Crowd-funding with Chinese characteristics

A new platform launched by internet giant Tencent enables social enterprises in China to diversify their funding streams and reach vast audiencesAdam Pillsbury – Guardian

La La Shou director Madam Zhang Lifang

La La Shou director Madam Zhang Lifang. Photograph: British Council

When the Chinese social enterprise La La Shou decided to create a club and host an annual conference for its beneficiaries, it turned to a new crowd-funding platform launched by Chinese internet giant Tencent to raise the needed funds.

La La Shou, which provides training, consulting and advocacy for disabled children, their parents and teachers in the city of Xi’an, applied to join the scheme in September. It uploaded its proposal and business plan on Tencent’s public welfare page and launched a social media campaign which netted it RMB 50,000 (£5,000) by encouraging 47,000 people to re-tweet its messages in less than two months.

“Crowd-funding platforms such as Kiva and Kickstarter are well established in the UK, but Tencent’s platform breaks new ground in China and could become a significant source of investment and publicity for social entrepreneurs here,” says Dr. Mairi MacKay, who heads the British Council’s Skills for Social Entrepreneurs programme in Asia. The programme has provided skills training to over 800 social enterprises in China including La La Shou.

Because of legal restrictions, the platform cannot directly solicit funding from individuals. Instead, featured social enterprises and NGOs upload their proposals and post tweets to gain support. Each time a member of the public re-tweets a message, the beneficiary is credited with £0.06 which will be donated by Tencent’s charity foundation if the social enterprise reaches a minimum threshold of re-tweets.

The maximum offered to each social enterprise is £5,000 and in the first four months Tencent had donated nearly £500,000 to 97 recipients through the scheme and inspired nine million re-tweets.

‘I sometimes describe Tencent to people outside China as “the biggest company you’ve never heard of,”‘ says MacKay referring to the world’s fifth largest Internet company by market capitalisation. Ubiquitous in a country where Twitter and Facebook are blocked, Tencent operates a Twitter-like micro-blogging service called Weibo with nearly 570 million users (of whom 277 million are active users), an online payment system, a gaming division and an instant messaging platform.

Tencent has partnered with the British Council since 2010 to promote social enterprise in China and, according to MacKay, ‘the partnership illustrates the evolving attitudes to CSR in China and the power of social media to promote social innovation.’

‘We take our responsibility to be a good corporate citizen seriously,’ says a Tencent spokesperson. ‘We were the first Chinese IT company to set up a charity foundation in 2006 and we are always thinking about how to leverage Tencent’s assets to promote the development of social enterprises and other charitable organisations and get the public involved in charitable work.’

‘In 2010 Tencent invited us to operate a branded feature page on their ‘social welfare’ portal which promotes philanthropy and public service. We use this channel to post news about social innovation in the UK and promote the social enterprises in our programme to our more than 170,000 followers,’ explains British Council Digital Manager Hou Peng. Then in 2012, Tencent staff started providing pro bono web communications training to participants of the British Council programme.

‘By the time they launched their crowd-funding platform in September, Tencent were familiar with our programme and vast social enterprise network,’ says Hou. ‘They offered us free banners on the site and asked us to recommend candidates for the scheme. To date, all 17 social enterprises we proposed have reached their funding targets,’ he adds.

For La La Shou director Zhang Lifang, ‘This platform offered a number of important benefits: it allowed us to raise money, broaden our funding mix, inspire 47,000 people to re-tweet our messages and add nearly 6000 new fans to our corporate weibo micro-blogging account.”

Currently, China’s estimated three million social enterprises and NGOs are barred from accepting direct donations from individuals and are effectively unable to secure bank loans, so to finance their operations they rely on their revenue as well as grants from official foundations (which can receive individual donations), government contracts and personal loans. La La Shou, for instance, relies on the fees generated through training and consulting for 61% of its budget and grants for the rest. In 2009, it raised an £11,000 interest-free loan from the families it serves.

The limited sources of funding have proved a barrier to growth, according to the 2012 China Social Enterprise Report produced by FYSE, an intermediary organisation.

The report found that ‘Access to funding, especially mezzanine funding, presents a severe or significant challenge to 86% of social entrepreneurs’ in China. This limits the expansion plans of even well established social enterprises such as La La Shou, which estimates that it serves only 10% of its potential market in Xi’an.

‘The funding raised through Tencent’s platform thus far is small if measured against the estimated £8bn that went to charitable causes in China in 2011,’ says the British Council’s Mairi MacKay, ‘but with over 564 million internet users in China, such platforms have vast potential.’

‘For the British Council, which was the first foreign organisation to launch a social enterprise programme in China, working with Tencent is a great way to support our social enterprises and promote the UK as a partner of choice and global hub of social innovation,’ says MacKay.

Adam Pillsbury is senior communications manager at British Council

Content controlled by British Council

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