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’,, 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.


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