(Luận văn thạc sĩ) 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

MASTER'S THESIS

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VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

TRAN HONG HANH

THE NECESSITY OF A LEGAL FRAMEWORK REGULATING ONLINE DONATION BASED CROWDFUNDING IN

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

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TABLE OF CONTENTS

LIST OF TABLES i

LIST OF FIGURES ii

ABBREVIATIONS iii

Chapter 1 INTRODUCTION 1

1.1 Research background 1

1.2 Problem statement 4

1.3 Research purpose 5

1.4 Research questions 5

1.5 Research scope and time 5

1.6 Research significance 6

1.7 Structure of research 6

Chapter 2 LITERATURE REVIEW AND METHODOLOGY 8

2.1 Literature review 8

2.2.1 Overview of crowdfunding 8

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 3 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 4 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 5 CONCLUSION AND RECOMMENDATIONS 40

5.1 Conclusion 40

5.2 Recommendations 40

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REFERENCES 44 APPENDIX 48

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LIST OF TABLES

Table 2.1 Classification of crowdfunding model 8Table 4.1 Sample demographics 28Table 4.2 Summary of interviewee’s project 32

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LIST OF FIGURES

Figure 2.1 Sources, levels and dimensions of donors' motivations to invest in

crowdfunding projects 11Figure 2.2 Research design 18Figure 4.1 The most popular donating channel 29

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ABBREVIATIONS

DCF Donation-based crowdfunding model

CET Cognitive evaluation theory

ISSEE Institute For Studies Of Society, Economics And Environment ITD Intention to donate

SET Social exchange theory

SNS Social network sites

SDT Self-determination theory

TAF The Asia Foundation

VAPEC The Vietnam Asia Pacific Economic Center

MOF Ministry of Finance

NGOs Non-governmental organizations

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Chapter 1 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

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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 e-banking 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

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Second, in cases where the fund raised is large, the question of effective distribution comes to hand Both Phan Anh and Thuy Tien faced problem of distributing the mobilized voluntary contribution In the case of Phan Anh, among 24 billion VND, emergency assistance including financial assistance, food and supplies amounts roughly to half of the total donations The remaining was used for providing breeding cows and calves to 04 poor communes of 02 provinces of Ha Tinh - Quang Binh, namely: Phuong My, Phuong Dien, Mai Hoa, Thach Hoa; building 1 clean water station to serve 500 households in Minh Cam parish, Tan Hoa village, Quang Binh province; sponsoring heart surgery for 90 cases of children in the Central with congenital heart disease through the Heart Understanding Fund; supporting project to build 31 flood-proof houses for people in Phuong My commune, Phuong Dien, Huong Khe district, Ha Tinh province Though being transparent in the way of distributing the donations, Phan Anh was under criticism for not using the money for the purpose as stated in his fundraising status Similarly, the post of Thuy Tien asking for using part

of the donations to assist Vietnamese labor in Japan during Covid-19 was opposed by many supporters Later, she announced to have been assigned all the contribution to local province to distribute to 61.532 households affected by the flood Some expert claimed that the distribution of a large amount, if not being in line with the government support scheme, may cause overlap Some households may receive too much while others cannot access to necessary assistance

In Vietnam, the mobilization, receipt, distribution and use of sources of voluntary donations is regulated by Decree 64/2008/ND-CP Accordingly, organizations allowed

to perform mobilization, receipt, distribution and use of sources of voluntary donations are limited to Vietnam Fatherland Front and Red Cross Society (at all administrative levels), social and charity funds registered under Government's Decree No 148/2007/ND-CP of September 25, 2007, and central and local mass media agencies (in case of donations for terminally ill patients only) The emerge of DCF practice has revealed the gap in the current legal framework In October 23rd 2020, Government Office issued Official Correspondence No 8876/VPCP-QHĐP to assign the Ministry

of Finance to urgently draft a Decree replacing Decree No 64/2008/ND-CP According to Correspondence No 8876/VPCP-QHĐP, the purpose of the amendment

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is to ensure the efficiency and timeliness of the mobilization, reception, distribution and use of voluntary contributions to support people in overcoming difficulties caused

by natural disasters, epidemics and incidents; patients suffering from dangerous

diseases; and to encourage, honor and create favorable conditions for organizations

and individuals to promote the spirit of solidarity, mutual love and support in order to stabilize life, restore and develop production and daily life of the people

According to the latest proposal from Ministry of Finance on December 25 2020, regarding the regulations on individuals participating in the mobilization, receipt, distribution and use of voluntary contributions, two options are being proposed The first one is that mobilization, receipt, distribution and use of voluntary contributions

by individuals shall be regulated through reporting regime The second option is that the Government provides just the legislative backing for individual to do DCF, leaving open all the requirements

