Why do people give for charity? Understanding philanthropy in India

By Amir Ullah Khan and Anjana Divakar

Philanthropy sector has always been seen as being dominated by large family foundations and over the recent past by donations made under Corporate Social Responsibility in India. The social sector funding or grants as they are called has been a point of contention since the evolution of the philanthropic structures in India. The spotlight is back on this topic due to the recent Mackenzie Scott’s ‘no-strings-attached’ donation to several development organisations in the world and those select few in India.

Human nature is fundamentally creative there exists a desire for constant change and innovation. Many people look forward to and support David’s in every David vs Goliath, or Champion vs Challenger. Despite this, many small and innovative organisations fail, usually due to the severe barriers placed on them.

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Even if large amount of money is given, such as Mackenzie Scott’s massive donation of about 2.7 billion dollars, the question then is, who gets the money? Does it go to the new and developing small organisations? Or is it swallowed up by the big few? It creates competition on one hand and bad blood on the other. Unfortunately, the data supports the latter.
The Centre for Development Policy and Practice has been conducting a weekly talk series on the Philanthropy sector in India. One of its recent guests was Mr Ved Arya. Ved is a Social Development Entrepreneur, author, and a well-known brand of his own in the social sector. He raises an important question does Philanthropy reach the smaller NGOS’s? Or get consumed by the behemoths?

To answer this question there are different perspectives and they are not and should not be limited to the giver and the taker but reach out to organisations with different scales. It is important to consider the challenges faced by smaller-scaled organisations. Ved makes it clear that the world is certainly not fair to small organisations. Starting from the government regulations, the FCRA (Foreign Contribution Regulation Act) only to apply, a minimum of 20 to 30 lakh rupees of expenditure in one financial year is required.

The other element is of donors, the donors’ policies also affect these smaller organisations. Some (or most) have specific requirements for a minimum of Rs 4-5 crore turnover which usually runs in crores and nothing less. But 85% of organisations have a turnover of less than 5 crore, hence almost 85% are ineligible to get Private Donor funding. And almost half of these 85% have less than a crore as their turnover. This eliminates any chances of these smaller organisations from the race before it starts.

Given all these, only about 5% (less than Rs 10cr turnover) of small organizations get funded, in contrast to 65% (Rs 1 to 10 cr turnover) of medium organisations and 30% (Rs 10cr or more turnover) of big organizations. This goes to show the clear entry barriers for funding support of small NGOs and CSO organisations. The minimum requirement of financial turnover becomes a burden, and a question of survival arises from the get-go. To add to this, there are barely any support mechanisms out there, in terms of social development fellowships and programmes that shall help build and nurture the passionate young entrepreneur with a small-scale organisation.

The other perspective is of the issues that the social sector itself faces. The sector overall has had some problems and specifically the last one-and-a-half to two years in terms of funding. With COVID and its relief activities, the CSR funding has been diverted to the PM Cares fund. The CSR funding to the sector is crucial as government stopped funding the NGO’s. Pressures mount on these organisations and heads from the government, its officials, and politicians, hence putting them in a tight spot. The inflow of monies has reduced (rather diverted from) to the sector due to this reason.

Another reason is the increase in the outlays by philanthropic organisations to aggregators. More and more of these aggregators’ involvement is seen in the last few years, where they step-in to collect the crowd-source funding and then disseminate. Although one hopes this is being done for the right reasons without questioning the integrity of the act, it does take away the funding to the small organisations. As seen especially in the COVID times, large funds are given to aggregators despite not having a proper field track record.

In addition to this, bilateral or multilateral funding that come into the country goes to the government programmes (NRLM) rather than CSO’s doing similar work on the field. There are no networking and Communication system for the relay of these funds to the grassroots level organisation. The lack of a networking system and mobilisation often results in misplaced and lack of funds.

Data from Bridgespan India reveals that most of these small organisations were out of funds to even cover their organisations overhead costs. Almost 45% of organisations did not have funding for 3- 6 months. Operating expense and human resources costs were also not available. Another pressing issue, an observation made is that of the discrimination faced by NGO’s and CSO’s headed by BDA’s (Bahujan, Dalits, Adivasi) and women. Time and again these organisations have gone without basics funds to cover costs, far more than organisations headed by non-BDAs and women. Ved points of the sector’s leadership and the sector must take responsibility to bring this debate out in the open and tackle this issue.

With both perspectives out in the open, the philanthropy sector and the funding by donors require a deeper study and understanding. There is a need to develop networks which assist in information sharing and making work more easily accessible to other organisations.  A need to highlight small scale organisations in Government forums, to help them in getting grants and other assistance. Also a need to try and group various small organisations into a semi-large group, to help in getting donations from large scale funders to create an efficient network system.

The authors Amir Ullah Khan, Anjana Divakar are Researchers at the Centre for Development Policy and Practice (CDPP)

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