The Madeira Terrace is a 850m-long stretch of seafront arches in Brighton, England. After an effort to secure a RM22.3 million government grant failed, the local authority worked out a plan to save the Victorian-era structure via crowdfunding campaign.

IN this state of our economy, when money is tight but growth in educational opportunities must somehow be achieved, the Higher Education Ministry has come up with a policy that public universities should be self-supporting, and the route towards that objective is through endowments.

Models for such efforts are not difficult to find. Well-known universities, such as Harvard, Yale and Princeton in the United States, and Oxford and Cambridge in the United Kingdom, are all endowment institutions. The Al-Azhar University in Egypt is a wakaf university.

And the ministry’s experiment proved to be an instant success.

In an Astro report on Aug 8, Higher Education Minister Datuk Seri Idris Jusoh told the Dewan Rakyat that RM1.85 billion had been collected in the endowment funds of 20 public universities.

He added that 13 public universities had set up their respective endowment centres with the approval of the state Islamic Religious Councils, while seven others were seeking approval to set up their endowment centres.

The ministry, in cooperation with other agencies, has also come out with a guideline called “UniTP Purple Book — Enhancing University Income Generation, Endowment and Wakaf”.

There is a lesson here for other public institutions such as local authorities. Under Section 39 of the Local Government Act 1976 (Act 171), the revenue of a local authority consists of:

RATES, taxes, rents and licence fees;

CHARGES or profits arising from any trade;

INTEREST on any money invested; and,

REVENUE accruing from other sources, such as grants, contributions, “endowments or otherwise”.

In an earlier article, I had said in the past, our local authorities have been relying on the first three sources of revenue to meet their operational and development expenditure (Local authorities should set up endowments — NST, Oct 19).

The challenge in future is to tap “the other sources” spelt out in the last point as their new source of revenue. In that article, I had discussed the issue of endowments, leaving the term “or otherwise” for elaboration now.

Current practice abroad show that besides endowments, local authorities have also resorted to crowdfunding. There is a fundamental difference between them — endowments are for long-term and permanent objectives, while crowdfunding is for specific and short-term objectives.

With “little money” coming from a “lot of people”, who share a common interest, local authorities can benefit from the “power of crowdfunding”.

There are four types of crowdfunding — donation-based, reward-based, equity-based and debt-based (also called peer-to-peer lending).

As the last three types are not suitable for our local authorities, discussion hereafter is focused only on donation crowdfunding. As an illustration, we take a look at how a local authority in England uses crowdfunding to restore an old decaying building.

The Madeira Terrace is a 850m-long stretch of seafront arches on Madeira Drive in Brighton. It is one of the top 10 most endangered Victorian and Edwardian buildings in England and Wales built in the late 1800s.

It includes a Victorian promenade with a raised walkway, access stairs, associated buildings and lift tower. In 2012, it was closed to the public.

After an effort to secure a £4 million (RM22.3 million) government grant failed, the local authority (Brighton and Hove City Council) worked out a plan to save Madeira Terrace via crowdfunding campaign.

The campaign was led by VisitBrighton (a department of the local authority) using Spacehive. The initial target was to raise £400,000 (which is a tiny fraction of the estimated £24 million needed to complete the restoration work), but it was crucial to get the project off the ground as early as possible.

The remaining funds will be secured from other sources. The project will take at least seven years to complete.

I visited the crowdfunding portal recently and noticed that £429,555 have been pledged by many donors. I also visited the local authority’s official portal to find out the current situation.

Council leader Warren Morgan said the crowdfunding campaign was the first step in a £24 million plan to save Madeira Terrace.

He added that raising the money through “people power” would help to persuade other major donors (such as the Heritage Lottery Fund) to back the project until its completion.

What I find most significant is the council leader’s promise that pledges “will be refunded if planning permission and building consent cannot be obtained”.

The crowdfunding campaign commenced on July 26, and the target of £432,526 must be reached before the deadline of Nov 26. The local authority will utilise that initial sum towards restoring at least three of the 151 arches along Madeira Drive.

According to The Guardian, many local authorities in the UK will be turning to crowdfunding because local government budgets are being cut down by the central government.

By 2020, 168 councils in England will have lost about three-quarters of central government funding that they were able to spend in 2015.

Crowdfunding is built on four concepts — collective efforts of individuals to reach a set goal, the use of micro-financing methods to raise the required capital, an Internet platform that allows fundraisers (project initiators) to publicise the project and collect donations from the crowd, and harnessing public participation in the project.

It is not uncommon for major government projects to be abandoned due to lack of funds, while minor projects (such as green space, car parks, swimming pools and bicycle lanes) cannot get off the ground due to similar constraints.

Crowdfunding should be able to help local authorities resolve their predicament, thereby allowing them to provide better services to residents.

The writer formerly served the
Attorney-General’s Chambers before leaving for practice, the corporate sector, and then, the academia

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