More investment is needed in skills and capacity-building to increase the number of charities that use crowdfunding to generate revenue, according to a new report from the innovation charity Nesta and the National Council for Voluntary Organisations.
The report, Crowdfunding Good Causes: Opportunities and challenges for charities, community groups and social entrepreneurs, says crowdfunding can help projects that would otherwise struggle to get funding, as well as increasing the amount of volunteering, improving transparency and helping to find new ways to increase awareness of social issues.
But the report, which is based on interviews with crowdfunding platforms and a survey of 450 charities, community groups and social entrepreneurs, says that although crowdfunding has grown significantly in other parts of the economy – for example, making up 12 per cent of new loans to small businesses – it makes up less than 0.5 per cent of charitable giving in the UK.
The report says that two in three charities reported not having the requisite skills and capacity to set up and run crowdfunding campaigns, although 43 per cent said they would be likely to use crowdfunding at some point in the next year.
Grant funders and social investors, among others, should therefore invest in crowdfunding skills and capacity-building, and test and measure the effect of crowdfunding, the report says.
It says that these investors should integrate crowdfunding into existing funding schemes through match funding, set up referral schemes from funders to crowdfunding platforms and support the transition from crowdfunding projects to developing sustainable organisations.
The report recommends that charities try to set up crowdfunding campaigns and join up fundraising and campaigning teams to run crowdfunding campaigns.
Writing in the report, Karl Wilding, director of public policy and volunteering at the NCVO, says crowdfunding could help charities deal with long-term demographic changes and the end of "industrial" fundraising methods.
"Many of us believe that the future of social sector organisations will be as the hubs for social networks, empowering supporters to change the world around them," he writes.
"Crowdfunding absolutely fits this model. This report helps us understand that future better."