Sandboxed at the Deshpande Dialogue 2015!

We have to agree with Gururaj (‘Desh’) Deshpande when he refers to the Deshpande Foundation organized Development Dialogue as the ‘Woodstock for social entrepreneurs’. The annual Development Dialogue is a confluence of NGO staff, academics, grant-makers, social entrepreneurs, folks from the business world and lots of people with big ideas to change the world. The Dialogue is organised by The Deshpande Foundation which was set up by Jaishree and Gururaj Deshpande. This year’s attendees were addressed by the likes of Kailash Satyarthi, Narayan Murthy, Ramji Raghavan, Jeffrey Bradach and others from various walks of life.

Teach a man (or woman!) to fish

The founders of the Deshpande Foundation don’t believe in handouts or charity as we know it. The Foundation funds ideas that can change the world, but refuses to be a one-off donor or create a culture of dependency. The ‘Sandbox’ concept is an ecosystem for entrepreneurs and innovators to test their ideas, develop working models and scale them for maximum social and business impact.

This year’s theme, ‘Scaling by Proving’ describes the Foundation’s work in a nutshell. At the conference, it’s not uncommon to be asked what your business plan is, even if you’re an NGO! Madhua Pandit Dasa, Chairman of the Akshaya Patra Foundation (APF) spoke about how technology proved to be the differentiator that led Akshaya Patra to implement the world’s largest NGO-run feeding programme. APF’s industrial-grade kitchens fed 1.4 million children in 2014. APF embodies scale like few NGOs do – each of their dal cauldrons cooks between 1,200 – 3,000 litres of sambar at a time. They plan to now extend their services to less accessible rural areas with a goal to feed 5 million children by 2020.

Give me a place to stand and I will move the world

“Begin from where you are” was a sentiment raised by Desh and echoed by many at the conference. The innovators the Foundation hopes to fund aren’t armed with degrees from elite universities. They work with farmers, artisans, technicians, students – anyone with an idea to solve a social problem. Neelam Maheshwari, who heads Grant Making at the Foundation described themselves as the “McKinsey of nonprofits.” The success of the Hubli Sandbox is spreading to other regions – RedBus co-founder Phanindra Sama has committed to setting up a Sandbox in Kakatiya in association with Raju Reddy, Founder of Sierra Atlantic Corporation. Another Sandbox is coming up in Uttar Pradesh. The Foundation has Sandboxes in the US and Canada.

Ideas looking to scale – soon!

Organisation

Big idea

FUEL Professional career guidance ecosystem for India’s youth
Karadi Path Literacy without relying on the written word
Arohana Dairy Making dairy farming and farmers profitable
Gram Vikas Providing sustainable, socially inclusive and gender equitable services to the poor
Swayam Shikshan Sansthan Bringing poor women to the mainstream of development
Sevamob Mobile clinics providing primary healthcare to low-income groups

Sustainability is linked to accountability of people running the organisation

Narayan Murthy said this, but the proof of the above statement was evident in the keynote speech delivered by Kailash Satyarthi. The Nobel Prize winner held the audience spellbound with stories of his work rescuing children from bondage. Jailed for a night by an irate railway policeman for trying to save some enslaved children, he started thinking about how he could redirect his anger to tackle the demand for child labour. His quest to stop child trafficking in the carpet trade led him to Europe where he convinced Indian carpet importers to insist on a sticker that certified the product was not made using child labour. Buyers in European markets soon began looking for the GoodWeave label on carpets they bought from India, and this led to a decline in demand of non-certified products. GoodWeave has resulted in 75% less children being employed in the carpet industry since 1994.

The Development Dialogue is filled with an infectious energy that participants cannot help but imbibe. The Hubli Sandbox also drives home the point that change begins at home. Post-session discussions are abuzz with words like innovation, business model and revenue generation plans. There is a belief in bottom-up practices and frugal innovation that can change inequality of access and income in the world. We wish all the participants the very best for their endeavours, and look forward to new ideas at the next Dialogue!

New-age forms of philanthropy!

There are many ways in which you can donate to charitable organisations. Most donors prefer to write out a cheque, drop cash into a box or personally hand over money to NGOs with which they are familiar. Other donors are rocking that boat a little. These philanthropists engage establish sophisticated instruments to generate funds for their pet causes. We introduce new-age forms of philanthropy!