Since 2010 when Vietnam achieved low, middle income country status, foreign donors have been considering the plan to assist countries at lower status In the trend

of gradual decrease in foreign development assistance the mobilization of voluntary contributions within the nation is essential to help address existing and new development challenges Meanwhile, a regulation can be a double-edged sword If it imposes too much burden on the subject, initiatives to do good can be discouraged Therefore, it is 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 can be proposed so that new laws and regulations can provide a favorable condition for individuals mobilizing resources for charitable cause and yet ensure the effectiveness of distribution process

1.2 Problem statement

In the era of Web 2.0, individuals are assisted to changing from solely donors to the fundraiser using DCF model The DCF model by individual now has not been regulated by any official regulatory documents Meanwhile, frauds and ineffective distribution are potential to happen, causing lost to the society In line with the aim of

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mobilizing resources from society for charitable cause of the Government, it is necessary to explore the practice of DCF by individuals and evaluate the necessity of issuing new legal regulations regarding the matter

1.3 Research purpose

The research aims at giving an exploratory of the current situation and analysis of the draft regulation on mobilization, receipt, distribution and use of sources of voluntary donations by individuals using DCF model, especially for the cause of helping people to overcome difficulties caused by natural disasters, fires or serious incidents and for terminally ill patients From the analysis, the paper will then propose suitable policy implications to create favorable conditions for individuals participating

in fundraising activities and to ensure the efficiency of the mobilization, reception, distribution and use of voluntary contributions

1.4 Research questions

The main research question is “Is a legal framework regulating online donation

based crowdfunding necessary in Vietnam?” To clarify this matter, the paper focuses

on answering the following sub-questions:

 What is the current legal status of DCF in Vietnam?

 Does the government need to issue new regulation to regulate DCF in Vietnam?

 Is there any alternative to mandatory regulation of the State?

1.5 Research scope and time

Basing on the nature of the research, a desk review was conducted regarding regulation theories, DCF and the current effective legal system of Vietnam Information regarding online fundraising campaign dated from 2015 to 2020 which is available in the circle of the author is gathered to provide a glimpse of the potential of DCF in Vietnam

The Vietnamese residents and overseas are surveyed through an online questionnaire open in May 2021 in finding an overview of DCF practice in Vietnam and exploring the potential impact the proposed regulations may have on donor’s

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behavior as they are the subject of the regulations The population is selected randomly by providing a survey link accessible to everyone

The in-depth interviews are carried out with three fundraisers and one lawyer in Hanoi via telecommunication channel and in person

1.6 Research significance

Regarding academic significance, the research hopes to contribute as an exploratory to the under researched practice of DCF by individual in Vietnam From the results of survey and in-depth interviews, insights from different stakeholders are identified and compared with theoretical foundations from international researches The research is expected to pave the way for further studies in the sense that similarities and difference between practice of DCF in Vietnam and international are reviewed with reference to theories behind

For practical significance, being carried out in line with the timeframe of the Government in reviewing legal documents on mobilization, receipt, distribution and use of sources of voluntary donations, the research aims at presenting diverse viewpoints of subjects affected by the proposed regulation to the Government By analyzing donor-fundraiser’s perspective with theoretical framework, implications are expected to contribute to create favorable conditions for individual to participate

in mobilization, receipt, distribution and use of sources of voluntary donations Moreover, it could promote the process of mobilizing the resource from the society for pro-social mission in the context of decrease in foreign development aid

1.7 Structure of research

The thesis will contain five chapters with the contents as follow:

Chapter 1: Introduction This chapter will illustrate the research background and

clarify the research problem The research questions, research scope and time, and significance of the research are also presented in this part

Chapter 2: Literature review and methodology The content of this chapter

focuses on reviewing available literature history of research on DCF in the world and Vietnam The second part will clarify the methodology applied in the research

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Chapter 3: Current legal status of donation based crowdfunding by individuals in Vietnam Chapter 3 will first present theoretical foundation for the

intervention of the 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 are provided

Chapter 4: Findings This chapter shows the findings resulting from online

survey and in-depth interviews These finding will then be analyzed and discussed in this part

Chapter 5: Conclusion and recommendations This is the final chapter of this

research which summaries all the main findings and discussions from the analysis in the above chapters Then, the author will provide suitable recommendations to the draft of new regulations relating to the mobilization, receipt, distribution and use of sources of voluntary donations by individuals in Vietnam

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Chapter 2 LITERATURE REVIEW AND METHODOLOGY

2.1 Literature review

2.2.1 Overview of crowdfunding

Emerging from the concept of “crowdsourcing” in micro-finance (Mollick, 2014), crowdfunding is an unofficial channel of raising fund to finance a venture or project from the general public, rather than an intermediation such as banks or venture capitalists Crowdfunding is often used to refer to an open call by individuals or a group of individuals over a fixed time, often through the medium of web-enabled information systems for making financial contribution to support a project (Belleflamme et al., 2012) Basing on the backer’s return type, (Massolution, 2012) categorized crowdfunding into four different models namely: donation-based model, lending-based model, reward-based model, and equity-based model, which has reached consensus among literatures in the field (detailing as in Table 2.1)

