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Charity no longer a cottage industry

Resource type: News

Financial Times |

The first thing greeting visitors to’s home page is a photograph and description of a featured business. It could be a Ugandan cobbler, a Peruvian farmer or a shopkeeper in Tajikistan. Users can make small loans to these entrepreneurs and, during the course of the loan, receive e-mail updates from their borrowers. More than $13m has been raised in the two years since the website was launched, reaching 20,000 people in developing countries. What is happening on reflects three big trends in philanthropy. For a start, the activities of the website’s users are global, with donors sending funds to far-off countries. Second, donors are looking for feedback on the impact of their donations. And third, technology is powering the transaction, facilitating the donation as well as providing information on the needs and the benefits of the funding. It is perhaps no surprise that, like business, philanthropy is undergoing a process of globalisation. Technology brings information about once-remote parts of the planet to computer screens. And, as people travel more frequently, they are seeing first hand some of the world’s more intractable problems. There’s also the recognition that the root causes of a lot of local problems are linked to global issues, says Luc Tayart de Borms, managing director of the Brussels-based King Baudouin Foundation. So in Belgium, if we work on, say, illegal migrants, you’re linked with the problem of human trafficking and then you’re linked with what is happening in the Balkan region, which is a transit zone. Some countries have always focused a portion of their giving on international projects. In the UK, about 13 per cent of charitable giving by individuals in 2005 went to overseas causes, according to the Hudson Institute, a think-tank. In the US, donors who once might have given to their local church or university are directing more money to causes in developing countries. The shift in emphasis partly reflects how today’s donors made their money. A lot of the wealth that’s fuelling the new philanthropy comes out of global businesses, says Salvatore LaSpada, chief executive of the UK-based Institute for Philanthropy. So, they’re taking the same boundary-crossing drive into their philanthropy. The emergence of a new generation of wealthy individuals not only in the US and Europe but also in emerging markets such as India, China, Russia and Brazil means that the pool of money available for charity is greater than ever. Moreover, while the flow of philanthropic funds was traditionally from wealthy donors generally European or American to poor countries in Asia, Africa or Latin America, this is no longer always the case. This can be seen in the growth of community foundations and development projects to establish schools and hospitals in eastern European countries. Community foundations are also expanding rapidly in Asia, Africa and Latin America, with their numbers growing 26 per cent between 2000 and 2005, according to the Hudson Institute’s annual Index of Global Philanthropy. Jonathan Fanton, president of the MacArthur Foundation, the US grantmaking organisation, looks forward to the day when local philanthropy will be more common. I’m hoping the trend will be more philanthropy in the developing world and in Europe, he says, and that there will be partnerships between local donors and American foundations. But while the charitable sector’s geographical boundaries are breaking down, the way donors give is becoming more structured. Today’s philanthropists want to do more than write cheques. They often want to become involved in the creation and design of programmes, track their progress and measure the difference their money has made. A shift in the sources of wealth is one factor behind the prevalence of this hands-on approach. It’s especially noticeable in the UK, says Susan Mackenzie, director of Philanthropy UK, an independent resource for donors. Fifteen years ago, three quarters of The Sunday Times Rich List had inherited their wealth and a quarter were self-made, and today that ratio is completely reversed. And, say experts, the wealthy who have made their money, rather than inheriting it, tend to view it as their own rather than seeing themselves as stewards protecting a family legacy, and a greater sense of ownership of wealth brings more freedom in deciding how to give it away. At the same time, a greater professionalism is emerging as both individual donors and charitable organisations try to achieve more with their funds and infrastructure. People want to get results because the problems are gigantic compared to the resources, says Tom Tierney, founder of Bridge-span Group, a consultancy catering to charities and non-profit organisations. When you go down the track of impact philanthropy, it changes behaviour. You become much more cost-efficient, more disciplined and you have to build capacity in organisations. In the process, the lines between the activities of companies and non-profits are blurring. Take microfinance. Looking towards the double bottom line of social benefit and profit, mainstream banks such as Barclays and JPMorgan are entering a field that was once the preserve of non-profit organisations. The presence of the corporate sector in such fields is challenging philanthropic organisations. For a start, it is creating greater competition for talent. People wanting to help alleviate global problems once could only do so by working for charities or non-governmental organisations. Now they can take well-paid positions in companies and participate in their community or volunteering programmes. As companies become more strategic in their approach to philanthropy, these opportunities are increasing, with high-performing executives able to take sabbaticals to work with non-profits in the developing world. The entry of corporations into arenas once dominated by non-profits is also introducing market-based tools and techniques to philanthropic activities, while innovative partnerships between non-profits and corporations are proliferating. But while business techniques can streamline certain operations, they cannot solve every social or environmental problem. Tayart de Borms stresses the need for organisations from different sectors to recognise their limitations. It’s easier to sell a product than create social change and [foundations and charities] are moving in a much more complex environment than those selling products to the market. One of the most powerful forces shaping the philanthropic landscape is technology. Global communications tools not only facilitate the flow of information to and from different parts of the world but also help philanthropists exchange ideas and contacts. We know a lot more about remote places in the world where people are less fortunate and need help, Fanton says. Moreover, technology is providing a quick and easy way for individuals to make donations. Think about what happened with the tsunami and the amount of money that was raised within hours, Tierney says. Society could not have done that five years ago. And if sites such as eBay can bring together buyers and sellers, donors and beneficiaries can also meet on sites such as and The internet facilitates partnerships between philanthropic organisations, allowing them to exchange information. Many see great potential in establishing this more collaborative, open source approach to philanthropy. In the UK, Corporate Culture, a communications company, recently launched the Change for Good Network, a web-based forum where senior managers from companies, government bodies, charities and non-profits can share insights and good practice. John Drummond, its chief executive, believes that the charitable sector needs to go through a period of consolidation. The idea of collaboration is increasing, and my sense is that in the next decade or so we’ll see an increasing number of mergers between charities.