Winner Takes All in South East Asia? (Or will philanthropy rise along with wealth?)
Perhaps it was the unseasonably warm weather in Davos, Switzerland that caused the shift of attention at the World Economic Forum to challenges faced by the global south and increasingly by developed nations: rising income and social inequality. OxFam released a report called Working for the Few that starkly illustrated the divide quite: the number of people whose wealth equals 50% of global assets could all squeeze into a double-decker bus. International Monetary Fund leaders expressed concern about rising inequality and its effect on political stability. Clearly, the rising economic tide has failed to raise all boats. Under the circumstances, “winner takes all” may be a better catchphrase.
Another truism to be revisited is the notion that increasing wealth automatically results in increased relative or absolute amounts of philanthropic and charitable giving. More to the point is the question of whether the political and economic arrangements contributing to growing gaps can be addressed through voluntary giving or whether they require more structural approaches.
Those arguing that giving can and should play a role in contributing to gradual change, or at least in shielding the most vulnerable groups, remind us that it cannot spring from charitable impulses alone. What is needed is philanthropy, conceived as a set of socially-conscious capabilities and practices that can be encouraged and shaped by a blend of legal, fiscal, socio-cultural and economic factors. In this context, the presence of local philanthropy in new markets and emerging economies is hailed as a possible, albeit limited, answer to growing disparities and new population needs.
The Lien Centre for Social Innovation, a think-tank based at Singapore Management University, partnered with the International Development and Research Centre to study the extent of philanthropy in Southeast Asia and its link to public policy in four Southeast Asian economies (Indonesia, the Philippines, Singapore and Thailand). Our report, entitled Levers for Change: Philanthropy in Select Southeast Asian Countries sets out to answer the question: how has philanthropy developed in the region and how is public policy and practice encouraging or inhibiting its growth?
Rising Wealth, Lagging Philanthropy
The Giving Pledge now has 122 signatories in 11 countries, but only two of them are from South East Asia, despite the fact that Asia’s number of ultra high net worth (HNW) individuals (those with $30M US or more) has caught up to levels in the US and Europe and is expected to eclipse those regions within the next five to ten years. The Giving Pledge is only one marker, and there is no way to capture giving that is anonymous or unrecorded, but the available evidence suggests giving, especially by the wealthy in Asia, lags behind that of the West. Of course cultural differences should be acknowledged: giving and philanthropy will and should look different in Asia than they do in the West.
Previous surveys of HNWs in the region suggest a greater interest in preserving wealth for future generations than developing strategies for giving it away. Those studies have concluded donors are motivated to give primarily in order to pass values from one generation to the next; they fund education and religion far more than other issues, are family- and clan-oriented, prefer giving to services over causes, and like to give quietly.
So what does all this mean for those interested in increasing philanthropy to help it address social and economic inequity? The Lien Centre’s report reveals consistent evidence that thoughtful public policy can increase philanthropic giving, but it also uncovered many gaps and missed opportunities in policy and practice that hinder philanthropic growth, particularly philanthropy focused on addressing thorny social problems.
Innovations in Giving
The study found a number of approaches and innovations in giving practices–some encouraged by policies, but more frequently by civil society initiatives—that can serve as replicable models for the region and beyond:
- Singapore clearly emerged as a leader in driving increased giving through policies that encourage domestic contributions to voluntary organizations. Donors can deduct two and a half times the value of their donations to approved NGOs in their tax filings, resulting in Singapore’s charitable contributions consistently increasing.
- In Indonesia, a growing movement of nonprofit organizations collects and distributes zakat (alms) to support community development for poverty alleviation, a relatively new approach since these are funds had primarily been given to temples for relief of the needy. Given that Islam requires zakat of all able-bodied Muslims, it potentially constitutes a vast sum of money in this, the largest Muslim nation in the world.
- In the Philippines, networks of NGOs lobbied for the creation of The Foundation for the Philippine Environment, set up in 1992 through a unique debt swap that required government support and legal permission.
- The Thai Health Foundation, the nation’s largest philanthropic institution, established under the Health Promotion Act of 2001, is funded by a 2% excise tax on alcohol and tobacco products sold. The fund disburses about $100M US each year.
- Disaster relief has grown significantly in all four countries and is raising the profile of community-wide giving rather than just giving by the extremely wealthy.
- Nascent efforts to start community foundations shows promise as a way of focusing resources on community needs while also providing donor education.