Table 2.1 Classification of crowdfunding model Donation-based

crowdfunding

Crowdfunding model where funders donate to causes that they want to support, with no expected compensation (i.e, philanthropic or sponsorship based incentive”)

Equity-based

crowdfunding

Crowdfunding model in which funders receive compensation in the form of fundraiser’s equity-based or revenue or profit-share arrangements

A typical crowdfunding model consists of three participating stakeholders: the project initiators who seek funding for a project, the backers who are willing to contribute, and the crowdfunding platforms acting as intermediaries to match project initiators with donors and facilitates the exchange (Belleflamme et al., 2014; Tanaka & Voida, 2016) The project initiators determine the pledge amounts and publish it on crowdfunding platforms to draw supports from the backers The platforms are often run by established institution with it owns operation rules and requirements such as minimum pledge amounts, all-or-nothing-/keep-it-all-principle fundraising principle, compulsory information and the like By it matching mechanism, the platforms help to bring the projects to the potential backers depending on their preferences In return, the platforms may receive commission basing on the percentage of the pledge (Gierczak

et al., 2016) A few crowdfunding platforms to be named are Crowdfunder, Kickstarter, Indiegogo, Patreon, GoFundMe, GoGetFunding, Fundable, Suning, CircleUp, Jingdong, AngelList, Alibaba, RocketHub, DemoHour, DonorsChoose, Modian, CrowdPlus, FundRazr, Crowdo, Companisto, Milaap, Crowdcube, and Campfire

….(Ziegler et al., 2020) Besides crowdfunding platform, the initiators can also broadcast their call on social networks (SNS) and other available online channels In mainland China, two largest social network sites Weibo and WeChat run its specific features for charity fundraising called “weigongyi” and “qingsongchou” respectively Even in Facebook, Instagram it is not difficult to come across fundraising posts

From 2013 to 2017, total global market volume of crowdfunding had grown 40 times from $11.06 billion in 2013 to $418.52 billion in 2017, in which DCF amounted

to $0.47 However, this number was based only on data collected from formal online, peer-to-peer or crowd-led marketplaces Statistics on “individual crowdfunding’ initiatives which are individual- or organization-specific fundraising campaigns carried outside the control and oversight by a formal crowdfunding platform has not been produced by any report yet (Ziegler et al., 2020)

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2.2.2 Studies on donation based crowdfunding

International studies

Within the field of DCF, scholars attached great importance to the exploration of the motivations behind the funder’s behavior (Bagheri et al., 2019) Prominent theories used to examine the psychological and social motivations of donors' choice and real behavior are self-determination theory (SDT) and social exchange theory (SET)

In the field of DCF, the motivation of backers are often impure altruism (Zhao & Shneor, 2020) Impure altruism is the combination of pure altruism and warm glow Pure altruism is "a motivational state with the goal of increasing another's welfare" In other word, the donor donates because he/she believes that his/her donation can alleviate the suffer of the beneficiary The donor, upon the act of donating, may enjoy pleasure and satisfaction, which is often been referred to as warm glow effect The warm glow reflects the empathy process between donor and receiver, which on one hand motivate donation by positive feeling of helping others On the other hand, it amplifies the guilt when the individual turns away While intrinsic motivations can be understood as individual’s inherent joy in doing good led by impure altruism, extrinsic ones could be the impulse to comply with group expectations, the sense of social belonging, and the desire to gain peer recognition or have better image or influence

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(Bagheri et al., 2019) in exploring donors’ motivations in DCF in Iran carried out a semi-constructed interview with 13 donors who had donated through Hamijoo – a DCF platform in Iran The interview transcripts were analyzed with additional information of the project available on Hamijoo The finding confirmed that the impetus behind individual donors is a combination of both intrinsic and extrinsic and

at both individual and social level Summary of indicators under each category is in Figure 2.1

Figure 2.1 Sources, levels and dimensions of donors' motivations to invest in

crowdfunding projects

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Source: (Bagheri et al., 2019)

Basing on SDT, Wang et al (2019) examined the donor’s intention in DCF in China using a framework incorporating intrinsic and extrinsic motivations with conceptual factors Intrinsic variable is defined by the author as the degree of inherent joy and personal value that donor believe as outcome of donation, referred to as sense

of self-worth Extrinsic ones are presented by face concern, perceived donor effectiveness (the perception that donation may contribute to solve the problem) and moral obligation Conceptual factors include social interaction and referent network size which respectively indicate the communication between donors and fundraisers in crowdfunding communities and perceived donor size of the crowdfunding platform