More popular:

  • Shares, stocks, and interest: Azim Premji donated shares worth Rs12,300 crore[2] to a trust that will fund the Azim Premji Foundation and his other philanthropic entities. Bill Gates, meanwhile, funds the Bill and Melinda Gates Foundation with the sale of Microsoft shares[3]. He and his wife have signed a pledge to eventually give away 95% of their wealth to charity[4]. Rakesh Jhunjhunwala currently gives away 25% of his dividend income from investments to philanthropy[5]. These gifts are a way of creating assets for non-profits that they could not otherwise have amassed.
  • Donor-advised funds: Community Foundations work as grant-making bodies that pool donor funds to create a multiplier effect. Donors can choose sectors to which they can give their money, set up donor advised funds or have the money go into a common pool. The money is then directed to organisations working for beneficiaries in the area. The Silicon Valley Community Foundation is best known for the donations it has received from Facebook co-founder Mark Zuckerberg, Go Pro founders and other internet giants. It now houses 1650 philanthropic funds and manages $4.7 billion in assets.[1]

Lesser known:

  • ‘1% equity’: Tech companies are known to make millionaires of founders overnight. Several young co-founders are starting to pledge 1% of equity. The 1% will be donated to the charity of their choice when the business is sold, so it works as a future investment for founders who desire to give to charity but don’t have the money. The plus point: 1% can turn into a huge amount depending on how much the company got acquired for. Australian startup Atlassian ended up donating $35 million to the Atlassian Foundation they established on being acquired[6]. Imagine what 1% of equity of a Flipkart or Amazon would be, and what it would mean for the organisation it goes to!
  • Mutual funds: Can mutual funds be a philanthropic instrument? HDFC Mutual Fund shows us how. In 2011, it launched a close-ended debt fund called the HDFC Debt Fund for Cancer Cure. Investors had to invest a minimum of Rs1 lakh with a lock-in period of three years. The total principal was then invested in debt/money market instruments or government securities. Investors could then choose to donate 50% or 100% of all dividend earned to the Indian Cancer Society, an organisation that sponsors treatment and therapy for patients in need. Investors could claim a tax deduction under Section 80G on any dividend amount they donated. HDFC reports that the total donations received under the scheme totaled Rs10.87 crores till December 2013[7]. A second series was launched in February 2014, with HDFC offering to match any donations made through the fund.

The world is changing at a rapid pace and philanthropy is evolving with it. We’re sure there are more innovative instruments and donation options coming in the future.


[5] ‘Rakesh Jhunjhunwala’s next target: Shed 20 kilos, give away Rs5000 crore to philanthropy’, http://firstbiz.firstpost.com/money/rakesh-jhunjhunwalas-next-target-shed-20-kilos-give-away-rs-5000-cr-philanthropy-106538.html, accessed on 4th December 2014

Khadi 2.0: Can ‘Make-in-India’ change the fortunes of traditional Indian textiles?

January 6th is celebrated as ‘veshti’ day in Tamil Nadu every year! With pride, Tamil men step out of their homes dressed in traditional veshtis or lungis. While ‘veshti’ day is encouraged in the name of culture, the Tamil Nadu Handloom Weavers’ Co-operative Society has stated that it supports the “interests of cotton weavers”. Prime Minister Narendra Modi has emphasized ‘make-in-India’. Remember too, Gandhiji’s successful strategy to promote spinning one’s own yarn as a mark of independence from the British and their machine-manufactured cotton. While these choices appear to be political statements they have significant economic impact. With Republic Day around the corner, we thought we’d examine how ‘Make-In-India’ can transform the fortunes of traditional Indian textile workers.

John Bissell is not a household name. Yet the company he founded is unique in many ways. Their brand is associated with making ‘ethnic’ fabrics cool, and moving them away from the government khadi bhandar aesthetic. They simplified, contemporized and commercialized traditional Indian designs and motifs, and brought them to the urban shopper who has rewarded them handsomely. They’ve grown bigger and bigger over the years, attracting funding from Premji Invest, Azim Premji’s investment fund and turning a profit of Rs54 crore in FY14.