Challenges for Philanthropy
Lack of Data. A number of significant challenges remain, however. Limited data on philanthropy and nonprofits inhibits growth in all four countries. This makes it difficult to accurately capture the state of giving, while resistance to data collection inhibits public faith in the sector as well as entrenching inefficiencies in funds disbursement and donor isolation.
Awareness of the need for philanthropic efforts is limited. Focus on the high average income has, until very recently, overshadowed discussions of poverty pockets in Singapore. Similarly for the region, the focus on rapid economic growth limits attention for wealth disparities and persistent poverty. Moreover, there is a perception among many HNW individuals that socio-economic issues are the responsibility of governments and international aid bodies.
Limitations of Tax Policies. Individual income tax policy (which in the US is considered a key driver of charitable giving) is underutilized in the region, with the exception of Singapore, largely because of the limited potential of individual taxes as a lever for change in emerging economies. In these countries, a small portion of the population pays income taxes and the effective tax rate is relatively low. Tax collectors face highly mobile, extremely savvy HNW individuals who will unlikely be swayed by modest deductions on taxes they may in any case be able to avoid.
Nor does this tend to be a high priority for NGO activists. Much of the wealth in the region rests with individuals and families in privately held conglomerates with close government connections. Transparency in corporate and inheritance tax policy is a critical work in progress. NGO activists, who in the West fight for the charitable deduction, may understandably choose to focus on government accountability and transparency rather than tax breaks for the wealthy.
While the possibilities of individual income tax may be limited, corporate or industry taxes may prove to be an area of opportunity for spurring institutional philanthropy. In 2007, Indonesia passed Law No 40 on limited Liability Companies requiring extractive industries to contribute 2% of profits to community benefit. Without transparency and clear reporting, it is currently impossible to measure the impact of this law, but many hope such funds could eventually be channeled into local grantmaking.
Skepticism about corporate giving. Corporate giving is increasingly viewed with skepticism by NGOs because more corporations are now fundraising for company-run programmes. In Indonesia, NGOs have developed a set of recommended ethics for media fundraising as they have watched newspapers raise millions for disaster relief, with little accountability for how funds were distributed.
Distrust of NGO’s. The fact that regulation of NGOs is either nonexistent or unenforcement creates confusion in the field and undermines public faith and support in nonprofit and philanthropic institutions. In the Philippines, a voluntary ‘accreditation’ for NGOs is being tried as a way to break through donor distrust for the sector.
The symbiotic, yet sometimes uneasy, relationship between nonprofits and donors was highlighted as a challenge in all four countries. NGOs would prefer donors to offer longer-term support to build institutional capacity, while many donors cite lack of accountability as a reason many create their own projects rather than working with NGOs. Robust networks of donors and NGOs, as evidenced in the Philippines and increasingly in Singapore, can begin to help overcome these challenges through knowledge sharing of best practice.
Some strategies to be considered. To help offset these obstacles, the study suggested a number of approaches worth exploring:
- Singapore’s tax benefits for charitable giving currently do not apply to NGOs working outside of Singapore. As an economic and policy leader in the region, expansion of those policies could significantly spur giving especially since so much of the region’s wealth sits in Singapore’s private banks.
- All four countries would benefit from concerted donor education to advance strategic philanthropy and move beyond chequebook charity. A promising sign is the nascent development of community foundations and giving circles where donors, large and small, can pool financial resources and match funds with expertise on community needs to support worthy NGOs.
- Regional collaboration could help each country align interests in maximizing revenues while also encouraging philanthropy. Could ASEAN (Association of Southeast Asian Nations) consider philanthropic policy as part of its mandate?
- Social media may be a means of increasing broad-based community fundraising. Mobile technology has a strong presence in all of the countries studied and has the potential to be a platform for change.
Ultimately, philanthropy’s singular value is its ability to be seed capital and patient capital for civil society. Governments and markets cannot build equitable societies without a vibrant civil society. And civil society needs strategic, thoughtful, educated and engaged donors as partners. The enabling environment for strategic philanthropy can be improved through policies that encourage innovation in civil society, increase non-profit and philanthropic accountability, improve data collection, and celebrate risk-taking leaders. Maybe this will be a topic for next year’s Davos.
This piece, written in collaboration with Rosalia Sciortino and Prapti Upadhay, originally appeared in March 2014 issue of Alliance magazine.
Impact Investing: Philanthropy’s New Frontier?