To collect the empirical evidence, the author built a five-point Likert scale survey to measure aforementioned variables and, then published the hyperlink on online survey website and random online forums which has DCF activities identified via search engines The survey was open from June 23, 2019 to July 12, 2019 and was answered

by 632 respondents in China nationwide 588 answers were valid and used to run correlation test The finding showed that self-identity and social identity significantly influenced the intent to donate All variables were proved to be positively associated with either or both self and social identity

(Jiao et al., 2021) also conducted a Likert scale survey targeting WeChat users

to find the answer for why Chinese supported online charities crowdfunding Eight independent variables including Reputation, Reciprocity, Sense of belonging, Joy of giving, Altruism Financial constraints, Social influence and Social tie with the initiator were put in OLS regression model to test the effect on intention to donate (ITD) The analysis of 617 valid responses indicated that except for Reputation and Social influence, six other variables had significant effects on ITD

Social exchange theory (SET)

Looking at the “online” feature of DCF, the act of donation in DCF bear resemblance with an online transaction Under social exchange theory (SET), the preliminaries to participate in a transaction is that the perceived benefits being higher than the perceived costs of interaction (Sidel, 1997) In the DCF, the cost is often

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associated with risk of fraud due to information asymmetry While trust plays vital role

in easing the perception of risk associated with highly uncertain online transaction (like crowdfunding) (S Ba & Pavlou, 2002; Jarvenpaa et al., 1999), several studies have confirmed the magnitude of trust and perceived creditability to intention of backers in crowdfunding (Fakultät, n.d.; Gerber et al., 2014; Kang et al., 2016; Rodriguez-Ricardo et al., 2019; Zhao & Vinig, 2019)

Especially to the DCF model, Liu et al (2018) explored the effect of both empathy form SDT and perceived creditability of SET to the ITD using stimulus-organism-response (S-O-R) framework The model consolidated various factors of Technological Characteristics (Website quality, Transaction Convenience) and Project Characteristics (Initiator Reputation, Project Popularity, Project Content Quality) to Empathy and Perceived Credibility with control variables namely altruism, income, past donation experience, social ties with project initiators The data was collected from the users of WeChat and Weibo and SNSs in Mainland by a seven-point Likert scales ranging from 1 (strongly disagree) to 7 (strongly agree) survey from May 12 to May 26 2016 205 valid responses were collected and tested The findings showed that empathy and perceived credibility were statistically proved to have strong positive effects on ITD Technical characteristics, project content qualities were all positively associated with empathy and perceived creditability Altruism and past donation experience asserted significant effect on ITD Notably, initiator reputation was confirmed to attribute to perceived creditability but not empathy while project popularity was significant to empathy but insignificant to perceived creditability Taking the qualitative approach, by analyzing comments expressing doubt of creditability of medical crowdfunding campaign available in Reddit and data from semi-structured interviews with 20 DCF participants, (Kim et al., 2016) suggests ten indicators for creditability including two indicators regarding legitimacy of the

beneficiaries (Details of External Financial Support, Beneficiary Merit), three about project quality (Off-Site Verification Details, Realistic Funding Goals, Redundancy in Campaign Description, Multimedia, & External Resources), Fundraiser and

Beneficiary Identity Verification, Communication between Donors & Fundraisers,

Presence of Personal Comments, Appropriate Level of Emotion and Others such as

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crowdfunding site’s reputation, grammar mistakes and/or lack of professionalism Among which, presence of variety of external sources such as links to articles, news and SNS were rated as highest important Communication between Donors & Fundraisers through updates was the runner up The author, thus, emphasized the role

of collective endorsements, i.e “collection of personal messages from people

appearing to be close friends on the public campaign page (whose identities are linked

to a social media site) and the online community discussion threads describing that campaign” as leverage to perceived creditability

(Bukhari et al., 2019)’s research confirmed the suggestion of (Kim et al., 2016) in the market of Iran Accordingly, testing on 223 donation-based projects from LaunchGood - a large and fast-growing Muslim crowdfunding platform during Ramada month using multiple linear regressions and logistic regressions, the author confirmed that creators’ credibility and backers’ endorsements are decisive factors to success In which, creators’ credibility was measured by the ratio of previous successful project(s) to unsuccessful projects in the platform Backers’ endorsement indicates the number of shares on SNS or through emails or number of followers The perceived creditability of donors in DCF reflects what donors evaluate the trustworthiness of not only the project itself, the project initiator but also the institutional environment (Choy & Schlagwein, 2016; Jiao et al., 2021; Kim et al., 2016; Strohmaier et al., 2019) When it comes to institutional factors, most of researches drew the attention to the effect of quality of website service (Lacan & Desmet, 2017; Sura et al., 2017; Zhang et al., 2020) or perceived platform rules (Strohmaier et al., 2019)

