The necessity of a legal framework regulating online donation based crowdfunding in vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY TRAN HONG HANH THE NECESSITY OF A LEGAL FRAMEWORK REGULATING ONLINE DONATION BASED CROWDFUNDING IN VIETNAM MASTER'S THESIS VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY TRAN HONG HANH THE NECESSITY OF A LEGAL FRAMEWORK REGULATING ONLINE DONATION BASED CROWDFUNDING IN VIETNAM MAJOR: PUBLIC POLICY CODE: 8340402.01 RESEARCH SUPERVISOR: Dr NGUYEN THUY ANH Dr YANAGIHARA TORU Hanoi, 2021 ACKNOWLEDGMENT Foremost, I would like to extend my appreciation and sincere thanks to my supervisor from the Vietnamese side, Dr Nguyen Thuy Anh Her patient and constructive advice had helped me a lot in the completion of this thesis My great gratitude is due to my supervisor from the Japanese side, Dr Yanagihara Toru for imparting his valuable guidance and constant supervision during my preparation time Special thanks to the lecturers and staffs in Master’s Program of Public Policy and researchers for their studies and reports on the topic I have researched, whose information and findings had been a great support for my thesis Finally, I would like to express my love and gratitude towards my family and my friends Their encouragement and support have shaped my thesis to this stage Hanoi June 20, 2021, Sincerely, Tran Hong Hanh TABLE OF CONTENTS LIST OF TABLES i LIST OF FIGURES ii ABBREVIATIONS .iii Chapter INTRODUCTION 1.1 Research background 1.2 Problem statement 1.3 Research purpose 1.4 Research questions 1.5 Research scope and time 1.6 Research significance 1.7 Structure of research Chapter LITERATURE REVIEW AND METHODOLOGY 2.1 Literature review 2.2.1 Overview of crowdfunding 2.2.2 Studies on donation based crowdfunding 10 2.2.3 Research gap 17 2.2 Research Design and Methodology 18 2.2.1 Online survey 18 2.2.2 In-depth interview 19 Chapter CURRENT LEGAL STATUS OF DONATION BASED CROWDFUNDING BY INDIVIDUALS IN VIETNAM 21 3.1 Theories behind government’s intervention 21 3.2 Legal documents and framework relating to donation based crowdfunding in Vietnam 23 3.3.1 Effective laws 23 3.3.2 Proposed draft 25 Chapter FINDINGS 28 4.1 Survey results 28 4.1.1 Popularity of DCF and willingness to participate 29 4.1.2 Donor’s motivations and perceived creditability 30 4.1.3 Information interest 31 4.1.4 Attitude toward the proposed regulation 31 4.2 Interview results 31 4.2.1 From the perspective of fundraisers view 31 4.2.2 Lawyer – Fundraiser for disaster relief 35 4.3 Major findings and discussion 38 Chapter CONCLUSION AND RECOMMENDATIONS 40 5.1 Conclusion 40 5.2 Recommendations 40 REFERENCES 44 APPENDIX 48 LIST OF TABLES Table 2.1 Classification of crowdfunding model Table 4.1 Sample demographics 28 Table 4.2 Summary of interviewee’s project 32 i LIST OF FIGURES Figure 2.1 Sources, levels and dimensions of donors' motivations to invest in crowdfunding projects 11 Figure 2.2 Research design 18 Figure 4.1 The most popular donating channel 29 ii ABBREVIATIONS DCF CET ISSEE ITD SET SNS SDT TAF VAPEC VND MOF NGOs Donation-based crowdfunding model Cognitive evaluation theory Institute For Studies Of Society, Economics And Environment Intention to donate Social exchange theory Social network sites Self-determination theory The Asia Foundation The Vietnam Asia Pacific Economic Center Vietnam dongs Ministry of Finance Non-governmental organizations iii Chapter INTRODUCTION 1.1 Research background Emerging from the tide of industrial revolution 2.0, crowdfunding models are becoming an effective micro-financing methods used by both for-profit to social project founders (Mollick, 2014) Lambert and Schwienbacher (2010) first define crowdfunding as “an open call, essentially through the Internet, for the provision of financial resources either in form of donation or in exchange for some form of reward and/or voting rights in order to support initiatives for specific purposes.” In the realm of donation funding, the model is called donation based crowdfunding (DCF) DCF has been gradually become a popular fundraising method to financially support charitable projects According to recent studies, the global value of DCF in 2016 amounts to $0.56 billion (Scataglini & Ventresca, 2019) The Americas (US) led the race with 290 million and the runner up was the Asia-Pacific with the volume of USD 53 million (Zhao & Shneor, 2020) The volume is predicted to keep increasing DCF is used to fundraise for a wide variety of charitable causes ranging from specific tasks such as providing free meals to the poor to more ambitious