is another area where crowdfunding is just coming along now. This will include both loans and equity, with investors seeking competitive returns. I believe this will pick up significantly. It will give people the same kind of emotional connections, but offer productive uses for money that wouldn’t go into philanthropy. And with an annual financing gap for small businesses globally in the order of two to three trillion dollars a year, there’s no shortage of need.

JULIA: By participating in Zidisha, lenders can really get a window into life on the other side of the world for someone in a very poor community. The borrowers will post comments. For instance, one might write, “I went to the market this morning to buy that dairy cow and prices were lower than expected so I also bought this goat.” Then a lender receives this message in his or her in-box. That had never been possible before.

ROBERT S: I think crowdfunding platforms can be a great way to offer advice and other technical assistance beyond money. That said, I would encourage the recipients to exercise some discretion. Just because you live in the United States doesn’t mean you have very much advice to give an entrepreneur in Uganda.

(*factoid source: 2011 report)


About Author

I am an energetic and creative individual. Who believes in the power of the crowd to have a positive effect in Africa. I thrive on knowledge and look for new opportunities to learn as often as I can. I ensure to ask the right questions to understand all aspects of operations and believe in learning from those with experience. Even though I am young in years I feel that I have a great deal of wisdom, both personally and professionally, and have the ability to share this with others. On a more personal note when I have free time I enjoy creating digital art, searching the web and designing buildings and homes.

Leave A Reply