Tapping the promise of philanthropy

Although India has a centuries-old tradition of philanthropy by way of charitable donations, organised philanthropy at scale is fairly recent. In the few decades before and post-independence, large-scale philanthropy was mainly undertaken by a few business houses as a way to contribute to nation-building. Think the likes of Tata, Birla, and Bajaj.

Where philanthropy stands today

This is no longer the case. Economic growth has contributed to a rising middle class and people becoming wealthier at younger ages. Consequently, many more families, professionals and self-employed are looking to “give back” with their wealth and time. Regulations around corporate social responsibility have provided a nudge to corporations to support social causes. Platforms like GiveIndia have “democratised giving” and made it easier to pool smaller retail donations.

There is now greater professionalism within philanthropy. Philanthropists are supported by specialised advisors, consultants and scores of talented professionals who are in this space for the long haul. A reorientation of philanthropy from charity towards development has been the basis for a burgeoning number of social enterprises in India. Collaborative initiatives with other philanthropists and areas like impact measurement are receiving greater attention.

Yet, several challenges remain in Indian philanthropy realising its full potential. The “India Philanthropy Report 2021” by Bain & Company and Dasra suggests that Indian philanthropists still donate a much smaller portion of their wealth relative to countries like the US. There are also significant sectoral and regional concentrations. For instance, education and healthcare receive 75 per cent of family-based giving in India. Many critical sectors like environment, rural development and citizen empowerment remain underrepresented. Similarly, 85 per cent of donations by ultra-high net-worth individuals are spent in three cities alone — Mumbai, Delhi and Bengaluru. This unequal distribution of resources needs to be addressed.

The post-pandemic crunch

The role of philanthropy has become more critical today. Many non-profits find themselves struggling to survive. According to research by Dasra, one in two NGOs has an income base that is more than 60 per cent restricted. Philanthropic capital did step up during the pandemic, however, most NGOs saw their funding decline. Reallocation of funds, especially corporate donations, towards Covid-relief meant that NGOs working in other important areas were left out. These organisations will require not just infusion of capital, but significant handholding to become stable again. The case and potential for effective and mission-driven philanthropy are stronger now than ever before.

Four attributes to maximise impact

Philanthropy can play an outsized role in the post-Covid recovery and reconstruction process. For funders, keeping four important attributes in mind can ensure that their funds are being truly catalytic and most impactful during this critical phase: (i) risk-taking, (ii) patience, (iii) trust and collaboration, and (iv) being nimble and adaptive.

Philanthropic capital is unique in its ability to take risks and place bold bets. It enjoys much greater independence than governments and corporations, who are accountable to citizens and shareholders. Philanthropists are better-placed to support complex and under-invested areas by experimenting with novel approaches, while also recognising that some efforts may result in failures. For example, REVIVE Alliance, a coalition of philanthropic funders and multilateral organisations, is experimenting with the concept of “returnable grants” with only a “moral obligation” to repay if specific financial milestones are achieved.

Philanthropic capital must be patient and seek to support longer-term, systemic change. Social change is a long and complex process; success is often not immediately visible. While grassroots efforts and government programme implementation are critical to provide basic services and relief to citizens, several other measures are equally important for longer-term change — these include research, developing sector-level institutions and infrastructure, and influencing policy. Another area that could lead to long-term gains is developing the capacity of NGOs themselves. For example, the Indian School of Development Management, supported largely by philanthropy, seeks to train a new generation of professionals to lead social purpose organisations.

Success requires cultivating trust and collaboration among funded organisations and others such as co-funders and implementation partners. Building trust with grantees can ensure honest conversations about what’s working and what isn’t. Multi-year funding commitments based on trust can allow NGOs to focus on impact rather than worrying about fundraising. Trust also implies being intellectually humble and resisting micro-managing investees, who often have years of on-ground experience. Further, collaborating with ecosystem partners by co-designing interventions, pooling-in capital or sharing learnings has a multiplier effect. For example, ACT Grants, which started as a Rs 100 crore Covid-19 relief fund formed by various philanthropists and investors, is funding tech-led innovations in areas like education, health and environment.

Finally, funders must remain nimble and strike a balance between being strategy-led and being flexible. During the pandemic, many funders are reacting nimbly and reprioritising resources. Funders must acknowledge that things will not always go as planned and that they will often need to re-evaluate their approach or priorities. For this, having an “ear to the ground” and creating robust feedback loops is essential.

As the waves of this global pandemic play out, philanthropic capital will be critical in supporting the most hard-hit sectors and organisations to recover and regain resilience. This will require funders to adopt an “impact-first” mindset and contribute not just their money, but also their expertise, networks and influence.

Kudva and Sahni are, respectively, managing partner and chief of staff at Omidyar Network India