Studies in Vietnam

Ever since 1997, the voluntary sector and philanthropy of Vietnam has attracted the attention of the academic (Sidel, 1997) basing on his own desk research, interviews and policy discussions with Vietnamese and foreign experts, provided an exploratory

of the development of the non-profit sector and philanthropy in Vietnam as well as a review of the legal environment in 1997 The research defines the voluntary sector in Vietnam as a comprise of nine varieties of organizations and philanthropy is referred

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to individual/private giving While the voluntary sector was robustly emerged, the organized private giving was lagged behind in term of values and still under umbrella

of an organization such as local peasant associations and collectives, ethnic and clan groups, private schools and universities, companies, charitable fund Looking into the regulatory context, Sidel (1997) found out that the legal framework for voluntarysector was primarily built on three sets of laws and regulations namely 1957 regulations governing the establishment and operation of associations and similar groups, 1989 - 1990 policy documents promulgated on mass organizations and associations and 1992 legal documents issued which allow the formation of organizations to promote scientific research and technological innovation and exchange These instruments were overlapping, confusing and sometimes contradictory, out of dated, which nevertheless was the advantage for non-profit sector

to claim at least quasi-legal status in the absence of explicit approval of the Government The regulations regarding philanthropy is out of scope of Sidel’s research

During 2009 - 2010, The Asia Foundation (TAF) and The Vietnam Asia Pacific Economic Center (VAPEC) carried out a research on both individual and corporate giving in Vietnam, with the goal of providing a sketch of current state of philanthropic giving, along with the motivations for and challenges of such activities 16 large corporations and 100 small enterprises in Hanoi and Ho Chi Minh City, 100 households in Hanoi and Ho Chi Minh City and 100 households Thai Binh and Long

An provinces were surveyed using semi-structural questionnaires and in-depth interviewed The findings derived from the survey among household suggests that a majority of both urban and rural households were willing to participate in charitable activities Motivations for the charitable act were the desire to share the difficulties of others and the satisfaction received, especially when being inspired by the practice of giving by individuals The two most popular cause for donation is for disaster rescue and assistance to the poor with the ranking differed between rural and urban household group Although the survey finds that the likelihood to increase the donation amount and re-donate was high, up to 20% of people in urban areas expressed the dissatisfaction with the giving method pointing to the ineffectiveness and lack of

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transparency and trust in the process In addition, the respondents also doubted that the donation could reach the person of greatest need The research also reveals that the primary channels to access the information on charitable activities were differed between rural and urban area While the information was often delivered to rural household by grassroots organizations, urban households rely more on mass media to get informed There was a consistence tendency among both rural and urban households to donate through unofficial channels (community, pagoda, church and donations) rather than official ones like (corporate organizations, established funds, etc.) Besides providing initial picture of philanthropy activities in Vietnam, the research also pointed out that the Decree 64/2008/ND-CP – the primary legal document in the field was not compatible with the practice of philanthropy

Taking the approach of topic-based study and inductive analysis, in 2015, Institute For Studies Of Society, Economics And Environment (ISSEE) carried out a research into the public awareness of charitable activities in general and their current status of charitable donations Focusing on the non-governmental charitable organizations (NGOs) only, ISSEE surveyed 1,197 people living in four different cities and provinces nationwide (Nam Dinh, Dak Lak, Ho Chi Minh City and Dong Thap) during the period of 2012-2013 to explore their understanding of NGOs and willingness to donate to such organization Sample size was pre-determined using Fleiss and associates’ formula The respondents were chosen randomly as long as they were willing to participate The finding confirmed the previous studies on the willingness of individuals in participating in charitable activities, main motivations and primary information channels Contrary to findings of TAF, the research furthers showed that dominated channels of donations were those relating to local authorities (53,5%) and funds for the poor The survey in ISSEE’s research also recognized the practice of individuals organizing charitable events However, it was assessed as less effective and transparent than state agencies and only 1.8% respondents donating through individuals Interestingly, the research asserted that the dominance of state mobilization channels does not reflect the trust of the citizen on the effectiveness of state organized charity campaign but rather a practice of administering these activities

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In term of publications specialized in DCF, though several researches have been published exploring the crowdfunding in Vietnam almost all the researches examines crowdfunding as a new form of informal financing for business (T Nguyen, 2017; Thanh Tu et al., 2018) or in the reward based model (Dat Trinh & Hoai Phuc Nguyen, 2020; Linh, 2019; T Nguyen, 2017) All the aforementioned literatures focus on the determinants or the success factor of a crowdfunding project using quantitative method, basing on data collected from some famous crowdfunding websites in Vietnam such as fundstart.vn, comicola.com, betado.com, firststep.vn, funding.vn The findings are of consistent that quality and quantity of project information (number of videos, description of the product, product demo, website, spelling mistakes), founder information (personal information, contact information, personal website/page/introduction available, number of social network friends) and project goal significantly determined the likelihood of success of a project While the first two were positively correlated to the success of the project, high amount of money raised might indicate lower chance of target hit

