By Anjana Divakar and Moumita Barman
As India navigates the evolving landscape of social impact, the recently released Doing Good Index 2024 by the Centre for Asian Philanthropy and Society (CAPS) offers critical insights into the regulatory and societal environments that shape private capital’s contributions to the social sector across Asia. Now in its fourth edition, the Index provides a nuanced perspective on how policies, incentives, and social delivery organizations (SDOs)—entities addressing societal needs—interact across 18 Asian economies.
On August 28, 2024, CAPS hosted a webinar to discuss India’s position within this evolving framework. Expert panelists from across the social sector painted a complex portrait of India’s regulatory landscape. Despite the country’s consistent placement in the “Doing Okay” cluster of the Index, challenges such as conflicting regulations and administrative hurdles persist. Simultaneously, opportunities for growth and innovation are emerging, creating both optimism and uncertainty.
A key theme that emerged from the discussion was the conflicting nature of India’s regulatory environment. While policies like Corporate Social Responsibility (CSR) regulations and the Social Stock Exchange create promising opportunities for channeling private capital into the social sector, stringent laws such as the Foreign Contribution Regulation Act (FCRA) and complex tax regulations pose significant challenges. These barriers are particularly difficult for smaller SDOs, which often lack the resources to navigate these regulatory demands. This tension has created an atmosphere of uncertainty, holding back innovation and discouraging potential donors.
At the same time, some panelists acknowledged that regulatory requirements, while burdensome, have also fostered greater accountability. This accountability helps build trust between SDOs, donors, and the broader community—a critical element for driving impact in the social sector. This dichotomy of regulations acting both as enablers and obstacles highlights the complexity of India’s social sector environment.
Micro funding
Complementing the Doing Good Index 2024, a recent study by the Centre for Development Policy and Practice (CDPP) and Plustrust titled “Micro Funding: The Potential of Individual Philanthropy for Last Mile Changemakers” sheds light on a pivotal but often overlooked funding approach: micro funding. The report emphasizes the importance of individual and family philanthropy aimed at “last-mile changemakers”—small, grassroots organizations working in remote and underserved communities.
Micro funding holds immense potential to transform India’s social sector, particularly for organizations that struggle to access traditional funding channels. The COVID-19 pandemic exemplified this, as many grassroots organizations relied on micro funding from individual donors to continue providing essential services to communities in need. By nurturing this type of philanthropy, India can unlock the full potential of its social sector, empowering smaller entities to make a greater impact.
However, this potential cannot be fully realized without addressing the regulatory barriers and capacity challenges that hinder SDOs. India needs a more streamlined regulatory framework that simplifies compliance processes and reduces the administrative burden on SDOs, allowing them to focus on their core missions. Furthermore, the government should provide capacity-building support to smaller organizations to ensure that regulatory compliance does not become a barrier to growth.
Funding and resource sharing
Collaboration between the government, private sector, and SDOs is also essential. Expanding public-private partnerships can leverage the strengths of each sector, creating more opportunities for funding and resource-sharing. This collaborative approach would help bridge the gap between policy intentions and on-the-ground realities, ensuring that policies are aligned with the needs of SDOs.
Promoting innovative financing models, such as impact investing, is another important step in overcoming funding challenges. While the Social Stock Exchange is a positive development, its success will depend on how effectively it engages investors and supports SDOs in meeting their expectations. In addition, the CDPP-Plustrust report highlights the growing interest of individual philanthropists in targeted contributions with measurable impact. Retail donors and family philanthropists are increasingly focusing on areas such as education and health, representing a significant opportunity for the social sector to tap into new funding streams.
To build a more resilient and impactful social sector, SDOs must also focus on strengthening their internal capacities. Training staff in areas such as fundraising, accounting, human resources, and governance will help organizations meet regulatory requirements and scale their operations. Transparent reporting and accountability should be prioritized to demonstrate effective use of funds and measurable impact, fostering greater trust between SDOs and donors.
Ultimately, both the Doing Good Index 2024 and the CDPP-Plustrust report outline a clear roadmap for action: streamline regulations, build capacities, foster collaboration, and encourage innovative financing models. By embracing these recommendations, India can enhance the effectiveness of its social sector and unlock the full potential of micro funding and other philanthropic efforts. This will not only improve India’s standing in future iterations of the Index but also contribute to building a more equitable and prosperous society for all.
Anjana Divakar and Moumita Barman work at the Centre for Development Policy and Practice (CDPP) in Hyderabad. CDPP is an independent research organisation working to influence public policy with a focus on the development of vulnerable populations.
