Lack of transparency shrouds donations-based crowdfunding

Chennai: Sandhya (name changed) had sought the help of crowdfunding site Ketto for meeting the medical expenses of her mother, who is suffering from cancer. Initially, the site said that they did not have any platform fee for usual service and would charge only a total of 3.45 per cent of the accrued amount as GST and payment gateway charges.

However, when she approached the site to withdraw money after it had crossed Rs 50,000, they made a deduction of 27 per cent as their charges. When she raised a query, she was told that it included 5 per cent platform charge and Rs 1,499 charges for the premium service yet to be availed. But these charges could aggregate only up to 9 -10 per cent, and the site did not provide her the particulars of the 27 per cent deduction.

As she had raised a query about the charges, they finally paid the accrued amount after deducting 22 per cent from it. She was also asked to provide a ‘tip’ to the site before withdrawing the amount.

While the medical crowdfunding sites like Ketto, Impactguru and Milaap have raised several crores of rupees to help millions to meet financial needs for medical emergencies, lack of transparency is a bane of some of the crowdfunding sites.

“Most of the beneficiaries would be going through a trauma and they would not be in a mental state to raise questions about the money that comes their way. Some of the sites are taking undue benefit of this,” said a beneficiary of crowdfunding who did not want to be named.

Social lending or donation-based crowdfunding is governed by SEBI’s ‘Framework on Social Stock Exchange’. While, there have been a lot of discussions on reward-based crowdfunding, transparency regarding the operations of the donation-based sites have remained a grey area.  

“Crowdfunding, be it debt, equity or donation-based, is a recent phenomenon in India. While, cost of the platform and running expenses have to be met through the donations, the sites cannot make unreasonable deductions. While donation-based sites are hardly regulated, the crowdfunding sector does not have the size to have a regulator of its own,” said Sanjay Pande, associate of insurance consultancy firm Inregro LLP.

Maharashtra’s medical education and drugs department has recently appointed a committee to draw up rules for crowdfunding companies before they ask for donations.

“As online funding cannot be tagged to a particular geography, we need federal laws to ensure transparency in the transactions. However, the laws should not be so stifling that the purpose is lost,” said Pande.