There has been only one work that mentioned DCF However, it is not the main subject of the research (Bui & Hoang Bui, 2017) in exploring how to facilitate crowdfunding in Vietnam examined the impact of regulatory factors to crowdfunding through interviewing three co-founders of three crowdfunding platforms (one DBF and two from reward-based crowdfunding) The interviewees all agreed that regulatory factors will affect the crowdfunding However, no further discussion was provided

2.2.3 Research gap

These studies mentioned above are abundant sources for exploring DCF in the perspective of Antecedents, Actors, Enablers and Effects of DCF for Charitable Causes However, almost all the researches were based on the data collected from mature/well-known DCF platforms rather than general internet medium like SNSs or webpage, which is more related to DCF practice in Vietnam In addition, little took the regulatory approach or examined thoroughly on the policy of the state regarding DCF (Salido-Andres et al., 2020) Particularly in Vietnam, researches on crowdfunding are limited and DCF seems to be an untapped area as compared to other form of crowdfunding Especially in the context where there is currently no DCF platforms

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exmined in previous still in active, we can see the gap in research related to the practice of DCF in Vietnam

2.2 Research Design and Methodology

Due to the nascent of the DCF phenomenon in both the practical and academic in Vietnam, the author adopts inductive analysis approach in exploring the subject of interest (Choy & Schlagwein, 2016) Under inductive approach, understanding of the situation is iteratively reviewed and developed basing on both ongoing literature review and ongoing data collection and analysis Survey and in-depth interviews were carried out without any pre-formulated theory Concurrently, literature was reviewed

on the emerging insights from the data to form theoretical understanding and development The author took existing theories as guidance in data analysis and discussion rather than foundations to construct survey questionnaires or interview on The engagement with SDT and SET in Chapter 2 is for purpose of necessary linear structure of the research The literature review, data collection and analysis, and theory development mutually informed one another until the author reached an “emerging fit”

Figure 2.2 Research design

2.2.1 Online survey

To have a sketch of the phenomenon of interest, the author carried out a survey among internet users in Vietnam nationwide The survey aimed at investigating the popularity of DCF among traditional channels of charitable giving, experience, deterrence, willingness to ITD, perceived creditability, information interest and attitude toward the drafted regulations from the government Since the term “donation-based crowdfunding” has not been in frequent use in Vietnam, the survey was drafted

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in Vietnamese with term of the closest meaning A pilot survey among fourteen individuals was performed before the formal release to ensure the comprehensiveness, logical consistency, contextual relevance and clarity of the survey Based on their feedbacks, the questionnaire items were thoroughly reviewed

Final survey was released in form of an open access hyperlink Targeting both participants with and without previous experience of DCF, the opening of the survey provides definition of basic concept relating to the subject including “donation based crowdfunding”, “online platform” and “charitable cause” The author finally collected

268 responses during May 2021

The sample included 72.39 percent female and 26.12 percent male respondents Nearly 90 percent of the participants had previously made donations in the past five years Among which, 68.12% have donated to DCF project initiated by individuals This suggests that information collected through survey can reveal insights from both actual and potential donors of DCF Although the sample of the present study have potential selection bias, it is impossible to select a random sample of users due to the lack of a directory of DCF projects

2.2.2 In-depth interview

To explore the subject of interest from different perspectives, the author conducted four interviews, using semi-structured and open-ended questions The interview took place via phone, Zalo, voice chat or in person upon the interviewee’s preferences For the purpose of later data analysis, record and detailed note taking were employed Interviewees were selected basing on the criterion that they possess relevant experience or knowledge about the respective case and be willing and available to contribute to the study Four interviewees comprise of three fundraisers and one lawyer who also is a fundraiser The scale and nature of DCF projects being run by three fundraisers are different, promising interesting and diverse relevant information The main topic evolved around the interviewees’ assessment of the proposed draft of new regulation on DCF To complement and support the interview data, the author revisited platform on which the fundraisers operate and used search

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tools to collect public data about the fundraising achievement and operation of the interviewees

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Chapter 3 CURRENT LEGAL STATUS OF DONATION BASED

CROWDFUNDING BY INDIVIDUALS IN VIETNAM

3.1 Theories behind government’s intervention

Charitable and philanthropy services bear resemblance with positive externalities in the sense that the beneficiary can enjoy the benefit while the cost is on the philanthropists The government, thus intervenes by tax exemption policy to lend support to and encourage the practice of philanthropists Such invention comes from the economic significance of a government in a mixed economy as a guardian to public interest (Dũng Bùi Đại, 2018), as suggested by public interest theory