projects like arts promotion and sustainable goals Among which, DCF has been proven as an effective fundraising mechanism for disaster recovery (Behl et al., 2020) and medical aid (Z Ba et al., 2021) Though sharing a great commons with traditional charitable fundraising, DCF distinguishes itself by the utilization of the internet which makes it superior in term of eliminating geographical barriers (Choy & Schlagwein, 2016; Zhao & Shneor, 2020) Often just through a single click anyone can make information on a person in need of help known to the large crowd It means that, on the one hand, the information on the beneficiaries are more diverse and abundant On the other hand, with the assistance of social network sites (SNS) the information can reach a wider range of audience Besides the fundraiser’s social network, the call can also spread extensively with sharing function to reach donors who is not known to the fundraiser before From the donors’ side, DCF, thanks to search engines, may tap to donors who is actively seeking for the right project to support Furthermore, DCF increases the likelihood of a charitable project to be funded as coordination and transaction costs associated with donation collections are reduced in a significant way With the aid of the internet, each step to fundraise for charitable purposes has been simplified and integrated into one standardized process (Zhao & Shneor, 2020) The campaign initiator can not only easily broadcast the call, but also provide real-time interaction in form of updates, comments and live streams to emotionally appeal the donor The availability and popularity of wire transfer and ebanking enables the donor to make donation from anywhere at any time DCF, thus, is open to anyone who wishes to raise funds or make a donation by lowering the threshold for participant and activism In recent year, Vietnam witness the trend of DCF in form of individual calling for voluntary contribution for charitable cause on the internet In October 2010, Hoang Phan Anh – a famous MC, through a Facebook post, raised 24 billion Vietnam dongs to support people suffering from flood in the central provinces of Vietnam November 2020, for the same cause and with the same means, Thuy Tien – a pop singer collected roughly 178 billion Vietnam dongs Furthermore, DCF model is not only used by celebrity but also regular persons Hoang Hoa Trung, a normal man of his thirties, thanks to online platform like social network and mobile application has connected to 12,000 donors and galvanized enough financial resource for 77 voluntary construction works, providing lunch for a year for 20.000 children in mountainous area with the value of 1.450.000/per school year in year 2020 Besides Phan Anh, Thuy Tien, Hoang Hoa Trung, many persons are utilizing online networks to initiate both ad-hoc and long term charitable projects The emerging of DCF by individuals also comes with concerns First, asymmetric information between the donators and the beneficiaries exists, especially in the context that information used in online platform is mostly unverified and unapprised Recently, in the national television news reported an individual illegally gain 07 billion Vietnam dongs by posting calls for charity donations through SNS Unofficial reports on the fraud in form of DCF are also popular APPENDIX ONLINE SURVEY QUESTIONAIRES COVER PAGE I am student under Public Policy Master Course in Vietnam Japan University – Vietnam National University I am in the process of doing my graduation thesis titled “The necessity of a legal framework regulating online donation based crowdfunding in Vietnam” Online donation based crowdfunding is the activity of an individual, through online channels, calls for donations from the public for charitable purpose Online channels include: website, online newspaper, SNS (Facebook, Zalo, Instagram, Twitter), mobile app and other online platform Charitable purposes include: disaster/fire/ serious incidents relief, assistance to poor patient, education promotion and other purpose of altruism I cordially invite you to participate in this survey All information provided will be kept confidential and anonymous I pledge to use this information only for research purposes I really appreciate your participation! PAGE – GENERAL INFORMATION Full name Gender: ☐Male ☐Female ☐Prefer not to disclose Current address: ☐Hanoi ☐Hochiminh City Age 48 ☐Others: ☐Under 18 ☐18 – 24 ☐25 – 39 ☐40 – 55 ☐Over 55 Total income per month ☐No job ☐Under 5,000,000 dong/month ☐From 5,000,000 to 11,000,000 dong/month ☐Over 11.000.000 to under 