Dr. Judith Rodin, President of the Rockefeller Foundation, recently visited Singapore and hosted a series of talks and meetings to stimulate and support impact investing in Asia.
Dr Rodin joined a heavy-hitting panel that included Asian Development Bank, International Finance Corporation, Rangsutra (a social enterprise), Credit Asia Capital, and Impact Investment Exchange Asia (IIX). They addressed a filled-to-capacity crowd at INSEAD business school where 100+ students, investors, philanthropists, bankers and academics listened to their call to action.
The speakers outlined what they perceive to be the many benefits of impact investing: social as well as financial returns, side-stepping inefficient or corrupt governments, unleashing entrepreneurism, and building enterprises that can be sustained without philanthropic support.
The idea that markets can be harnessed to solve social problems is not a new one, but I have observed that the concept holds particular resonance among the socially-minded wealthy here in Singapore and some parts of South & South East Asia. My conversations with current and interested impact investors and fund managers suggest some potential reasons why this might be so:
1) The power of the market is indisputable and omnipresent. Year over year double-digit growth throughout Asia has decreased the percentage of the population living in poverty (though absolute numbers remain frighteningly high) and the creation of a middle class has been achieved and appears sustainable in some countries.
2) Fewer wealthy individuals have ‘cashed out’ of the enterprises that made their money. Wealth is more likely to come from family businesses and ideally successive generations continue to run those businesses. The money feels more like ‘working capital’ than an endowment.
3) Family offices are built to manage investments. Impact investing fits better within that organizational ethos. Language matters in establishing comfort and familiarity. ‘Structuring deals’ is more compatible with those in the family office than ‘making grants.’
4) Many third generation, high net worth individuals in their 30s and 40s have a finance or investing background. The generation of ‘new philanthropists’ here in Asia are ex-bankers, MBAs, Ivy/Oxford-educated and they feel called to use that unique skill-set to make their social impact.
Of course, among the converted sat plenty of skeptics. Many traditional investors questioned the entire category of impact investing—asserting that ‘social’ is another term describing higher risk and that true investors would never pay a higher price than necessary for an investment: everything else is philanthropy.
Indeed, the feeling of philanthropy was very much in the air, despite the finance lingo. While some people pitch impact investing with assurances that investors can put money here even if they don’t care about social returns, that proposition rings hollow. The people I’ve met who are intrigued by impact investing care a lot. They are bringing their hearts and their minds to the proposition. And that impulse is very much grounded in philanthropy—from the Greek origin philanthropos: love of mankind. So while some impact investors dismiss the term philanthropy, still others believe they are redefining or adding new dimensions to it.
Impact investing—here or anywhere—is not for the faint of heart. Impact investing that achieves broad scale, is a theory that has yet to be fully proved. But it posits an exciting possibility. As such, it requires risk-taking, strategy, patience, determination, humility, and passion. Passion to make a difference and chart new territory. This is not the settled homelands of philanthropy, this may be its new frontier.
In the coming months I’ll be interviewing key philanthropists and impact investors in the region to hear, in their own words, some of their successes, challenges, and motivations. I hope you’ll join the conversation.
This piece is cross-posted on the @Alliance Magazine website which can be found here.
It’s Not (Just) About the Money
Elegant and well-heeled would be the best way to describe them. I smiled at these two women of indeterminate age who I had just met at the launch of the UBS-INSEAD Study on Family Philanthropy in Asia. As I moved to introduce them to one another, they both laughed and said, “We’ve known each other since…” putting the flat of their hands forward at small-child-height.
“ We were neighbors,” the petite Chinese woman said.
“Our apartment was here, and their apartment was there,” said the smiling Indian woman, pointing her finger in the upward diagonal.
“Didn’t you play marbles?” One asked the other with a mischievous grin.
“Oh yes, all the time. And with the boys!”
“And every day your mom—rest her soul. She was a real force of nature. She would go to the market over there on…”
“And my father, he’s not well now, but we take care of him at home…”
“Yes, we knew each other.”
“ But it’s not like that anymore.”
“ No nothing is like that anymore.”
There was silence as I imagined them thinking about all the changes—education, jobs, marriage, kids, and clearly wealth—that had happened since those long-ago days. For a brief moment I could almost see the bustling apartments these women described, in the brand-new nation Singapore was 30 or so years ago. Where families knew one another, children played in empty lots, and what bound everyone together was that they were all strivers.