On the other hand, information asymmetry is frequently repeated in the literature in the field of philanthropy as a problem in the market of fundraiser and donor (C Cordery, 2013; C Cordery & Deguchi, 2018; C J Cordery et al., 2017; Shleifer & Jones, n.d.) Primarily charities act as intermediary to redistribute resources from donors to beneficiaries In doing so, these actors do not receive any material benefit in return This lead to the fact that manager/operator has less incentive to be efficient and even give rises to the potential of opportunism In addition, the contributions is often characterized as unreciprocated (Weisbrod, 1989) and altruism, leading to the fact that information in charities is highly asymmetric The government,

in this case often introduce regulations requiring charities to perform general to financial public disclosures The aim of such intervention is to ensure that redistribution does not contravene the public interest and to increase public trust and confidence in the market In addition, the public of information can promote fair competition among charity organization to increase efficiency

Another tool that the government often adopt in regulating charitable activities

is to limit the entry into the market by registration mechanism Since charities and philanthropists will receive tax exemption as reimbursement for positive effect of the act, only limited and “qualified” actors are permitted to avoid any pecuniary gain and abuse De-registering or punishing miscreant are enforcement tools to response to public complaints and as a result of regulators’ investigations

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Public interest theory has been subjected to a number of criticism (Shleifer & Jones, n.d.) First, domain of market failure that is not automatically controlled by markets and private orderings is extremely limited Take, charities for example, if a specific actor have good practice of reporting and publicizing, it is more attractive to the donor and creating pleasure on the others to follow the same pattern Even without the presence of a third party, by “word of mouth” donors can give reference to good practice organization, creating a push for self-regulated market Second, public interest theory relies on the competence and benevolence of the government Meanwhile, public servants and policy makers could be incompetent, corrupt, and captured Public choice theory suggests that often, regulations are merely a tool for addressing perceived problems and fail to achieve the public interest Regulators in signing a bill may prioritize their self-interest and aim at maximizing political returns rather than purely economic interest (C Cordery & Deguchi, 2018)

Combining both public interest and public choice theory, the challenge for the government is to introduce a policy/instrument which is not only “effective‟ in terms

of achieving policy goals but also “efficient‟ in terms of minimizing costs In the context of charities, under pressure of the public outcry regarding to miscreants, theft and fraud, rational regulators may escalate the requirements on reporting and accounting, which increase charities’ compliance costs without regard to public benefits Nevertheless, on one hand, the donor contributes on the basis of altruism and

“warm glow”, which suggests low demand for charities’ performance (Andreoni, 1998) On the other hand, charities often perceive regulation, especially reporting and accounting obligations as burden (Burt & Taylor, 2004) in term of financial and expertise requirement Thus, the government should deliberate an approach that match the need of the donor without creating too much burden on the fundraiser

(Glen Hepburn, n.d.) suggested that besides command and control regulations, the government should consider alternatives including market-based instruments, self-regulation and co-regulation approaches, and information and education schemes Market-based instruments work through the mechanism of economic incentives that aim at changing behavior of stakeholder Self-regulation typically involves third-party quality certification, codes of conduct or private rating system Actor involving in

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developing self-regulations could be professional group, associational entrepreneurs,

or more informally networked partners’ feedback (McConville & Cordery, 2018) regulation is often referred to self-regulation combined with the government involvement Last, information and education schemes work to change behavior through the provision of greater information for better consideration and decision making

Co-3.2 Legal documents and framework relating to donation based crowdfunding

money laundering stipulates that: “Non-profit organizations which are juridical

persons or organizations with key operation being mobilization or distribution of capital for the charitable, religious, cultural, educational and social purposes or similar purposes, not for profit purpose, include: Foreign non-governmental organizations, social funds, charity funds established and operate in accordance with Vietnamese law.” Decree 93/2019/NĐ-CP issued by the government on November 25,

2019 prescribing organization and operation of social and charity funds, further

stipulates that “Social fund” means a fund that is organized and operates on a

not-for-profit basis with the aims of supporting and promoting the development of culture, education, healthcare, sports and science as well as for agricultural and rural development purposes.” “Charity fund” means a fund that is organized and operates

on a not-for-profit basis with the aims of supporting the remedy of difficulties caused

by disasters, conflagrations, epidemics or accidents and other disadvantaged persons

in need of social assistance.” In addition, Decree No 116/2013/ND-CP, Law On

Science And Technology on June 18, 2013 and Decree 95/2014/ND-CP issued on October 17, 2014, regulating investment in, and the financial mechanism applicable to, scientific and technological activities recognize the fund for scientific and technological development established by organizations and individuals is a kind of

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not-for-profit organization The objective of the fund must be to provide refundable sponsorship, loans with low or no interests, loan guarantees for scientific and technological development of organizations, individuals Science and technology development funds shall be set up from non-state budget contributions of their

non-founders, voluntary or donated capital contributions and other lawful sources

Besides nonprofit organization (NPO) particularly listed in the laws, voluntary sector in Vietnam also consists of party-related mass organizations such as such the Fatherland Front, Women’s Union, Youth Union and Farmers’ Union, General Confederation of Labor, Peasants Association, the War Veterans Association; associations in the kind of business, trade, professional and socio-professional, policy research groups, social activist and social, service groups, religious groups, clans, private and semi-private universities, and other institutions (P A Nguyen & Doan, 2015)