20.000.000 dong/month ☒From 20.000.000 dong/month and above PAGE - SURVEY ON THE SITUATION OF DONATIONS In the last years, have you ever made a charity donation in cash or in kind? ☐YES ☐NO - -PAGE Please kindly share the reason why you have not made charity donation in cash or in kind in the last years ☐Economic conditions not allow ☐Don't know about donation information and/or call for donations ☐Don't trust the person/organization calling for donations ☐Do not trust the authenticity of information on the beneficiary 49 ☐Doubt the positive result of the donations on the beneficiary ☐Not sure why ☐Other reasons, please specify …………… Do you have any intention to make charity donation in cash or in kind in the future? ☐YES ☐NO ☐OTHERS Currently, there are person calling for charity donations in cash and/or in kind in online channels, what is your attitude toward these kind of calls? ☐Always doubtful ☐Sometimes doubtful ☐Neutral ☐Trust ☐Completely trust Are you willing to make charity donations in cash and/or in kinds to such calls? ☐YES ☐NO ☐OTHERS - -PAGE Why are you not willing to make charity donations in cash and/or in kinds to such calls? (You may choose more than one option) ☐Individual call for donations is not legitimized by the State 50 ☐Do not trust the fundraiser ☐Do not trust the authenticity of beneficiary information ☐Do not know how the fundraiser will use/distribute the donations ☐Doubt the positive result of the donations on the beneficiary ☐Not sure why ☐Other reasons, please specify …………… Among the above reasons, what is the most important one? PAGE What is your standpoint toward the guidance of the local authority on the distribution of charity donations fundraised by individual? ☐Support ☐Not Support ☐Not sure How does the requirement that individual fundraiser has to comply with guidance of the local authority on the distribution of charity donations effect your willingness to donate to individual fundraiser? ☐It has no effect ☐I will change my decision ☐I will reconsider, not sure the outcome PAGE Please specify total amount of charity donations in cash and/or in kinds you have made during the past five year (This question is optional) 51 What causes have you made charity donations in cash and/or in kinds to? (You may choose more than one option) ☐Natural disaster, fire and/or serious incident relief ☐Support to patients with critical illnesses financial ☐Support to individuals under difficult circumstances ☐Other purposes, please specify………… Will you continue to make charity donations in cash and/or in kinds in the future? ☐YES ☐NO ☐OTHERS Have you ever made charity donations in cash and/or in kinds to DCF projects initiated by individual? ☐YES ☐NO - -PAGE Throug which channels you often make charity donations in cash and/or in kinds? (You may choose more than one option) ☐Sending money/material directly to the beneficiaries ☐Through Vietnam Red Cross at central and/or provincial level ☐The Vietnam Fatherland Front Central Committee at central and/or provincial level ☐Social/charitable fund registered with the State 52 ☐Mass media (newspaper, radio, television) at central and/or provincial level ☐At the company/organization you are working under projects initiated by the company/organization or the state ☐Other, please specify… Why haven’t you made charity donations in cash and/or in kinds to DCF projects initiated by individual? (You may choose more than one option) ☐It is not legitimized by the State ☐Economic conditions not allow ☐Don't know about the project ☐Don't trust the project initiator ☐Do not trust the authenticity of information on the beneficiary ☐Do not know how the project initiator will use/distribute the donations ☐Doubt the positive result of the donations on the beneficiary ☐Not sure why ☐Other reasons, please specify …………… Among the above reasons, what is the most important one? What is your attitude toward DCF projects initiated by individual? ☐Always doubtful ☐Sometimes doubtful ☐Neutral ☐Trust 53 ☐Completely trust Are you willing to make charity donations in cash and/or in kinds to DCF projects initiated by individual? ☐YES ☐NO ☐OTHERS - -PAGE How you know information of DCF projects initiated by individual? (Social network: Facebook, Zalo, Twitter, Instagram Webiste: private website of organization/individual Open souce: Google, Cốc cốc, newsfeed, advertisement You may choose more than one option) ☐Social network of the project initiator ☐Website of the project initiator ☐Online news/electronic media ☐Shares from individual/organization that you know in the social network ☐Open source ☐Other source What is the most popular one? 54 Please specify total amount of charity donations in cash and/or in kinds you have made to DCF projects initiated by individual during the past five year (This question is optional) What cause of DCF projects initiated by individual have you made donations to? (You may choose more than one option) ☐Natural disaster, fire and/or serious incident relief ☐Support to patients with critical illnesses financial ☐Support to individuals under difficult circumstances ☐Other purposes, please specify………… What is your attitude toward DCF projects initiated by individual? ☐Always doubtful ☐Sometimes doubtful ☐Neutral ☐Trust ☐Completely trust Through which channels have you made charity donations in cash and/or in kinds? (You may choose more than one option) ☐Sending money/material directly to the beneficiaries ☐Through Vietnam Red Cross at central and/or provincial level ☐The Vietnam Fatherland Front Central Committee at central and/or provincial level ☐Social/charitable fund registered with the State ☐Mass media (newspaper, radio, television) at central and/or provincial level 55 ☐At the company/organization you are working under projects initiated by the company/organization or the state ☐To DCF projects initiated by individual ☐Other, please specify… Please kindly rank the popularity of donating channel from to – the most popular – the least popular ☐Sending money/material directly to the beneficiaries ☐Official channels (Vietnam Red Cross at central and/or provincial level; The Vietnam Fatherland Front Central Committee at central and/or provincial level; Social/charitable fund registered with the State, Mass media (newspaper, radio, television) at central and/or provincial level) ☐At the company/organization you are working under projects initiated by the company/organization or the state ☐To DCF projects initiated by individual ☐Others as specified in the previous question What is your standpoint toward the guidance of the local authority on the distribution of charity donations fundraised by individual? ☐Support ☐Not Support ☐Not sure How does the requirement that individual fundraiser has to comply with guidance of the local authority on the distribution of charity donations effect your willingness to donate to individual fundraiser? ☐It has no effect ☐I will change my decision 56 ☐I will reconsider, not sure the outcome How often you check the information regarding how the project’s initiator use the donations? ☐Never ☐Sometimes ☐Always From 1-5, how much you rate your satisfaction of information provided by the project initiator in DCF projects? – Have no information I interested in – Have some information I interested in – Acceptable – Have relatively all information I interested in – Have all information I interested in Will you continue to make charity donations in cash and/or in kinds to DCF projects initiated by individual? ☐YES ☐NO ☐OTHERS If the answer is No/Others, please kindly specify the reason PAGE 10 What factors you concern when deciding to make charity donations in cash and/or in kinds to DCF projects initiated by individual? (You may choose more than one option) ☐Total amount raised ☐The cause 57 ☐Scope of the call ☐Receiving account information (for money) ☐Receiving location (for kind) ☐Total amount called ☐Beneficiary information ☐Credibility of the project initiator ☐Other, please specify …………………… What is the most important factor? Which following factors positively effect your perceived creditability toward the project’s initiator? (You may choose more than one option) ☐The fame of the project initiator ☐Verification from local authorities ☐Positive endorsement from mass media such as television, radio, newspapers ☐Confirmation/referral from a third party that you trust ☐Public information related to the results of receiving, mobilizing and using money/in-☐kind donations in previous projects ☐Other factors, please specify What is the most important factor? Please kindly choose your level of interest given to specific information after the end of mobilization stage? 58 Completely Not not Normal Interested Completely interested interested interested Notice from the project                          initiator that donations having been transferred to the beneficiary Proof that the project initiator having transferred donations Financial statements/Documents of the use of donations Photo of the beneficiary after receiving the donations Information on how the project initiator uses the donations Apart from above listed information, are you interested in other information? If yes, please kindly specify: ……………… What is your standpoint toward the fundraiser using part of donations to cover expenses for making report on use and distribution of donations? ☐Support ☐Not Support ☐Not sure If you support, what maximum percentage over donations deem acceptable? 