We drifted apart as the 150+ person crowd wandered into the auditorium to hear the current state of family philanthropy as described by the recently completed study. Despite the fact that we are all living in the midst of Asia’s economic engine, the stats were still mind-boggling.
- China now has over 1 million US dollar millionaires.
- In recent years, Indian households have witnessed the highest absolute gains in wealth in the world.
- By the end of 2009 there were some 3 million Asian Pacific high net worth individuals, equaling the number in Europe for the first time, and their wealth totaled US $9.7 trillion.
But the rising tide has not raised all boats.
- In sheer numbers the region is still the largest locus of poverty and deprivation in the world. In 2005 there were over 660 million people in India and China alone who lived on less than US $1.25 per day.
- In India, the wealthiest 5% of the population control 40% of the country’s wealth.
All of these statistics from the report were only the prelude to the substance of the discussion. Through 200 quantitative surveys and over 100 in-depth interviews, the report’s author Mahboob Mahmood, Adjunct Professor of Entrepreneurship and Family Enterprise captured themes on motivations for giving, priorities, and philanthropic approaches.
The image that emerges is a charitable sector led by closely held family businesses with a strong entrepreneurial ethos, complex intergenerational relationships, delicate succession and legacy challenges, and a deep awareness (particularly on the part of the patriarchs and older generations) of the power of education to change the course of lives in a single generation. Philanthropy is a useful mechanism for reinforcing shared values with the goal of supporting family cohesion and harmony.
Education is by far the largest area of investment, with poverty alleviation and health distant seconds and thirds. Arts/culture (4%), the environment (4%) and civil rights (1%) were small also-rans.
Among the challenges cited was lack of experienced staff, the perception (and sometimes reality) of a limited number of high-impact NGO partners, and difficulty in finding philanthropic co-investors who are aligned in mission.
The incredibly generous families who participated in the study are to be lauded for their leadership. They are impressive fonts of giving but as yet there exist few networks of strategic philanthropy that can achieve what the authors called, “sustained transformational impact in Asia.”
I was struck by the words of panelist Laurence Lien, CEO of Singapore’s National Volunteer and Philanthropy Centre and a member of one of Singapore’s most philanthropic families when he said, “The most important use of philanthropy is social innovation and social change. Charity is important, but there is much more to do.”
His comments took me back to the conversation I’d had earlier with those two elegant, well-heeled ladies. Money provides privilege to those who possess it but it also changes everything. It can create fractures in families, as well as in societies. It can disconnect people from their broader community. And the relentless drive for economic growth can take a deep toll on cultural traditions as well as our physical environment.
The challenge ahead for philanthropists in Asia, indeed philanthropists everywhere, is to engage with communities in developing solutions. Charity is usually top-down, highly transactional and rarely transformative. It is important, but not enough. Transformational impact can be achieved by moving beyond charity with strategic analysis, community engagement, and emphasis on our shared vision and common destiny. Networks and collaboration are required. Civil society can play an essential role in reweaving the fabric of society. But it requires more than charity. It requires vision more than just money.
The title of this post was at least partially inspired by the Jesse J. song my kids adore which is on a regular loop in our house…
We Always Give What We Have, Not What People Need
This post was originally published as a guest blog on the Good Intentions web site.
The aid community has been having a healthy debate about whether gifts-in-kind (GIK) othertimes called SWEDOW (stuff we don’t want) donations are a good or bad thing. The most recent spark to the flame occurred in February 2011 when t-shirts declaring the Pittsburgh Steelers the 2010 Super Bowl Champs were donated by the NFL to World Vision International for distribution in Zambia, Romania, Nicaragua, and Romania. (follow @GoodIntents or @texasinafrica on Twitter, for the low-down)
Critics argue that these kinds of giveaways harm poor communities more than they help because they flood the markets with free goods which underprice clothing and thereby put local tailors, dressmakers or small clothing companies out of business.
But are all clothing donation programs created equal?
As an advisor to Ashoka, I was invited to meet Anshu Gupta at a coffee shop here in Singapore to learn more about this fellow’s work. He’s polite and a bit reserved until he starts talking about Goonj, the organization he founded in 1999. Goonj, which serves 21 states in India, receives donated clothing, largely from upper and middle class Indians, and then using hundreds of trained local volunteers, cleans and distributes that clothing to Indians too poor to afford even basic clothing.
