Accelerating family philanthropy will drive India's socio-economic growth

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Giving has long been a part of Indian culture. Strong ties in local communities create socio-economic ecosystems, where well-to-do families have traditionally supported those in need of aid. Over a period, these charitable contributions from families have shifted from charity i.e., giving for an immediate need or to solve the current problem, to philanthropy i.e., giving to drive a more permanent change and to deal with the root cause of a problem.

A major part of the funds donated to social development comes from family philanthropic initiatives. A recent report by Dasra and Bain and Company titled ‘India  Philanthropy Report (IPR) 2021' reveals that the corpus of family philanthropy has tripled, growing to nearly Rs 12,000 crore in FY20. This shows the catalytic role that philanthropic families can play in driving positive social change. The concept is not new in India, and remains deeply ingrained in the country’s customs and traditions. Philanthropic families continue to create economic opportunities, invest in initiatives, and chart a course that is central to India achieving its potential.

However, most of these initiatives remain fragmented and skewed towards certain sectors. The report further points out that education [47 percent] where India has a strong score on sustainable development goals (SDG) attracts most of the philanthropic funding. On the other hand, healthcare [27 percent], disaster relief [12 percent], and vulnerable sectors like gender equality [1 percent] get bare minimum funding.

Also, most of the funding is spread across beneficiaries and ends up having little impact on the ground. A study by the Central Bureau of Investigation found that India has at least 31 lakh NGOs. That’s double the number of schools and 250 times the number of government hospitals in the country. Family philanthropic funding or even the mandatory 2 percent CSR donations directed to these NGOs often end up dispersed.

The role of family philanthropies and the need for a collaborative effort to drive social change The Covid-19 pandemic has once again turned the spotlight on the critical need for organised philanthropic interventions to rebuild lives and mitigate potential risks to lives and livelihoods. The pandemic has brought to sharp focus the vulnerabilities of groups like women, adolescents, and workers in the informal sector. We’ve all heard the horror stories of abuse, violence, and desperation during the lockdown. People lost livelihoods and lacked funds to even buy essentials or get access to basic healthcare. Children, especially girls, lost significant ground on education and nutrition.

What the pandemic did was highlight the chinks in India’s socio-economic infrastructure. What we need is a holistic social support architecture catering to marginalised populations. However, India’s complex socio-economic development challenges cannot be managed by any individual entity. India is expected to have a shortfall of $60 billion per year to achieve even five of the 17 SDGs. Development requires large and sustained funding with continuous effort—something that is only truly achievable through multi-party collaboration. This is where family philanthropy could act as a catalyst of change.

Given their unique circumstances, family foundations have the potential to catalyse social impact at a scale that far eclipses the financial resources they invest. Free of political pressures faced from the government and foreign funding agencies, as well as shareholder pressures faced by corporations, family foundations have the potential to influence systemic factors by encouraging innovation, funding proof-of-concept projects, influencing public policy, building institutional capacity, and experimenting with new forms of funding.

The potential of family philanthropy is still untapped
Currently, family philanthropy is skewed towards technology as a sector with 26 percent of the donations coming from it. Funds are also directed more in the regions where the families are established, creating a geographical imbalance. Also, Indian philanthropists donate a smaller portion of their wealth relative to countries such as the US (0.5 vs. 3.4 percent). If this gap is addressed, it could unlock an additional annual investable corpus of Rs 60,000 to Rs 100,000 crore for the non-profit sector.

Four ways to accelerate the impact of family philanthropy
Family philanthropy has been playing a pivotal role in enabling multi-stakeholder collaborative initiatives, which has experienced a four-fold increase globally from 2000 to 2015. Yet, we have a long way to go, and accelerating these initiatives is the need of the hour. This can be done through:

1. Public-private partnerships in philanthropy: As discussed, collaboration is the way forward for philanthropy. Collaborative initiatives between government and funding families, and platforms to support this scale, could create more impact and address marginalised sectors much better.

2. Direct engagement with communities/ beneficiaries: Connecting with the communities can give family philanthropies a sense of ground realities and inspire more action that goes beyond just funding.

3. Incentivising family philanthropy: Offering tax advantages in the context of estate and inheritance taxes could drive more funding.

4. Recognising and promoting family philanthropic initiatives in India: While the call for 2 percent CSR was an interesting approach, there is a need to recognise the impact these contributions make to India’s social goals. Sharing success stories will encourage more families to come into the fold, and the transparency will also bolster partnership efforts across the board.

Giving in the new normal
The number of philanthropic families has seen a drastic increase in the last few years. The new generation of wealthy Indians is taking a new approach to giving and wants to play an active role in creating impact. They are willing to collaborate and focus on larger issues and under their helm, philanthropy is getting more organised and attuned to measurable outcomes. This is therefore an opportune time to shift philanthropic discussions from surviving to thriving with focused interventions directed towards the most vulnerable sections of society, enabling  ‘A Billion Thriving’ in India especially in the wake of the Covid-19 pandemic.

Family philanthropies joined hands with other donors, governments, NGOs, and consultants to respond nimbly to the Covid-19 pandemic by pooling resources and realigning priorities. Relaxed funding norms, speedier decisions, and digging into their coffers to deploy funds rapidly through collaborative funding platforms led to a sea change.

In the coming years, we will need family philanthropies to continue this approach and play a more central role–as partners with other players–to drive more sustainable change.

Family philanthropy has played a critical role in India’s socio-economic development in the past and continues to remain a critical element in New India’s emergence. The Covid-19 pandemic has once again turned the spotlight on the critical need for organised philanthropic interventions to rebuild lives and mitigate potential risks to lives and livelihoods. It enables holistic and orchestrated multi-stakeholder efforts to find solutions, combining the agility and passion of NGOs and entrepreneurs, with the leverage and influence of governments and international organisations for tangible results. Families are in a unique position to leverage their human, social and financial capital, as well as their long-term mindset and reputational capital to do good and drive positive social change.

The writer is the Co-founder and Partner at Dasra

The thoughts and opinions shared here are of the author.