Philanthropy is broken, but here’s how we fix it

Philanthropy is broken, but here’s how we fix it…

Blog post by Roopa and Asha Suppiah, Co-founders of Water Well-ness Project – Get free updates of new blog posts here.

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Photo credit: Nicolas Raymond.

You are probably very familiar with the standard model of international philanthropy where organizations use money that is donated by individuals like you and I to provide the unfortunate and underserviced internationally what they need. Money might go to such things as building schools, providing clean water facilities or equipping farmers with agriculture tools.

Two stark challenges of philanthropy today

 But we see two problems with this model, which have probably crossed your mind too. First, the original definition of the word philanthropy seems to have mutated in society so that “philanthropy” (and similarly “charity”) has become synonymous with “giving away things for free to the poor”. Yet, we should realize that philanthropy derives from Latin and Greek origins to translate into “love for humanity”. There’s nothing about “giving away things for free” in there. By thinking so narrowly (and in a way, incorrectly) about what philanthropy is, we are allowing philanthropy to be unsustainable.  Why? Speaking in a general sense, when recipient communities obtain what they need for free, their connection to what they’ve been given is not very strong. Whether it is a house being built or a toilet being installed, those recipients may not feel the the drive to ensure the project is maintained on the long-term as would people who had to earn what they have. When repairs need to be made to infrastructure for example, it won’t necessarily get done. As a result, many international humanitarian projects are short-lived (by some accounts, the estimate is 70% of projects fail). Plus, let’s face it; the poor, like all people, want to feel they earned what they have and not be handed it. Pride tends to trump pragmatism.

 A second major issue of the standard model of philanthropy is on the donors’ side. Majority of philanthropic groups are relying on the generosity of individuals to fund their projects. In Canada, there are about 200,000 different non-profit organizations, all asking for contributions. More than $10 million is contributed annually to charities in Canada, but the reality is that 10% of the Canadian population is funding about 65% of the donations. Most people’s priorities are: 1) pay the bills and 2) with what’s left over, enjoy a reasonable quality of life. For the “everyday individual”, giving a large amount of money to charity is not a priority, and we can’t really fault them for that. For young people like me who are just starting out in their careers, although we know that we want to support the countless wonderful causes both internationally and within their own communities, we generally aren’t in the financial situation to be able to donate very much. In fact, the median annual amount donated by Canadians aged 25-34 is only about $100 (median meaning that half of donors gave less than $100 and the other half gave more).

The “feeling” we get is also a problem

A concern that also should be mentioned is that more so than ever before, the public is bombarded by requests to donate left, right and center (especially during the holiday time), which further impacts how much money ends up being donated. You’ve probably experienced those Saturday afternoons when you are out running errands but are asked at the grocery store, the liquor store, the bank, and even maybe by canvassers on the street for a donation. Do you ever feel frustrated or annoyed, even though you know that the request is good-intentioned? But taking part in philanthropy is supposed to feel good! When you do choose to donate, sometimes you aren’t provided enough transparency about where, when, how, and for whom your money is being spent. Many charitable organizations do make an effort to address these issues, but at the same time, many others don’t.

So all this discussion begs the question, is there a more sustainable model for philanthropy? Is this just the way it has to be or is there something we can do about it? To answer these question, we have to figure out how to tackle both issues identified – 1) how can we help the poor internationally in a way that supports their long-term wellbeing and dignity, and 2) how can we obtain the necessary funds in a way that is self-sustaining and organic.

 Step 1: Helping the poor

 40 years of practice has shown that microcredit is a good way to help the poor. Microcredit is giving small loans to poor individuals who traditionally cannot obtain loans from banks because of their lack of collateral (i.e. something that the borrower can forfeit if he or she is unable to repay the loan). These small loans are used for any income-generating initiative and loans are paid back with interest over time in small chunks. If structured properly, this method works extremely well to empower the poor, address root causes of poverty, and support long-term well-being.

Step 2: Financing philanthropy

But microcredit alone doesn’t address the second issue I mentioned–that philanthropy is dependent on the generosity of donors. To address this issue, a concept in finance called impact investing can provide some insight. Impact investing is investing capital into companies or initiatives that achieve social and environmental impact while also offering a financial return. Typically, impact investing is characterized by large investments made for equity (i.e. shares) into socially- and environmentally-conscious for-profit companies. But what if we could apply these impact investing principles in a different setting: in philanthropy? For example, let’s provide regular individuals like you and I the opportunity to invest into international humanitarian initiatives that transform lives and promote equality. Rather than being obliged to invest large sums (e.g. $25,000, $100,000), we would have the option to make small (e.g. $100, $500), medium (e.g. $1000, $5000) or large (e.g. >$10,000) investments. We could choose whatever suits our financial situation. If our money was used for microfinance projects, we could receive this loan (a.k.a. the investment) back and even receive a financial return from the interest that is repaid by the borrowers. Rather than being asked to make a donation, we can make an investment, which is both responsible and practical for most people. The opportunity to invest increases the incentive to take part in philanthropy – and totally changes the way people see philanthropy.

The bottom line: Everybody wins

So how it would works is: make an investment into worthy international projects, help the poor lift themselves out of poverty, and receive your investment back with interest. It’s a self-sustaining cycle for how to achieve good in the world. This is a win-win (and probably win-win-win-win) situation because it makes sense for absolutely every party that is involved. Let’s use microcredit to achieve massive impact. Let’s re-inspire contributions by having an alternative to donating.

So now to hear from you – what do you think? Would you like to see philanthropy done this way? Comment below to share your perspective. Water Well-ness Project is energized by the huge potential of this model and we’ve developed it into a real-life program, first of its kind in North America. We call it H2O Investments. Click here to see it in action or to become one of the trailblazers that is proving to the world that philanthropy can be done right and done innovatively. Let’s bring the heart back to philanthropy and show a little love for humanity. H2O Investments is launching on October 29th click here to be part of the historical launch of this game changing program!


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