In the world of giving, the amount of donations that actually reach those in need can vary significantly. It depends on factors like the size and effectiveness of the NGO, the type of program being funded, and where the NGO operates.
Usually, bigger and more efficient NGOs have lower administrative and fundraising costs. This means a higher percentage of donations directly benefits the end users and the programs they support. Some of these organizations aim for 80% or more of the donations to reach the intended beneficiaries. However, in certain cases, this number can drop to as low as 30%, which means a significant portion of an individual's donation is absorbed by the intermediary NGO as structural costs.
Many times, larger international NGOs act as fundraisers, leveraging their trusted reputation, and then redistribute the funds to local NGOs or communities responsible for implementing conservation actions on the ground. You might wonder why we need an intermediary when we know that part of the donation will be used for overhead costs in the first structure. There are two main reasons for this multi-layered approach that has been standard for many decades.
Firstly, it's about trust. By giving to a well-established and familiar institution, donors feel assured that their funds will be used appropriately, and monitoring will be conducted by the larger NGO.
Secondly, there's an international liquidity inefficiency in the banking system. Sending $100 to a local community in the Philippines through wire transfer can be complicated due to high fees and long processing times. In contrast, filling a check or using services like TWINT to support a Swiss NGO is more straightforward.
The combination of these factors has led people to rely on larger structures to deploy their philanthropic funds internationally, even though they understand that part of their donation will be lost in administrative costs.
GainForest is a Swiss non-profit organization that isclosely collaborating with ETH Zurich. Their main objective was to address the funding gap in global conservation efforts and revolutionize the current donation model using cutting-edge technologies.
Initially, they focused on minimizing the need for intermediaries to tackle trust issues in international donations to local communities. Their solution was centered around transparency instead of relying solely on trust.
« GainForest developed a digital platform that enables local communities and NGOs to showcase their projects. »
To achieve this, GainForest developed a digital platform that enables local communities and NGOs to showcase their projects. Donors can explore various projects worldwide and choose their preferred one. Using a stablecoin payment in USD through blockchain technology, donors can contribute the desired amount to the selected project. The platform acts as an "escrow account," holding the funds until the specified action is completed by the local NGO.
To unlock the funds, the local NGO must provide evidence specific to the action (e.g., satellite imagery, drones or phone pictures, bioacoustics tapes, camera traps, eDNA sampling, etc.). These proofs are then evaluated by a combination of validators supported by artificial intelligence tools. If the proofs meet the criteria, the funds are released and distributed to the local communities.
By adopting this approach, GainForest not only addresses the trust issue, but it also streamlines the money transfer process, making it more efficient and incurring minimal fees compared to traditional banking methods. Blockchain's transparent nature allows donors to track the distribution process down to the individual level once the local NGO divides the funds among the community members.
Moreover, the platform facilitates direct communication between donors and project participants through a chat feature, creating a stronger connection between the contributors and the beneficiaries.
By leveraging blockchain, AI, and monitoring solutions, GainForest is revolutionizing philanthropy, reducing the need for trusted intermediaries, and enhancing the overall efficiency of the ecosystem. This approach empowers local communities by providing direct access to international funding.