The covid-19 pandemic seems to have made high net worth individuals and families to allot more funds for philanthropic activities, a new report suggests.
The monetary contribution made by family philanthropy grew three times to the tune of Rs12,000 crore in the fiscal year 2020. It also accounted for two-thirds of the incremental growth in the total private-sector funding in 2019-2020, states the India Philanthropy Report 2021. The 11th edition of the report, brought out by Bain & Company and Dasra, was launched today.
Overall, private sector donations saw nearly 23% rise, up to Rs64,000 crore, as compared to the 2019 fiscal year. Of this, family philanthropy comprised about 20%, while the rest was from foreign contributions, domestic donation by corporates or corporate social responsibility (CSR) funding and retail investors.
While the spending on social sector has notably increased, India still holds a poor rank (117) on the Sustainable Development Report, compared to other BRICS countries. In fact, the pandemic’s impact, the report predicts, will have “significant annual funding deficit in the near term” on the sector in meeting its annual demand of Rs21.2 lakh crore until 2025.
The CSR kitty has increased by 17% since 2014, however, a 5% decline is expected this year. Along with reduced funding, the CSR priority has changed to Prime Minister’s Citizen Assistance and Relief in Emergency Situations (PM Cares) and other covid-19 relief initiatives, leaving traditional non-profits and sectors in a fix, the report states. For international non-profits, stringent government regulations on foreign funds have already seen about 30% decline in contribution over the last five years.
Room for growth
That’s where family philanthropy can help, as the pandemic has had little impact on it, the report says. The non-profit organisations which had the backing of family foundations fared better than those who were backed by CSR funding in protecting their funding.
Illustrating this point, it gave the example of Society for Nutrition Education and Health Action (SNEHA), which got timely help from family philanthropy. “When one of our major CSR funders—about 10% of our annual budget—who was committed in an MOU with us suddenly gave us two months’ notice, stating inability to fund beyond the period, individual philanthropists helped us,” said CEO Vanessa D’Souza.
According to the Billionaires Insights 2020 published by UBS and PwC, the wealth of Indian billionaires increased by 35% between April and July last year. There are close to 150,000 ultra high net worth families in India having a cumulative net worth of about Rs140 lakh crore, and this group is going to expand to 400,000 families with net worth of nearly Rs360 lakh crore by 2025, Edelweiss’ The Family Wealth Report 2018 reveals.
95% of family business owners are interested in philanthropy or already involved in it. Besides financial grants, 90% of the families also actively participate in other activities such an technical knowledge in their field, network, influence public policy, build institutional capacity, and be innovative in new forms of funding. This is much higher than the global average of 68%.
“For instance, some participate in a fiduciary capacity as board members for their non-profit partners, and others advocate for causes they support, while many choose to leverage their technical knowledge and networks to provide advisory support or raise additional capital,” the report states. The average time taken by wealthy families to set up their first philanthropic foundation too has halved from 1950s to 2010s.
Some of the patterns in family philanthropy, which the report picked up, were the leanings towards specific issues. Education (57%) and health (27%) received the highest funding. “India is further behind on gender equality indicators than on indicators related to health and education, which receive a significantly higher share of domestic philanthropic funding compared with gender equality. The personal experiences of wealthy donors are a key factor in this bias,” the report revealed.
Having said that, the family donors also play a crucial role in offering risk capital to underrepresented areas within education and health issues, and in enabling NGOs to build their capacity and administration needs.
The concentration of the donation is also focused on certain regions. Since most wealthy families live in Mumbai, Delhi and Bengaluru, these areas account for major portion of the total donations, leading to disparity in resource distribution across the country. Another challenge is family philanthropists giving grants to NGOs, which works well when the social sector ecosystem is more sophisticated and has a larger scale.
One of the growth areas the report suggests is increased funding in technology. While technology accounts for 9% of family net worth, it attracts at least a quarter of family philanthropy donation. With more active philanthropists and foundations, there will be a need for advisory support to navigate legal and regulatory fields. Hence, it’s a good time for advisers to enter the space to guide family philanthropists, the report suggests.