The super-rich, whose net worth has risen significantly in the past six years, have become less philanthropic, while retail givers—or individuals who give less than ₹1.5 lakh per year per head—have grown in number and contributions.
The philanthropic contribution by ultra-high net worth individuals (UHNIs or people with a net worth of more than ₹1,000 crore) has reduced by about 40% over the last six years, says the India Philanthropy Report 2022 released today. In the same period, however, retail giving has increased from ₹21,000 crore in 2015 to ₹28,000 crore in 2021. The segment that has kept the growth of private domestic philanthropy steady, however, is contributions under corporate social responsibility (CSR) mandates, which have increased.
Overall, the report observes, total private philanthropic funding is expected to grow at 12% in the next five years, as compared to the flat growth of 8-10% it’s been clocking for the last few years, and touch ₹180,000 crore by 2026. The annual report brought out by consulting firm Bain & Company and Dasra, a non-profit venture philanthropy fund, gives an overview of social sector funding and the contribution of various stakeholders.
Although absolute UHNI spends on philanthropy have increased in the last two years, the allocation in comparison to net wealth has reduced, the report says. Former Wipro chairman Azim Premji is the only exception to this. Family philanthropy, or giving through family foundations set up by UHNIs and HNIs, has reduced to one-third of total private giving from 37% in FY2015 to 11% in 2021.
“In the last two years, during the pandemic, there was a feeling or a subjective sense that a lot of giving was happening. Everyone has been trying to help either at the community or the individual level. So, I would have expected a far more significant increase (in numbers),” says Neera Nundy, co-founder, Dasra.
Agreeing with her, Radhika Sridharan, partner at Bain & Company, adds that the contribution from UHNIs has fluctuated year-on-year and there was lack of consistency. “We have seen a lot of fluctuation in giving year-on-year in this space. The funding allocation goes from close to ₹2,000 crore a year to ₹20,000 crore; that’s the kind of deviation the category has seen from individuals over the last six years. The category comprises about 100 UHNIs,” says Sridharan.
The reason for this, she explains, is individuals’ tendency to give a large chunk of money at one go, and not follow up later on. Since UHNIs tend to donate in a large amount—an average of ₹5 crore a year—they may donate one year and not come back to donate for, say, the next two years. “There is no consistency in who is giving and the number of givers. The amount they donate can varies quite substantially every year,” Sridharan says. About 50% of UHNIs have been consistent in their giving, while others “go in and out”, she adds.
There is also a gap between giving as a percentage of net worth, and the gap is especially stark as the net worth of most UHNIs has increased substantially over the last six years. “We haven’t seen giving numbers substantially go up in line with the increase in net worth,” Sridharan says. Each of the 10 UHNIs donate between ₹50-100 crore each year, while the rest, on average, donate ₹15 crore each per year.
On a global scale, the contributions of Indian UHNIs ranges from 0.1% to 0.15% of their net wealth. This is far less than what UHNIs in other countries, including China, have been giving, where the contributions have ranged from 0.5% to 1.4%.
Though individuals may not be giving as much as expected, the report is optimistic about performance of family philanthropy, and predicts a 13% year-on-year growth till 2026. This is likely to be led by technology entrepreneurs and NowGen (belonging to multigenerational philanthropic families) philanthropists.
Uptick in CSR giving
CSR contributions have grown to 23% in 2021 from about 12% in 2015, in terms of total philanthropic contribution as well as the contribution amount. Of course, the 2% legal mandate introduced by the government in 2014 has had a huge role to play in this. (All companies are legally bound to allocate 2% of their average net profit earned over the last three years to CSR).
Over 70% of companies gave less than ₹50 lakh, though there has been a 15% increase in the number of companies in this bracket. A miniscule 3% contributed above ₹10 crore in 2020.
“In 2015, the contribution of BSE 200 companies was more than 50%. It’s reduced now as we are seeing a greater number of smaller companies contributing to the CSR pie,” says Sridharan. According to the report, the contribution from CSR is expected to reach 19% and form 32% of total private giving by 2026.
Unlike family philanthropy, Indian CSR contribution has witnessed steady growth. In fact, in the US, CSR as a proportion of total private giving is not more than 15%, whereas it’s more than 25% in India, Sridharan points out.
In terms of fund distribution, CSR funding was largely focused on health and the Prime Minister’s National Relief Fund last year. In fact, 2020-2021 saw a five-fold increase in CSR spend at ₹9,225 crore as compared to ₹1,815 crore in 2019-2020.
Prior to the covid-19 pandemic, CSR allocation showed greater diversity as compared to family giving. Between 2018 and 2021, 70% of CSR funds went to causes relating to education, healthcare, rural development, environmental sustainability and poverty. The rest went to “lesser attractive sectors” like sports, art and culture, animal welfare and women's empowerment. In comparison, family philanthropy and retail (individual givers) fund allocation have largely been biased towards education and healthcare.
In terms of the spike in retail giving, the report observes that a rising middle class, growing popularity of crowdfunding and ease of payments have fuelled this trend. “The opportunity for retail giving is phenomenal. However, we need to strengthen the formal funding system to increase this base. Most of the retail giving still happens in informal space,” says Nundy. “Informal giving doesn’t get captured in this report. The sentiment of the wealthy and average middle-class person wanting to contribute was phenomenal during covid-19. We need to capitalize on that with stronger systems where they can participate,” she says.