A true philosophy of giving – Part II

In our earlier piece we mentioned being struck by the fact that Mr. Mohandas Pai’s philosophy of giving was also a ‘philosophy of living’. It wasn’t a statement of how much money he gives to charity each year. It’s not about which NGOs he supports. It’s an expression of the values that govern his work and influence his actions towards others. Curious? Read on!

The principles of philanthropy:

  • Duty: One got the sense that Mr. Pai believed that doing good towards others is a duty that he has to perform. Rather than CSR, he felt that individuals taking up responsibility would drive social change. He mentioned that one should consider donating 10-20% of one’s income to charity. There is a caveat – donations should not be made with the intention of seeing one’s name on a plaque somewhere, or cleaning off sins. A duty-bound donor is driven by a desire to pay off one’s debts to society and see everyone around him or her prosper. Mr. Pai expresses gratitude to the receiver who has provided Mr. Pai with an opportunity to give back to society. He never fails to he join his hands in front of the receiver and believes that ensuring that the recipient’s dignity is respected in the act of giving is paramount.
  • Accountability: Pai mentioned that he, like millions of Indians went to a low-cost government school. Subsidised fees made it possible for him to get a good education and access to a job market. As he said ‘Somebody paid for me.’ This country has given a lot to many of us. It is therefore up to us in turn to pay for other people. Imagine if all of us operated with such a strong sense of accountability towards others! Many of our social problems would reduce immediately. He also mentioned that for every student who received a subsidised IIT education, a hundred have probably died of hunger. If we are part of this society and enjoy these privileges, we should also give back to our society. Mr. Pai even took this one step further. Our time on Earth is one thing, but what happens when we meet our maker? Should we not be able to answer the question – What did you do with your life? Did you leave the world better than what you found it?
  • Giving back to one’s community (ies): Mr. Pai mentioned his personal philosophy of giving – first to the country you belong to, then the state, city and finally your own community. He mentioned various initiatives that he is part of that reflect this focus:
  • Country: Founding team member of Akshaya Patra which currently works in 7 states
  • State: Supports scholarships for deserving students through the Manipal group of colleges and a scholarships NGO in Karnataka
  • City: Mr. Pai, Kiran Mazumdar Shaw and other prominent citizens have spearheaded the Bengaluru Political Action Committee (BPAC). Political Action Committees are popular outside India. They work as a vehicle through which citizens come together and advocate with governments and elected representatives for their common interests. The BPAC hopes to improve governance of the city of Bengaluru, create infrastructure of global standards and improve the image of the city.
  • Community: Mr. Pai, a member of the Konkani community pointed out that his community numbers only 2.5 million in India’s population of 1.2 billion. He supports the provision of scholarships for students from the Konkani community.

This is a wonderful principle to follow indeed, as most of us have an identity of being citizens of India, live and work in a particular state and may belong to a community that is not part of that state. Each of these groups have different priorities, and it would be necessary to direct time, money and efforts towards each in a different way to achieve results. In this manner, we can work for the welfare of all the groups we are part of without neglecting a single one.

  • Ownership: Yes, we may belong to different states and communities. Yet Mr. Pai emphasised that every time he sees a child in need on the street, he feels for him as if it were his own child. As he said, many of us are well-off because our parents took good care of us, and we in turn take good care of our children. This should not result in a world view where we are only concerned with the welfare of people who are related to us. As Indian citizens and members of society, it is upon us to look out for all those in need.
  • How to choose a cause: There is an old quote that states, ‘a society grows great when old men plant trees whose shade they know they shall never sit in’. This philosophical sentiment was also echoed by Mr. Pai when he spoke of his choice of causes: ‘Pick a problem that is so big that you cannot achieve it in a lifetime’. Wouldn’t it be easy to say ‘I donated at Diwali time, I have done my part’, or ‘I gave away all my old clothes, there’s nothing more I can do?’ Real generosity lies in taking a long-term view of a problem you cannot solve alone, and making a start anyway. At Akshaya Patra Foundation, they took the view that they would not shut down the programme if even one child was hungry. There were a lot of times when the organisation was short of money, or did not know how it would meet its expenses. They soldiered on anyway.

Having such a value-based philosophy ensures that you bring about the maximum good towards others and the most peace towards yourself. It is an approach well worth emulating!

The side-effects of charity

Making a donation has an effect on your life and behaviour as well. You may not even realise it, but it will change the way you feel about the world. Have you ever had any of these reactions? Find out below!

