Mumbai: Arpan Sheth, the head of Bain and Co.’s India private equity practice and author of Indian Philanthropy Report 2011, speaks in an interview about the rising trend of philanthropy among Indian individuals and corporate houses. Edited excerpts:
Can you take us through some of the trends that stood out in the ‘Indian Philanthropy Report 2011’?
The key point that we make in this report is that the culture of private philanthropic giving in India is clearly cementing itself. We’ve seen significant momentum in 2010 and 2011 in private philanthropic giving. In fact, philanthropic giving has risen by 50% from 2006, which is a tremendous increase and there are a number of underlying reasons that are driving that growth in giving in India.
One is that there is this profound increase in wealth in the last few years, in fact, over the last two decades, which is providing the tailwinds driving the growth in India. Coupled with that, we fundamentally believe that there is a change in the attitude towards giving as well. The wealthy are intending to give more and are giving more.
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The second trend is that there is certainly more confidence in the non-profit community, meaning that donors believe that the funds that they give are having a greater impact, that they will get to the beneficiary.
Third, there are intermediaries in the market that are coming into play that will support the growth of foundations, helping in directing the flow of funds to the parties that need them.
What are the challenges that individuals who want to do philanthropy face today?
There are four specific things that need to be addressed by all parties in the philanthropic ecosystem—meaning donors, support networks, NGOs (non-governmental organizations), the media and the government.
One is to continue to increase the accountability and transparency, which is an incredibly important factor that will raise confidence in giving by would-be donors and existing donors.
The second factor is the need to professionalize, increase and enhance the skill set of NGOs, and the business community can play a role in that, as can donors.
The third factor is to continue to promote the culture of giving.
India has an incredibly long tradition of giving, but we need to do more to celebrate and foster a culture of private philanthropic giving. NGOs and donors can celebrate and talk about success stories and the impact that donations have had, which is the single largest catalyst in signing up new donors and motivating them to give. The media can play its part.
The fourth major point is around working with the government to create a more friendly environment for philanthropic giving in India. This includes working on tax laws that help on incentivizing giving, working on legislation that helps take away some of the cumbersome regulatory environment and requirements for NGOs.
Are corporate houses giving more?
Our work suggests that corporate giving has risen quite significantly over the last five years. In fact, we think corporate giving is about $1.5 billion in 2011, which is a greater than five-fold increase from 2006. That is a faster rate of growth than their own profit growth.
What can be the catalysts for growth in philanthropic giving?
There is a continuing and profound growth in wealth in India, which will likely continue.
The second major factor, we believe, (is that) in donors and would be donors, there is a change in attitude towards giving. There is a desire to give more. There is an inclination to give more if certain basic issues are addressed.
Among higher networth individuals, there is a younger generation of philanthropes coming on and they have a fundamentally different attitude towards giving.
They want to be more activist in their giving and ensure that their funds have greater impact as they take on management of their family’s business enterprise. They are professionalizing their businesses and in turn they will restructure their family’s approach to wealth.
Serious wealth creation in India has happened only over the past couple of decades. How do we foster the philanthropic ecosystem to mature on the lines of the US or the UK?
There is certainly plenty for us in India to learn from the US.
We will develop our own ways of giving, take the best practices from other societies but localize them.
Wealth creation is relatively new at this scale but we’re forming new generations of millionaires at an incredibly rapid pace and the needs are profound in India.
The philanthropic ecosystem is developing quite rapidly in India and it should continue to develop rapidly over the next five to 10 years.
Graphic by Ahmed Raza Khan/Mint