If you haven’t guessed by now, we’re talking about Fabindia. Few people follow the make-in-India model as well as Fabindia does. Fabindia sources its products from community-owned supplier companies. The company’s presence has given the artisans an identity of their own as professionals, removing their dependence on government handouts. Business comes into the hands of people who make the products, wedding the interests of industry and culture.

Ultimately, the success story of Fabindia is not just in their success in bringing traditional Indian designs back in vogue. It’s that they managed to convert the concept of working in textiles to a profitable option for weavers. In an era of mass production, weavers are challenged in competing with machine and power looms that churn out hundreds of identical pieces in minutes. (Readymade synthetic fabrics are also cheaper to purchase and maintain for those with limited incomes.) Fabrics that are intricate and take hours to produce, sell for large amounts of money, making them unaffordable to many. Weavers aren’t adequately compensated for skills which have been handed down to them over the centuries.

A Dasra report on the crafts sector in India estimated that while there were around 7 million artisans practicing in the country, India’s share of the global handicrafts market was below 2%. ‘Make-in-India’ in the textile sector reaps benefits for the weaver communities while keeping India’s traditional art forms alive. We’re eager to find out if NGOs and social entrepreneurs working with weavers, artisans and other groups can replicate Fabindia’s success.

For the moment, impact investors see some potential in the sector. Last year, Aavishkar Venture Management invested Rs18 crore into Mela Artisans, a company that directly procures and retails products made by Indian artisans. While revenue figures are not available, Mela has “placed orders with more than 50 artisan groups across 10 states in India” since 2012. “..these groups employ 4,500 full-time artisans, of which 77 percent are women, and more than 6,000 part-time artisans.[1]

There doesn’t have to be only one winner in the debate on tradition and livelihoods. With a little bit of support we can make in India and support the livelihoods of Indians as well.

A piggy-bank no NGO should break!

Human beings are biased towards action. When we are approached by a hungry child or a request to leave our change in a charity box, we (naturally) assume that our contribution will make a difference to the beneficiary’s situation in life. When faced with uncertainty, we prefer to act with the belief that we made an impact.

This bias towards action happens with decisions related to financial investments, impulse purchases, food and even giving to charity! Most of us give one-off donations to NGOs and don’t reflect about it later. Yet most would be surprised to know how minimal the impact our money has had. More importantly, we do not release that if given strategically, the same sum could create a larger impact.

Donating to an organisation’s corpus fund is a great way to help an NGO sustain itself in the future. A corpus fund is like a permanent fund that an organisation cannot dip into except in emergencies. The corpus fund and the interest on it act as an internal source of funds, as opposed to grants or donations that are one-offs received by an organisation. Additionally, a corpus fund can be created out of internal accruals and surpluses as well.

A healthy corpus fund can be a good indicator of an organisation’s sustainability. In 2013, The Akshaya Patra FoundationThe Leprosy Mission Trust IndiaHelpAge IndiaSri Chaitanya Seva TrustISKCON Food Relief Foundation had the largest corpuses of all 550 NGOs on our site. These organisations are well known, have been running impactful programmes for at least five years, and have among the highest spend on programme expenses in the latest available year.

Large Corpus = Long Term Sustainability
NGO Age Corpus Int to Corpus to Investment Int to
(All data pertains to FY13)   Rs mn Tot Inc (%) Tot Liab (%) to Tot Assets (%) Cash + Inv (%)
Akshaya Patra Foundation, The 15 756 1 55 10 4.9
Leprosy Mission Trust, The 146 346 1 62 5 4.3
HelpAge India 37 339 2 55 68 2.8
Sri Chaitanya Mission Trust 17 339 25 98 28 10.3
ISKCON Food Relief Foundation 11 303 1 79 14 5.5

You would be surprised to know that a number of ‘known’ NGOs are living a hand-to-mouth existence, overly reliant on the goodness of strangers to continue the work they are doing. Dependency on external donors makes it difficult for them to plan their activities in advance. A day-to-day existence also makes it hard for an NGO to innovate or scale programmes to benefit more people. Would Akshaya Patra be able to feed 1.3 million children if they were trying to cut corners at every step? HelpAge India provided 1.23 million free treatments through their mobile vans in 2013, the kind of scale that requires large investments.