  • You feel good: You start to realise that you are not helpless and can actually play a part in bringing about some change. It feels good take action about something that is important to you. This sparks a feeling that is not happiness, but a feeling of positivity about yourself and your action. This is especially true of people who donate blood.
  • You may even feel happier: But this is not the kind of happiness you get when buy something at the mall. Psychologists gave money to two groups of people. One of them was asked to spend it on themselves, the others were told to buy something for someone else. When surveyed later, those that had spent the money on others were happier! Turns out that sometimes doing something for others can make us happier than spending on more things for ourselves. This was even true for women in Uganda who had very little money of their own, but felt happier after helping others.
  • You feel less selfish: We are trained to conserve our money, time and our energy for ourselves, our families or things that matter only to us. This sentiment is understandable if you are going through difficult times. However, in the long run, it makes one narrow-minded and focused on the money-value of everything. After you donate, you start to lose a little of the scarcity mindset with which we usually view the world. You may realise you actually have enough resources, be it time or money. You are able to look beyond the concerns of everyday life.
  • You learn a little more about the world: We all have mental models of the world and we operate according to those. Our theories about other people’s lives change after we hear stories of those in need. You put yourself into the shoes of elderly mothers abandoned for being a burden to their children. You wonder why a woman who lost her only daughter is volunteering at the cancer wing where her daughter died. You start to realise that the world is not as predictable as you thought it was, and not as black-and-white either.
  • You rethink your own values: The media wrote a story about the man who downsized his daughter’s wedding to save farmer’s lives instead. Here is an ordinary, middle-class person who probably put aside some part of his salary each month for years to save for his daughter’s wedding. As it turns out, when his daughter is to get married, farmers who have been struggling with drought are dying for want of a few thousand rupees. Should he do something? Isn’t it the government’s job? After all, he didn’t cause the drought, and he had planned for his daughter’s wedding years ago. Yet there is something about the plight of the farmers and his own money that lights a spark in him. He cuts down the unnecessary expenses and manages to donate Rs6 lakh to charity. What’s more important than the money is the fact that he gave up something important to him to focus on someone else. He has acquired a new value of his life’s priorities, his money and his relationship to others in society. This happens to many people who sacrifice something of their own to give someone else. You orient your priorities in a way that is more meaningful to others, and not just yourself.

It's something to keep in mind the next time you want to help out someone else. The rewards you get from acts of charity are not material, but it is surprising what a high value they will have for you!

Our Summer Reading List is here!

It’s not every day that someone puts out a list of recommended reading that applies to the nonprofit sector. Bill Gates puts out a list each year, encouraging readers to dive into topics of interest like healthcare, climate change and world hunger. We thought we’d round up all the resources that keep us updated with the latest trends and developments related to the nonprofit sector across the world.

Publications covering India:

  • The Better India: Looking for stories of hope and inspiration? Look no further than The Better India (TBI). TBI looks to cover positive stories of hope and change from across the country, and has brought recognition many change makers in the process.
  • The People’s Archive of Rural India: This initiative set up by revered journalist P Sainath documents the stories of India’s invisible and unheard millions. As Sainath says, “There’s a continent within our subcontinent, …and that’s the 833 million people of rural India who speak 780 languages… there isn’t a single platform today that captures this incredible diversity. PARI is a wonderful resource on stories that mainstream media misses out on.
  • Accountability Initiative BlogAI was set up to monitor and research government spending on citizens. They also present the results of their work in reader friendly formats like the 4-page easy to read Budget Briefs series. If you’re game for some serious reading, do check out their website and blog for analysis of budgetary allocation and spending on various social sector schemes. Those looking for light reading should check out the RaghuBytes blog, a tongue–in-cheek look at India’s policy landscape written by a retired Joint Secretary of the Ministry of Panchayati Raj.

Videos:

  • TED Talks: Presentations by TED speakers can be an efficient way to get a grasp of a new topic. Speakers cover a range of issues spanning theories of social change, human behavior, domestic violence, educational reform and more. We recommend The Way We Think About Charity is Dead Wrong, Dan Pallotta’s powerful but polarizing call for a shakeup of the nonprofit world. Bookmark their site for uninterrupted viewing!

Publications:

  • Keep up with scholarly discourse: Not sure about the difference between impact and outcome? If funders frequently quiz you on incomprehensible metrics, the Stanford Social Innovation Review is the place for you. Their blog features detailed articles and explanations of technical terms from the nonprofit sector, case studies, and success stories from across the globe. We’ve been following Kevin Starr, former surgeon and active philanthropist who writes evocatively on all things nonprofit. He’s got tips for donors (Just Give ‘Em the Money: The Power and Pleasure of Unrestricted Funding) and nonprofits (The Trouble With Impact Investing), they’re worth a read.

In the future, we’d like to present a list of must-read newspaper columnists too! For the present, we’d recommend looking out for Naren Karunakaran, who covers the philanthropy space in detail. Anurag Behar of the Azim Premji Foundation has a bi-weekly column in Mint that covers education and livelihood related issues with some wonderful insights.

That’s our list! Let us know about your favourite reads and who you’d recommend!

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

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!