The aforementioned organizations shall have to be registered with state management agency The dossier must include charter of operations, stating the specific objectives of the organization The register NPO may receive donations from individuals and other organizations to deliver their objectives In addition, these organization has to perform reporting obligations, submitting annual financial report to the licensing authority and other obligations under Decree 93/2019/ND-CP In case of violation, suspension for 06 months and administrative fine shall be imposed License

is only revoked in case ownership of assets contributed to a fund haven’t been transferred to that fund within 45 business days (with a grace period of no more than

20 days) after obtaining the establishment license and acknowledgment of the fund’s charter

Regarding to the mobilization, receipt, distribution and use of sources of voluntary donations for people to overcome difficulties caused by natural disasters, fires or serious incidents and for terminally ill patients, not all NPOs are allowed to participate According to Article 4 and 5 Decree 64/2008/ND-CP, the legal entities permitted to receive and distribute relief money and goods comprise only of Vietnam Fatherland Front and Red Cross Society (at all administrative levels), social and charity funds registered under Government's Decree No 148/2007/ND-CP of September 25 2007,

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and central and local mass media agencies (in case of donations for terminally ill patients) Other than the above organizations and units, no organization, unit or individual may receive relief money and goods

When MC Phan Anh successfully fundraised 24 billion VND to alleviate the suffer

of people in Central of Vietnam after the flood in 2016, question on legality of the act drew a lot of attention from the public Interviewed lawyers stated that there was no specific provision regarding to fundraising activities of individual However, it could

be regulated by provisions on representation under tort laws In specific, the donor authorizes the fundraiser to deliver the donations to specific beneficiaries or use the donations to serve specific purpose as in the fundraising messages When pop singer Thuy Tien called for donations, the question of legality was raised again and the stand-point was not changed Since there are no specific regulations for DCF by individual,

in case of fraud or misconduct, criminal charges such as fraud, abuse of trust to appropriate property, illegal impoundment of property, illegal use of property and relevant administrative sanction are often provoked

Furthermore, DCF model has not been recognized in Vietnam Legal framework for crowdfunding model, in general is still embryonic with just a draft of MOF relating

to pilot program for Fintech

3.3.2 Proposed draft

In October 23rd 2020, Government Office issued Official Correspondence No 8876/VPCP-QHĐP to convey the Prime Minister's direction to assign the Ministry of Finance to urgently draft a Decree replacing Decree No 64/2008 / ND-CP According

to Correspondence No 8876/VPCP-QHĐP, the purpose of the amendment is to ensure the efficiency and timeliness of the mobilization, reception, distribution and use of voluntary contributions to support people in overcoming difficulties caused by natural disasters, epidemics and incidents; patients suffering from dangerous diseases; to encourage, honor and create favorable conditions for organizations and individuals to promote the spirit of solidarity, mutual love and support in order to stabilize life, restore and develop production and daily life of the people

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According to the latest proposal from Ministry of Finance on December 25 2020, regarding to the regulations on individuals participating in the mobilization, receipt, distribution and use of voluntary contributions, two options are being proposed The first one is that mobilization, receipt, distribution and use of voluntary contributions by individuals shall be regulated through reporting regime In specific:

“1 Regarding the mobilization and receipt of voluntary contributions

When an individual wishes to mobilize, receive, and distribute voluntary

contributions to support natural disasters, epidemics or incidents, he / she 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)

according to the form to be issued together with the Decree

2 Regarding the distribution and use of voluntary contributions

Individuals need to notify the local government where the voluntary

contributions are received of the scope, level, and duration of the support in the form

that will be issued together with the Decree, in order to be coordinated and guided on

the distribution of the voluntary contributions and to ensure safety and social order

3 Regarding the disclosure of voluntary contributions

Voluntary contributions mobilized, received, distributed and used by individuals to overcome consequences of natural disasters, epidemics and incidents

must ensure publicity and transparency Individuals have the responsibility to report

and publicize the mobilization, receipt, distribution and use of voluntary contributions when requested.”

The second option is that the Government provides just the legislative backing for individual to do DCF, leaving open the requirements The practice of individual mobilizing, receiving, distributing and using of voluntary contributions shall be

regulated by only one article, which is “When natural disasters, epidemics or incidents

occur in the country, causing damage to people and property or affecting the lives of people, individuals are allowed to mobilize, receive, distribute and use the contribution sources voluntarily to support people to overcome difficulties

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Individuals must comply with the relevant laws.” This article can be inferred that

although the restriction under Decree 64/2008/ND-CP is lifted, the voluntary contributions fundraised by individual still have to be transmitted to permitted organizations under the decree for distribution

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