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The future of philanthropy: When the art of giving will be about solving

The wealthiest families in the US give away just 1% of their net assets yearly, which falls short of the rate at which they are accumulating wealth (Graphic: Jayachandran/Mint)Premium
The wealthiest families in the US give away just 1% of their net assets yearly, which falls short of the rate at which they are accumulating wealth (Graphic: Jayachandran/Mint)

  • The next decade presents boundless opportunity for more donors to drive socio-economic change
  • According to a Bridgespan survey of 250 Indian NGOs, nearly 97% called leadership development important to organizations’ success

Philanthropy is approaching an inflection point. Outsize wealth is rapidly accumulating, alongside an acceleration in philanthropic ambition. As these two powerful forces converge, they will likely reshape the social sector for years to come.

Will philanthropic giving to alleviate socio-economic ills increase as dramatically as wealth is accumulating? Will more of that philanthropy go to solving the underlying problems?

In one indication of philanthropy’s potential, more than 190 ultra-affluent donors from around the world have publicly vowed to give at least half of their wealth back to society. If that holds true, no less than $500 billion will pour into emerging and established charities over the next decades.

However, there are urgent opportunities for wealthy philanthropists to lend even more hands to those who desperately need it. At the same time, more of philanthropy’s future could be about solving as well as serving. Not only rising to the call to feed the hungry, but also digging into the systemic problems that cause hunger. That means building on philanthropy’s most transformative efforts to catalyse population level change, such as RBM Partnership’s collaborative initiative to end malaria, which has thus far saved more than six million lives.

If philanthropy is to be a major driver behind abundant social change, the seeds of change will flourish in four ways.

Big bets for social change

First, donors will give big for social change. In 2015, Tata Trusts gave a 120 crore grant for five years to launch a social impact initiative called Lakhpati Kisan. By any measure, it’s a bold bet: By 2020, it is estimated to raise the incomes of 101,000 marginalised, tribal households in central India to more than 120,000 per year, enabling those farming families to permanently rise out of poverty’s trap.

Although Tata Trusts’ gift to Lakhpati Kisan is ambitious enough to make a difference for many struggling families, betting big on driving social impact is not yet the norm. Most of the world’s donors practice “peanut butter philanthropy", spreading modest gifts across many recipients. As a result, resource-constrained non-governmental organizations (NGOs) must often settle for doing less, such as serving fewer constituents, when society’s looming challenges demand so much more.

If philanthropy in India is to get to a future where the rule, rather than the exception, ensures significant gifts go toward social impact goals, donors will have to lean into risk.

When donors and NGOs accept the risk of taking on problems of great scale and significance, such as poverty and climate change, even relatively modest advances can yield big dividends.

Benefits of collaboration

Second, donors will partner with other actors to amplify impact. Today, global philanthropy is mostly a solitary activity.

However, there is a growing realization that no single actor, no matter how large, has the capacity to take on complex socio-economic development challenges. Increasingly, funders are citing the benefits of collaboration, where donors and other stakeholders form joint endeavours that pool money and expertise to advance a shared vision.

Recently in India, there has been a flurry of activity around multi-stakeholder collaborations that unite actors from the civil, public, and private sectors. One example is Co-Impact, which pools funding from Rohini and Nandan Nilekani, among other wealthy donors, to reach an estimated nine million people worldwide.

According to an NGO Dasra, from 2000 to 2015 there was a fourfold global increase in multi-stakeholder collaborative initiatives. Indian collaboratives comprise only about 10% of this set.

Multi-stakeholder collaboration redistributes power, requiring any single donor to give up unilateral decision-making control. Assuming more of India’s donors make these trade-offs, the sector will reap the benefits of collaboration.

Capacity building

Third, donors will help build the social sector’s capacity to do more. Too often, in today’s social sector, philanthropy under-invests in NGOs and over-focuses on their programmes. However, if NGOs are not organizationally fit for a challenging future—without adroit leadership, robust performance management, and effective IT systems—it is far less likely that their programmes will succeed.

Unfortunately, most of the major US foundations limit spending on indirect costs, which include capacity building, to 15% of a total grant, less than half of what American non-profits spend on an average. And this holds true for India, as well.

In a Bridgespan survey of 250 Indian NGOs, an overwhelming 97% called leadership development important to their organizations’ success. However, more than 50% of those NGOs reported they had not received any funding for leadership development in the past two years. Indian philanthropists, such as Azim Premji Philanthropic Initiatives, ATE Chandra Foundation, Edelgive, and Tata Trusts, recognize that they will likely get a better return on programmes if they also invest in organizations.

Greater giving while living

Aspiring donors too often push off their big gifts giving until later in life, often hoping that “later" they will have the time to engage more deeply.

However, when Bridgespan interviewed over 70 remarkable donors, one of the most common refrains was “not to delay."

According to a Bridgespan report, in the US alone, the wealthiest families give away just over 1% of their net assets annually, which falls far short of the rate at which they are accumulating wealth.

Unfortunately, while philanthropists postpone their giving, the world’s challenges continue their relentless advance. Case in point: India ranks 112th, out of 156 countries, on the United Nations sustainable development goals index.

Technology will also play a catalytic role across all four factors that are shaping philanthropy’s future.

In a recent initiative, Tata Trusts and Omidyar Network used drones and spatial technology to help the government create land maps of Odisha’s informal settlements and thereby roll out the Odisha Land Rights to Slum Dwellers Act, 2017.

In another instance, Romesh and Sunil Wadhwani have formed Wadhwani AI, a global hub for developing AI-based innovations in agriculture, healthcare, education, and financial inclusion.

As wealth rapidly accumulates in India as well as the rest of the world and the pace of technological innovation accelerates, the next decade presents a boundless opportunity for more donors to follow the lead of the world’s bold givers, step up to giving while living, and drive socio-economic change.

Soumitra Pandey is partner and head of Bridgespan Group India. Pritha Venkatachalam is a partner at Bridgespan Group India.

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