But the process is far from simple. Middle class women in Mumbai donate jeans. Rural women in Tamilnadu don’t wear jeans. They wear saris. And they might not wear saris made of the same cloth that women from Delhi might donate. So Goonj volunteers have a highly developed cataloging system that allows them to identify, separate and group clothing according to where the recipients can actually use it. In addition, recipients engage in neighborhood-building work in exchange for clothing. Goonj’s community organizers have developed a variety of means of helping communities help themselves using this recycled resource as an incentive, commodity, and exchange.
Goonj sees its mission as giving people clothing to help them move toward self-esteem, skills building and self-sufficiency. So the right clothing exchanged for work or expertise in a respectful way, is critical to the model.
So I’m so impressed with Goonj and I’m asking myself how is this charitable clothing donation different than the process employed by some large aid organizations? Seems to me there are a few key points of what makes Goonj effective:
1) Locally driven.
2) Culturally respectful.
3) Organized around the needs of the recipients, not the needs of the donors.
4) Fueled by creative re-use. Their newest initiative is using clean, recycled cloth scraps to make locally produced sanitary pads for poor women. A real public health and sustainability breakthrough.
5) And it recognizes that poor communities are looking to build markets of exchange and value, not destroy them. Those who extend the life of resource are performing an important function in the community’s ecosystem, they are not passive recipients.
When I met him, Anshu was asking for assistance in further developing his business model, training other NGOs to replicate the Goonj program, and seeking experienced volunteers to document and write case studies about their work. He was actively seeking support and critique. I was stopped in my tracks by World Vision’s statement that it has never evaluated their gifts-in-kind programs because “they are gifts, not programs.” Wow. There are so many things wrong with that statement that it’s still blowing my mind.
My point here is not to denigrate or bestow sainthood on any organization. World Vision is full of smart and dedicated people, so I have no doubt the organization will change and grow, as will Goonj.
But this discussion encourages us all to respond energetically to our charitable impulses, while also being open to learning when those impulses might need refining in order to be responsive to community needs. There is no shame in having an idea or program that needs improvement. The shame is in being too close-minded to make the improvements.
As we were parting Anshu summed it up perfectly when he said, the problem with most programs is that “we always give what we have, not what people need.”
Please share your ideas for how we might be able to change that.
Tempest in Three Teacups: Magical Storytelling
Storytelling is big. Our world seems alive right now with some of our best experts extolling the power of storytelling. Business schools have switched from ‘pitches’ to stories, Dan and Chip Heath’s compelling Made to Stick is required reading for NGO leaders, and politicians keep mining the power of Reagan-stories for inspiration. But let’s be clear, stories are complicated.
The reason most of us aren’t regularly regaling people with perfectly timed and eloquently described stories of our lives is because life rarely unfolds that way. It is only upon reflection that we recognize that x led to y, or that ‘this’ was the beginning and ‘that’ was the end. Yet leadership these days seems to demand that we pluck from the whorl of our past a sequence of logical facts that magically blend together into poignant lessons and an inspiring can-do tale.
But as researcher Elizabeth Loftus describes in her book Memory: Surprising New Insights into How We Remember and Why We Forget,
Memory is imperfect…The memory traces can actually undergo distortion. With the passage of time, with proper motivation, with the introduction of special kinds of interfering facts, the memory traces seem sometimes to change or become transformed. These distortions can be quite frightening, for they can cause us to have memories of things that never happened. Even in the most intelligent among us is memory thus malleable.
One particularly powerful influence in truth-bending is the desirability of outcome. People are prone to report what they believe the researchers wants to hear or report data that puts them (the subject) in a more positive light. What is critical to note is that over time, people actually believe the ‘adjusted’ facts to be true.
Greg Mortenson‘s unravelling is a cautionary tale for all leaders, especially those of us in the social sector where the self-revelatory, enlightening, ever-progressing origin story has almost become a requirement of the job. Where the desirability of outcome may tend towards exaggerated heroism.
Seems to me, this individualistic storytelling ‘heroism’ is partly the undercurrent of what distinguishes social entrepreneurs from mere executive directors? True stories are powerful and inspiring. But so are great managers.
The most discouraging thing about Mortenson was that he was too focused on being a celebrated founder and not at all focused on being a good manager. He didn’t understand that the inspiration story needs to be followed by the education story: testing one’s theories against data, research and outside expertise. He didn’t understand that the education story has to be followed by the institution story: building an organization capable of acting on the dreams he inspired. And mostly he did not understand that the job of an NGO leader is to surround yourself with staff, board, donors who can build upon AND save you from your own mythology.