crowdsourcing-crowdfunding-p2pfunding
published 23/08/2022 - 4 Min Read

Crowdsourcing, Crowdfunding, and P2P Funding: What’s the Difference?

Have you ever thought of contributing to projects with considerable significance, but you don’t have much resources to give? Thanks to the development of the information technology that enables people around the world to connect, each one of us is now able to chip in and give our contribution to business and non-profit projects through the mechanism of crowdsourcing, crowdfunding, and P2P funding. Through these systems, a large number of participants can give their ideas, information, or money. What are the differences between these three systems? How do they work? Read this article to the end to learn more!

Crowdsourcing

In simple terms, Crowdsourcing is an activity of obtaining work, information, and data from a large group of participants. It usually breaks out a big job into many smaller jobs that can be done by the participants who can include volunteers or paid freelancers. 

This activity typically involves the use of digital platforms, whether it’s internet, apps, or social media. One of the well-known examples is the digital map apps who let their users submit information about the traffic condition they go through, or Wikipedia who lets its users from various parts of the world write entries on the website. 

Crowdsourcing helps companies obtain the resources they need from people across the globe with various backgrounds or skills without having to spend much money and time. One example of the benefits is that a job that can be done by the in-house employees in a certain amount of time can be done in a shorter time thanks to crowdsourcing. 

In addition, crowdsourcing can be used to gather ideas for companies in developing their products. One of the companies that let their users submit their designs in LEGO. Other customers can also vote for their favorite designs and explain why they like the designs. Later, LEGO’s official committee will review the design with the most likes.      

Crowdfunding

From a certain point of view, crowdfunding can be seen as one kind of crowdsourcing. Crowdfunding is an activity of raising funds from a large number of individuals where each can contribute a small amount to fund certain projects.

These projects can be profitable, such as launching a startup company or non-profitable ones like helping people with medical emergencies. Crowdfunding can be an easy way to launch a business project because not everyone is eligible to invest as businesses have the probability to fail. Hence, for people who are not wealthy, investing in startup companies might put their money at risk. Thanks to crowdfunding, people can contribute to creating business projects for as little as USD10. 

An example of a company which was launched via crowdfunding was Oculus Rift, a company offering. At the age of just 20, Palmer Luckey founded Oculus Rift through a crowdfunding campaign. In 2012, the campaign was backed by over 9,500 people, raising more than USD 2 million, making it one of the biggest crowdfunding success stories.    

Crowdfunded companies might offer no incentives for the funders. However, many companies offer some incentives to people who fund their projects, such as a copy of their products that is given before the official launch.   

One type of crowdfunding is called the Equity Crowdfunding. Through this system, companies can seek funding from the public and can give a proportionate slice of the company in exchange for a relatively small amount of cash. Unlike donation-based crowdfunding which offers no repayment, equity crowdfunding gives the contributors some financial stake of the company. 

Peer-to-Peer (P2P) Funding

Peer-to-peer (P2P) funding platforms connect funders to beneficiaries or people who are in need of money but have no access to bank loans. Through the P2P platforms, individuals can obtain loans from other individuals. 

Each platform or website has its own terms regarding the loans and the interest rates and assess the risk for each project. The higher the risk, the higher the yield. The platforms will also have fees that can be charged to the funders, the beneficiaries, or both.     

What are the Differences between Crowdsourcing, Crowdfunding, and P2P Funding?

From the above description, we can see that there are similarities between these three systems: crowdsourcing, crowdfunding, and P2P funding. One of the main similarities is that they rely on contributions from outside parties (freelancers, volunteers, donors, or funders). However, because these three have their own characteristics, there are certain differences between them. 

Crowdsourcing is different from crowdfunding in terms of the resources that it farms out. Crowdsourcing commonly obtains work, information, or opinions from its participants, whereas crowdfunding is limited only to obtaining finances from a large number of people through donation campaigns.   

Although crowdfunding and P2P funding may appear similar because both collect finances from a large number of people, donation-based crowdfunding typically does not give any kind of repayment for what the donors have given. Many businesses, however, usually offer early access to their products as incentives for the contributors. 

In equity crowdfunding, the company gives a part of the company’s shares to the funders who act as investors. For this reason, equity crowdfunding is more strictly regulated compared to donation-based crowdfunding.   

P2P funding, on the other hand, offers only repayment and yield but not shares. The amount of the yield varies on each platform, but it is usually higher than time deposits. 

Unfortunately, if you wish to abide by the principles of the sharia, investing in a P2P platform can be problematic because the transactions are usually interest-bearing and the yield is taken from the interest charged to the borrowers. 

However, you no longer have to worry if you wish to grow your wealth in a sharia-compliant manner because ALAMI P2P Funding Platform offers you a chance for that. ALAMI Sharia is regulated by the fatwa of the National Sharia Board – Indonesian Ulama Council (DSN – MUI) number 117 Year 2018. The yield that the funders receive when they put their money to fund the projects is taken from the fees received as an agent. 

When you finance business projects through the ALAMI P2P funding app, the SMEs who receive the funds (beneficiaries) are required to prepare certain debt recovery documents to the funders. The funders will then appoint ALAMI as an agent acting on their behalf. From this contract, the funders can receive ujrah or yield. 

Are you interested in developing your wealth through the ALAMI P2P funding platform? Click the buttons below to download the app! 

Maulana Malik Ibrahim

Content Specialist

I love to see challenges as opportunities to grow. In a world where everyone feels obliged to speak, it is a luxury to sit, listen, and learn.

I love to see challenges as opportunities to grow. In a world where everyone feels obliged to speak, it is a luxury to sit, listen, and learn.

guest
0 Comments
Inline Feedbacks
View all comments