Are Non-Profits and NGOs Ready for Disintermediation?

The new word in the previous post was “precariat.”  The new word in this post is “disintermediation.”

And, yes, the two words are related, and should be of concern to non-profit fundraisers and marketers.

Disintermediation is what happens when a way of doing something that required the presence of a mediator is disrupted.

Through it, the need for a middleman, or a mediator, is eliminated.  

A good example is Kodak. For a long time, the only way to take a picture was to use film. Then along came digital cameras, and Kodak’s services were no longer required.

Later, we got cell phones that took pictures and the services of companies that made cameras become unnecessary.

Another example is Amazon. Once upon a time, people went to bookstores to get books. Then along came the Internet retailing giant and everything changed.

The most recent example is Uber, the ride sharing company that is disrupting the taxi industry in many cities. 

Through Uber, anyone can offer anyone a ride; no need to call a taxi.

In one sense, disintermediation is a good thing—it’s a sign of progress and innovation. Unless you worked for Kodak, a bookstore or own a taxi cab, in which case it is a terrible development.

The challenge of disintermediation is that it can disrupt whole industries, throwing people out of work. Which is why so many today are feeling a sense of precarity—they worry that their jobs are among the next to be "disintermediated," or rendered unnecessary.

Why should fundraisers and marketers who work for non-profits be concerned about disintermediation?

Foundational to their existence is the belief that a mediator—the non-profit—is required between the donor and the recipient to ensure that the best services are provided (and tax receipts provided for donations).

But what if the presence of a mediator is no longer required? What if recipients can raise their own funds for their own services through crowdfunding campaigns? 

And what if donors can help people who are poor—without resorting to a non-profit group to do it?

NGOs and Disintermediation

That’s a question that’s beginning to be raised about the industry I work in, international relief and development.

At first glance, it's hard to see how could this way of helping people could be disintermediated. There are so many factors that would seem to require a go-between—distance, language, culture, expertise.

But the gap between donors in the west and recipients in the developing is narrowing, in terms of fundraising, according to an article by Daphne Davies on Devex. 

Organizations at the forefront of this type of disintermediation include Kiva, which links lenders and loan recipients, and Give Directly, which identifies very poor households in Africa and invites people in North America and Europe to donate money directly to them.

For Tom Guiney, head of futures at Bond, an umbrella group for U.K. NGOs, this new way of connecting donors and recipients is positive since it gives donors “more choice, ownership and empowerment, enabling them to find the charity that fits their values.”

It especially appeals to people who want to be more engaged and have a closer relationship with a local project, he added.

(Church-related NGOs already have lots of experience with this, with many churches today bypassing NGOs to send members on service and missions trips to the developing world. My own church has established a direct relationship with an orphanage in the DRC.)

But the methods pioneered by Kiva and GiveDirectly still involves intermediaries to link donors and recipients. What if even they are no longer required?

What if the day comes when people in the developing world have enough access to technology to do their own crowd funding for a small business or a school, hospital or other serve that benefits their community?

Corruption and Fraud

An interesting idea, and maybe it could work. But what about corruption and fraud?

This is a legitimate concern. But if all that is needed is $1,000, a budding entrepreneur only needs 100 people to give $10, or 200 to give $5.

If it should turn out to be a fraud, or the project fails, so what? You only lost $5. People give $5 all the time to homeless people on the street or kids raising funds for band trips at the door or to help someone make a CD through Kickstarter.

I don’t think the big NGOs will go away. They will always have a role to play. Someone who wants to donate $1,000 a) wants a tax receipt and b) wants to be assured it is used properly—things only registered and expert charities can do.

But a niche could be developed for the smaller kind of person-to-person fundraising. And it might be driven by a younger donor demographic that places a higher value on experience and personal connections than on trusting large and slow-moving NGOs that want to mediate the experience for them.

Plus, they are already sophisticated users of technology; connecting with people around the world in this way is second-nature to them. Texting a few dollars to help someone in Africa would not feel like a big stretch. 

We are at a very early stage with this new way of thinking about charity. Many are already dismissing it; it will never work, they say. But what if it takes hold somewhere? What might happen? 

Maybe I will ask a taxi driver that question the next time I go to the airport.