Is Crowdfunding Legal? | Addressing Some Common Myths About Crowdfunding In India #CrowdfundingDay

India has always prided itself on being a collectivist culture – a society where the needs and goals of a community as a whole are prioritized over individualistic mindsets. Think about students gifting toys and clothes to underprivileged children in orphanages or neighbours pooling resources to pay for a stray dog’s medical treatment.

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These instances comprise the innate humanity beneath Indian culture. From donating to charities to gathering contributions for a friend going through hard times, India has been philanthropically driven for generations. So, a concept like crowdfunding couldn’t help but naturally rise in a country ranked #14 in the Top 20 generous countries in the world. 

It’s no wonder that Crowdfunding Day, celebrated annually on March 14th, highlights this spirit of generosity throughout India. Recognizing the potential of community-driven support, this day reminds us how collective action can drive meaningful change worldwide.

But what is crowdfunding, exactly?

As Micheal Scott from The Office would say, “Why don’t you explain it to me like I’m 5?” Well, in the simplest terms, crowdfunding can be defined as the online practice of gathering small donations from a large number of people to help raise a significant amount for a cause.

From medical treatments to social initiatives or educational opportunities, crowdfunding has proved to be a powerful tool, enabling individuals to unite towards a common goal and make a significant impact together. 

Also Read: Is Crowdfunding The Key To Driving Social Change?

The Evolution of Crowdfunding

While historians have traced crowdfunding-like practices way back to the 13th century, one of the earliest instances of crowdfunding as we know it today was in 1997, when a British rock band raised funds for their reunion tour through online donations from fans. 

It was not until the early 2010s that this wave of crowdfunding reached India’s shores. When crowdfunding went mainstream, it coincided with India’s radical shift to online spaces, making it a significant part of the crowdfunding revolution. So, with the rise of social media and UPI services, crowdfunding started becoming easier and more accessible. 

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Yet, on the other side, people became increasingly skeptical. From the fear of failure to raise funds to the embarrassment of sharing their vulnerabilities online, people hesitated to begin their fundraising journey. Moreover, amidst the wave of rising crowdfunding campaigns on social media, donors failed to understand what was genuine and what was not. 

To address both sides of the crowdfunding coin and ensure an impactful journey for both the person in need and the donor, what was needed was a comprehensive crowdfunding platform that was accessible, trustworthy and reliable. Recognizing this need in the crowdfunding sector, ImpactGuru, India’s leading crowdfunding platform, was established in 2014.

ImpactGuru’s Efforts Towards Crowdfunding in India

ImpactGuru brought in a new wave of change in the crowdfunding landscape – a platform that prioritized 100% transparency in their daily operations, earning trust from lakhs worldwide. 

In the last decade, ImpactGuru has transformed innumerable lives and helped raise funds for a myriad of causes ranging from medical emergencies and critical illnesses to personal causes such as business ideas, social initiatives and educational opportunities. 

Source: ImpactGuru

Here at ImpactGuru, it is our belief that transparency is key when it comes to fundraising. Hence, with this blog, we aim to provide a comprehensive guide to the inner workings of crowdfunding in India by clearing some common misconceptions. 

Also Read: Common Misconceptions About Crowdfunding, Cleared!

7 Crowdfunding Myths, Busted!

Let’s revisit some common myths about crowdfunding in India –

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1. Myth: “Crowdfunding is illegal in India.”

Fact: Digital crowdfunding is legal in India and regulated by the Securities and Exchange Board of India (SEBI). While equity-based crowdfunding is still illegal in India, different types of crowdfunding, such as donation-based crowdfunding and reward-based crowdfunding, are legal and are considered to be effective means of raising funds for various causes. 

2. Myth: “I can only use crowdfunding for one type of cause.”

Fact: While donation-based crowdfunding is greatly prevalent when it comes to medical emergencies and critical illnesses, the world of crowdfunding is far more intricate. 

Aside from medical causes, crowdfunding enables anyone and everyone to achieve their purpose – a passionate student who dreams of studying abroad, an NGO wanting to provide education to more people in need, an entrepreneur building their start-up, or simply any person wanting to create an impact in the world.

3. Myth: “People don’t care about donating to a cause these days.”

Fact: When starting out on your fundraising journey, it is natural to have this doubt in your mind – “What if no one donates to my cause or no one cares?”. Well, that is far from the truth. In reality, as awareness about crowdfunding grows, people are donating now more than ever. 

The turning point of crowdfunding came during the COVID-19 Pandemic, as people became more susceptible to each other’s vulnerabilities through social media. In fact, many crowdfunding platforms witnessed a surge in donations during the pandemic, with 31.2% more donations than in the 5 years before 2020.

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Hence, with growing awareness among the general population, the crowdfunding that we know today is much more impactful and reliable. So, without any fear, start a fundraiser and take the first step toward achieving your dream. We've got your back.

4. Myth: “All the stories I see about fundraising on social media are fake.”

Fact: Social media has gradually emerged as the centerpiece of online fundraising in the last few years. With 462 million users in India alone, it provides a huge platform for people in need to share their stories with the world.

So naturally, there has been an upsurge of fundraisers on social media. Here’s where ImpactGuru’s Trust & Safety policy comes in. For every fundraiser on our platform, the team conducts thorough background checks. Moreover, the campaign goes through a document verification process as well to ensure authenticity and transparency for donors.

Also Read: Crowdfunding In India Is Safe & Legal. Find Out How.

5. Myth: “I’m not sure if my donation is going to the right person.”

Fact: At ImpactGuru, we go a step forward to ensure complete trustworthiness in our operations. In case of medical causes, raised funds are transferred directly into the hospital’s bank account, ensuring that patients can receive life-saving treatment on time without any room for error.

Additionally, we provide fund utilisation reports and regular updates to donors, enabling them to keep track of the impact made and witness how their donation has made a difference in someone’s life. 

So rest assured that your hard-earned contributions are going to the right place.

6. Myth: “I am apprehensive about my bank details being shared with crowdfunding platforms.”

Fact: When it comes to online payments, safety from transaction scams is a grave concern for all in today’s times. To ensure complete safety in online transactions, ImpactGuru has introduced safe payment gateways, careful monitoring of data, the highest forms of SSL encryption, and many more such precautions. 

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Additionally, government intervention, such as provisions in the existing legal framework for raising funds regulated under the Companies Act 2013 and Securities Act, i.e. SEBI Act, 1992, has further ensured that crowdfunding is a completely safe experience for everyone involved.

7. Myth: “People will judge me for asking for financial assistance.”

Fact: We understand that it can be scary to share your story with the world and be vulnerable. During one’s hard times, it can be easy to drown in the whirlwind of doubts and insecurities like, “What if I share my story and people judge me?”.

But all it takes is that first step of courage to begin your fundraising journey. Aside from your family and friends, there are many kind changemakers out there who want a brighter and healthier future for you. 

Innumerable campaigners at ImpactGuru took this first step and unfolded a better tomorrow for their families. Click here to unveil their inspiring tales of resilience.

A Parting Note

We hope that some, if not all, of your misconceptions about crowdfunding were cleared with this blog. Ready to step into the promising realm of crowdfunding? Start a free fundraiser on ImpactGuru now, and be the author of your own tale of resilience!

ImpactGuru is always happy to give more clarity for all your queries. Feel free to contact us at 18008912903 or email us at [email protected].

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This Crowdfunding Day, remember that you’re not alone in your struggles, and it’s okay to ask for help! Start your fundraising journey now and let the community support you.