In every industry there is a phase that is marked by great turbulence and change. It’s hard to predict the outcome of the change while one is in the midst of it. However, we can be sure that the philanthropy sector is currently facing great changes from the outside. The assumption that NGOs are the solution to a social problems is being challenged by those who see NGOs as a last-mile delivery mechanism or a way of reaching the unreached. NGOs in turn are also responding to the changing paradigm in their own ways. Many of these factors complement each other, and have a cumulative impact on the non-profit sector and expectations from it. Here are factors that will change charity in 2016:
- Big donors who want causes, not charities: Mark Zuckerberg is giving away money! Will charities benefit? Ultra-rich donors like Bill Gates and new entrant Mark Zuckerberg are not looking to fund charities. They’d rather look at the root cause of a social problem and engineer a solution that can best address the problem. It marks a shift from philanthropists writing out to cheques to hospitals to indefinitely fund operations. It’s a new market-based ideology that is not averse to alliances with unlikely bedfellows to provide solutions. In India, many of the ultra-rich like Azim Premji, Narayana Murthy, Ratan Tata and others route money through their own foundations, with existing NGOs receiving funds from those entities. At the same time, Tata believes in funding low-cost technological innovations (like the X-Prize) that can improve the lives of the poor. Not all of tomorrow's philanthropists are going to be signing cheques to existing NGOs.
- A FitBit for your donations?: When you sign in to Facebook, you receive notifications of new messages, new friend requests and new updates. How about if you got notifications of how much impact your donations have had? There is now a move towards measuring and reporting NGO work in a manner that helps donors decode what is achieved with their money. Movements like ‘The Life You Can Save’ have pioneered this approach. Their 'Impact Calculator' shows you how many individuals you can impact for each dollar donated. For example, they estimate that donating Rs1000 to their chosen charity can provide 58 people with food-based micronutrient supplements for a year. The combination of data and the ease of giving online will transform the way donors look at donations. At HelpYourNGO, we're very excited by these developments. We started off by making data about NGOs more transparent and accessible. We're working on making giving easier next year. Watch this space for more!
Indian non-profits are looking at a changed playing field in 2016.
- CSR in shining armour?: There is likely to be a reduction in foreign aid to India as the Indian economy grows in size (and other countries stagnate). India has been giving more in foreign aid than it received since 2012-13, while net inflow of foreign aid has dropped since 2010-11. The United Kingdom has said it will phase out foreign aid to India from 2015, citing the size of the economy. The recent tightening of FCRA rules for NGOs may also impact the amount of funding they get. Who will fill the gap between the departing funders and the arrival of the new players? It remains to be seen if CSR funds can take on that mantle. However, the timing of CSR funds could not be more opportune. In the last financial year, over 1000 companies listed on the Bombay Stock Exchange were compliant with the CSR provisions of the Companies Act. In effect, this has meant an inflow of Rs6,400 crore into the social sector. A caveat – this has not resulted in an ‘all boats will rise’ situation. Smaller NGOs in underdeveloped regions were expecting to see more funds come their way. However, the most industrialised states saw the most CSR inflow, with healthcare, education, environment and Swachh Bharat attracting the majority of funds. It is hoped that the development of efficient mechanisms will enable corporates to partner with deserving NGOs that need funds.
- Revenue, not aid: Indian entrepreneurs have made their mark in Silicon Valley and in India as well. It seems that some of that energy has rubbed off on NGOs as well. Many in the social sector are now looking at social entrepreneurship as a route to solving social issues. (A social experiment in Nigeria found that unconditional cash grants to entrepreneurs worked as a hugely successful development programme). Impact investors are already pouring in funds. There are several accelarators that help early-stage organisations grow (or survive!). While the funders are ready, it will take some time for the sector to mature. Organisations that succeed should be able to sustain themselves without depending on donors for funds, altering the paradigm of need-based donations.
2016 marks a year that will herald great changes for charities. In the future, it will no longer be business as usual for charities!