NGOs tend to run their programmes as per the funding they receive. However, programme funding only covers the expenses of running that particular time-bound programme. An organisation with a healthy corpus fund is able to prioritise spending. As an example, interest income earned from the corpus could be a guaranteed source to finance the annual rent paid by an education NGO for the space they use to educate their beneficiaries.

A corpus fund in a legitimate organisation can go a long way towards supporting beneficiaries and programmes. Therefore, if you’re considering donating to an organisation you like, we’d urge you to reserve a part of your donation for the organisation’s corpus fund. What’s more, you’ll know your money won’t be misused. Here’s why:

  • A corpus fund is strongly regulated: Under the Indian Income Tax Act, an NGO cannot transfer more than 15% of a year’s voluntary donations towards the corpus fund. At least 85% is to be used for programme expenses which ensures that an NGO doesn’t forego programme activities to build up its own corpus[1].
  • Donations to a corpus fund are regulated: A donor has to include an explicit, written statement specifying that the donation is for the purposes of the corpus fund.

Watch out for:

  • NGOs that have built up large corpus funds and high interest income without corresponding spends on programme expenses, staff costs, overhead expenses or earmarked funds over two or three years. A donor should explore why an NGO is building up a corpus when no charitable work is evident.

 


Continue reading A piggy-bank no NGO should break!

Our 2015 wishlist (it doesn’t hurt to hope!)

We’re in contact with over 500 non-profit organisations across the country and speak to individual and corporate donors to design custom services for them. Based on our interactions with them and everyone on the other side of the fence, we present our wishlist for 2015:

  • Technical solutions for NGOs: “The power of algorithm is extraordinary. It can make the society a better place”, said Narayan Murthy at a global hackathon tasked to create software solutions for NGOs. Software, programmes and apps have revolutionized the world this decade, and we see no reason why they can’t be brought to the NGO sector as well. There has been a start – NGOs like SNEHA have used software and handheld devices to collect data from surveys and monitor beneficiaries in programmes, while Operation ASHA uses a tablet-based e-Compliance system to track tuberculosis patients’ treatment.

What we’d like to see: NGOs embracing technology to reduce their own time, stress and labour costs. A number of software services ‘predicted’ or at least estimated the Ebola outbreak earlier this year. Google’s disaster relief app came in handy to many during the Kashmir floods. There are several other ways in which NGOs can use technology to save the world, and we hope that list grows longer next year.

  • Focus on underserved sectors: Philanthropic activity tends to follow the 80-20 rule: 80% of all donations go to 20% of sectors. A McKinsey study found that around 90% of donor contribution was concentrated in 10 sub-sectors out of 50[1]. Sub sectors seen as having a direct impact – like mid-day meal programmes, tend to attract the most funding. However, indirect needs like staff salaries or support for advocacy-based activities are less likely to be addressed. While it is difficult to measure impact in these intangible sectors, investing in human capital, organizational resources like a corpus fund are necessary as well.

 

What we’d like to see: We wish people would give to underserved sectors like the arts, governance and human rights. On a positive note, the McKinsey study indicated that donors support more complex work as their giving cycle reaches greater maturity. We hope to see the arts, animal welfare and governance benefit from this learning.

 

  • More support for volunteering programmes: One estimate states that Americans spend over 15 billion hours volunteering a year, at an average of 5 hours a month[2]. In India and elsewhere, NGOs find volunteers a valuable addition to their teams – V Care Foundation is entirely run by volunteers. Animal loving volunteers help In Defense of Animals rescue and rehabilitate animals. Volunteering and mentoring the underprivileged is encouraged by workplaces, with offices often giving employees flexible working hours to volunteer. Corporates in India too are increasingly spending time with NGOs. Amit Chandra of Bain Capital, for example, spends up to 35% of his time on philanthropy, while Sanjay Nayar of KKR India spends 10-15 days a year on philanthropic endeavours[3].

What we’d like to see: More interaction between the for-profit and not-for-profit sectors, and more support for volunteering programmes from corporates. The gains from such a relationship are immense, and are just waiting to be tapped.

 

 

 


[1] Mangaleswaran, Ramesh, Venkataraman, Ramya ‘Critical gaps across sectors with donor focus limited to a few, Designing philanthropy for Impact: Giving to the biggest gaps in India, October 2013, Pg 13