4 min read.Updated: 04 Mar 2017, 08:43 AM ISTMoyna Manku
Dramatic rise in number of high networth individuals behind growth in individual philanthropy, says report
Management consulting firm Bain and Co. India Ltd, in collaboration with Mumbai-based not-for-profit Dasra, offers a framework for individual philanthropists to achieve impact on the ground.
In a report, India Philanthropy Report 2017: The Individual Philanthropist’s Path to Full Potential, shared with Mint ahead of its release on Saturday as part of the annual Dasra Philanthropy Week, the collaborators highlight the growing importance of individual donors in the funding of the development sector.
“Every philanthropy segment—corporate, individual, government/public—is growing but individual philanthropy is on the fastest growth track," says Arpan Sheth, co-author of the report and head of Bain and Co.’s private equity practice in India.
This growth in individual philanthropy is influenced by the fact that India is seeing a dramatic rise in the number of ultra high networth individuals and high networth individuals (UHNIs and HNIs), adds Sheth.
As chart 1 shows, in fiscal year 2011, there were 62 ultra high networth individual households.
The report is based on a survey of 33 individual philanthropists across eight major cities by Bain and Co. and has additionally used in-depth interviews of 23 philanthropists, conducted by Dasra, to garner qualitative insights into the giving landscape.
According to the report, the most significant development in the Indian philanthropy sector has been the rise in contributions from individual philanthropists.
Individual contributions are rising faster than the funds coming in from foreign sources or even corporates, it says.
The report says the total funds for the development sector have grown at about 9% over the past five years (chart 2).
They rose from Rs1.5 trillion in FY11 to Rs2.2 trillion in FY16. It pegs private contributions for social development at Rs70,000 crore over the last five years.
Such contributions make up 32% of the total in 2016, from 15% in 2011.
The funds made available for the development sector have been calculated based on contributions from the government, individuals and aid agencies to causes such as women and child development, healthcare, rural development, education, and sanitation.
The report stresses that while individual donations and other funds for social development have increased, there is need to ensure sustainable and long-lasting impact on the ground.
“The need for more strategic philanthropy is evident given that if you take any global or domestic social development metric—infant mortality, quality education, empowerment or any other—India fares poorly," says Deval Sanghavi, co-founder of Dasra.
The report says for India to meet the United Nations’ Sustainable Development Goals (SDGs) by 2030, the severe shortage of funds to the tune of about Rs533 trillion ($8.5 trillion) has to be tackled.
It cites India’s 130th position on the 2014 Human Development Index and 110th rank on the Sustainable Development Goals Index 2016 as indicators that social development investment in the country is critical.
As chart 3 shows, India fares lower on both counts than its neighbours and countries with similar-sized population and economies.
While public (government) funding remains the mainstay of social development, there is need for additional funds and systemic changes at the policy and service delivery level to achieve SDGs.
Sheth says that private philanthropists are critical to the social development landscape.
Pointing out how government funding is governed and driven by election cycles, Sanghavi says, “When compared to other funding sources for social development, private philanthropy funding is less restrictive, and with flexibility and vision lends itself to innovation."
The report suggests that philanthropists’ views on giving have evolved and many seek tangible results.
“Impact is different for each philanthropist. For some it may be about the number of children they are able to admit in a school while for others it might be about knowing what a child funded by their philanthropy has learnt in school," says Sheth, adding that philanthropy needs to have impact in order for the status quo to change.
Sonali Pradhan, head of wealth planning at Julius Baer Wealth Advisors India, agrees with the report’s findings.
“Philanthropists today want to try and ensure maximum impact of every rupee contributed and to try and develop sustainable models of development," she says.
Pradhan says until seven years ago, she had around 10-15 individuals in a year who sought advice before making large (Rs50 lakh and above) philanthropic investments.
Last year, this number rose to around 40 individuals. Citing an instance of a sustainable investment strategy, she says increasingly individual philanthropists want to invest in a corpus for not-for-profits that gives regular returns.
“Till a few years back philanthropists were happy just writing off donations to charitable trusts and causes. Today they want to ensure that the money they give changes the situation on the ground and can also attempt to generate income for that activity in the long run," she adds.
Impactful giving is a multidimensional activity that is different for each individual.
The report also offers a framework to identify the various ways in which philanthropists approach giving and engage with the development sector.
The four types of philanthropists identified include the “striving seekers’’, who have recently begun to explore philanthropy; the “professional partners’’, who are usually corporate professionals whose contribution with time and skills may be more valuable than their financial contributions; the “capital contributors’’, who are less hands-on and focus on thoughtful deployment of their capital for the right causes; and the “enlightened evangelists’’, who are champions of their chosen causes and strive to bring all stakeholders to work towards the same goal.
Based on the primary survey, the report points out that early stage philanthropists spend less than 5% of their time on philanthropic activities, going up to more than 30% in the mature stages.
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