Philanthropists in India need to strategically plan their contributions, says Bain
Levels of philanthropy in India are on the rise, but the quality needs to correspond with the quantity in a country with such dire need, according to a new report from strategy consultancy Bain & Company. Less than half of those donating in India currently review their portfolio periodically.
India offers an interesting paradox of growth. On the one hand, the GDP is soaring, placing it amongst the most important economies in Asia, and putting it on track to become the second largest economy in the world over the next few decades. On the other hand, a look at the socio-economic conditions outside of the country’s urban centres (representing a large majority of the population) reveals fairly dismal circumstances.
None are more aware of this stark divide than the people living in the country, and there appears to be an increasing desire to rectify this situation, as inferred from the upward trend in philanthropic activity within the country. An increasing number of high-income individuals across the country have a certain amount of money earmarked for philanthropy annually, as exemplified by Nandan Nilekani, who recently pledged $1.7 billion to charity.
For eight years now, management consulting firm Bain & Company has been releasing its India Philanthropy Report, which monitors philanthropic activity in the country, not only in terms of the number of donors and their contributions, but also in terms of donor profiles and behaviour.
The report’s overarching conclusion is simple: donors need to go the extra mile to ensure that their contributions are having a tangible impact. The firm paints a dire socio-economic picture, stating that more than 2 million crimes against women were reported in the country between 2004 and 2015, and 1.08 million children died before the age of 5 last year alone.
In order to ensure that donations make a tangible impact on some of these issues, the report recommends systematic planning of donations, based on a comprehensive list of best practices. In order to determine the extent to which donors in India plan their contributions, Bain & Company conducted interviews with more than 30 donors at various stages of their philanthropic activity.
In terms of donor-profiles, most donors interviewed by the firm have been involved in philanthropy for 3-10 years, and have accumulated their wealth through entrepreneurship or through a family business rather than from a salaried position. Most annual donations range between Rs. 100,000 and Rs. 500,000.
While the report recommends ‘strategic philanthropy,’ survey results revealed that the decision of where to donate is not predominantly an impact-driven one. Around 40% of the respondents, in fact, choose a cause based on personal interest or experience, whereas just over 20% make the decision based on the areas of greatest need/impact.
Other motivations include a ‘family legacy’ of donating to a cause, which is cited by around 10% of the respondents, while discussion with other philanthropists also informed the cause for donation in some cases.
However, strategic philanthropy also involves flexibility, wherein the impact of one’s donation should be periodically reviewed, and altered if the results are not satisfactory. According to the report, 70% of those who reviewed their contribution portfolio at least once a year made significant changes to their approach, demonstrating the will to rearrange based on impact.
The problem lies in the number of people who actually review their portfolios. While a number of donors have annual funds earmarked for philanthropy, less than 20% review their portfolios annually, while more than half don’t conduct reviews at all. 30% of the donors demonstrated high levels of diligence; conducting quarterly or half-yearly reviews based on latest information.
