A market for philanthropy

A market for philanthropy

Thursday was the birth centenary of an individual who has come to represent the face of charity in India, Mother Teresa. This newspaper believes that the occasion provides the right context to review charity and philanthropic initiatives of individuals and companies in the country.

The statistics, culled from a March speech by Bain consultant Arpan Sheth at the Indian Philanthropy Forum, aren’t inspiring. Giving in India totals 0.6% of the gross domestic product, higher than China’s 0.1% and Brazil’s 0.3%, but still lower than the UK’s 1.3% and the US’ 2.2%. Worryingly, only 10% of the contributions in India is from individuals and companies; the corresponding proportion is 75% in the US and 34% in the UK. These are not numbers to be proud of in a country that sees more people figuring in the Forbes billionaires listing or the CapGemini-Merrill Lynch Wealth Report every year.

The main reason for these numbers being as insignificant as they are is the absence of an institutional mechanism at three levels: to facilitate giving; to give; and to take. Sheth’s speech—it is available as a free download on the Bain website—offers some very interesting insights on this. Apart from highlighting the institutional gaps, the speech also highlights an evolutionary issue: Not enough Indians have been rich enough for a long enough period to start thinking seriously about giving.

It is clear from the report, and from the challenges that right-minded individuals trying to give speak of, that the real issue regarding philanthropy in India is that no one has bothered to create a market for it. In the absence of one, individuals and companies have no standard way to give and measure the effectiveness of their giving. The creation of a market will require givers, takers and facilitators to obey the laws of economics. It will also require the state to create a conducive environment. This last may require changes in rules and laws related to giving and taking.

It isn’t just the government and givers who will have to change or make changes; those who receive will have to change too and become more accountable and result-oriented.

Many Indian charities are run by people whose economic sensibilities are distinctly left-of-centre. Still, even they shouldn’t mind moving to a market-based approach of giving and taking. It will mean more giving from individuals and companies, and a more targeted approach to charity, which will ensure that money is spent on areas where it will have the most impact.

Can markets boost philanthropic outcomes? Tell us at views@livemint.com