59 INTERVIEW QUESTIONS FOR PROJECT INITIATOR 1, When did you start fundraising? At the moment, what channels are you using to fundraise? Have you ever fundraised online? If yes, since when? Online: website, online newspaper, SNS (Facebook, Zalo, Instagram, Twitter), mobile app and other online platform 2, Please kindly describe projects you have fundraised online during the past 05 years? (What is the cause? How does it operate? What scale is it?) 3, During the past 05 years, how much have you fundraised online? 4, How you often get information of the beneficiaries? How can you verify the authenticity of the information? 5, Have you ever countered any legal or policy problems during online fundraising? If yes, what are they? 6, What is the biggest difficulty in online fundraising? 7, In your opinion, you think requirement that individual fundraiser shall notify the local authority of his/her residence of the purpose, scope, and method on the form of mobilizing, receiving account (for money), receiving location (for goods) before mobilizing, receiving, and distributing voluntary contributions to support natural disasters, epidemics or incidents necessary? If yes, under which circumstances? 8, In your opinion, you think requirement that individual fundraiser notify the local government where the voluntary contributions are received of the scope, level, and duration of the support necessary? If yes, under which circumstances? 9, What is your opinion regarding to coordination and guidance of the local authority on the distribution of voluntary contributions? 10, In your opinion, you think reporting and publicizing the mobilization, receipt, distribution and use of voluntary contributions necessary? If yes, under which circumstances? 60 11, In your opinion, you think the Government should manage online fundraising? If yes, through which policy? 12, In your opinion, what policy the Government should introduce to promote the efficiency of fundraising, especially online form? 61 INTERVIEW QUESTIONS FOR LAWYER 1, What is your opinion of the legality of individual fundraising? 2, In your opinion, what problems could arise from the activity of online fundraising by individual? Online: website, online newspaper, SNS (Facebook, Zalo, Instagram, Twitter), mobile app and other online platform 3, Is there any effective legal mechanism that can be applied to regulate the activity of online fundraising by individual? 4, In your opinion, should the Government manage the activity through introduction of new legal documents? If yes, what aspects should be considered? 5, In your opinion, you think requirement that individual fundraiser shall notify the local authority of his/her residence of the purpose, scope, and method on the form of mobilizing, receiving account (for money), receiving location (for goods) before mobilizing, receiving, and distributing voluntary contributions to support natural disasters, epidemics or incidents necessary? If yes, under which circumstances? 6, In your opinion, you think requirement that individual fundraiser notify the local government where the voluntary contributions are received of the scope, level, and duration of the support necessary? If yes, under which circumstances? 7, What is your opinion regarding to coordination and guidance of the local authority on the distribution of voluntary contributions? 8, In your opinion, you think reporting and publicizing the mobilization, receipt, distribution and use of voluntary contributions necessary? If yes, under which circumstances? 9, In your opinion, what policy the Government should introduce to promote the efficiency of fundraising, especially online form? 62 .. .VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY TRAN HONG HANH THE NECESSITY OF A LEGAL FRAMEWORK REGULATING ONLINE DONATION BASED CROWDFUNDING IN VIETNAM MAJOR: PUBLIC... Government Then, a glimpse of current legal status of DCF and analysis of available laws and regulations that can applied to manage DCF in Vietnam as well as the proposed draft regulating DCF by individuals... essential to have a research to explore the DCF carried out by individuals in Vietnam and evaluate the necessity of a legal framework regulating such activities From the analysis, suitable recommendations