Laying the Groundwork for Growing Giving

RECOMMENDATIONS FOR GROWING GIVING

We offer some recommendations for growing mass engagement in giving.

CONTENTS

This 2017 report discussed the potential impact of middle class giving across the globe and the challenges ahead.

Executive summary
The polarity of wealth is changing & the rise of the middle class
The importance of middle class giving & quantifying the potential of middle class giving
The urgent need to drive a culture of giving
Recommendations and references

GROWING MASS ENGAGEMENT IN GIVING TO CSOs

International funders should:

1 Fund the expansion and retooling of infrastructure organisations

Our overarching recommendation is that funders, governments and fellow civil society actors should champion the role of and increase funding to infrastructure organisations as this compliments all further recommendations.

Creating an environment which encourages the growth of a culture of giving that augments and solidifies economic development is a task that can only be accomplished with the cooperation of governments and the private sector due to their scale and influence. However, civil society is far from powerless. Aside from earning public trust and support through their effective and responsive operation, civil society can organise into institutions that provide crucial services for donors and CSOs upon which the sector can flourish. CAF believes that by undertaking the following activities, these “infrastructure organisations” can help to create the Groundwork for Growing Giving.

Whilst large western headquartered organisations are doing important work, the fact that in 2011 it was estimated that only 1% of global official development assistance from governments was granted directly to Southern-based non profits suggests more needs to be done to balance the market. The prominence of large international CSOs in the civil societies of many emerging markets threatens to create a sense that institutional civil society itself is a foreign concept.

Without a dedicated approach to helping to build up locally trusted forms of civil society that already enjoy public engagement, we risk crowding it out. By funding local CSOs and movements directly, and ensuring that we are allowing priorities to be set by locals, we can not only ensure the building of future trust and engagement in civil society, but also increased effectiveness.

“We have moved to an era in which global partnerships are most effective when they create an environment that allows the general public to contribute to solving problems. The partnerships that inspire movements of hundreds of thousands of people advocating, educating, and fundraising for one end goal are the new recipe for sustainable solutions.”[36]

2 Recognise the importance of helping grantees to build sustainable domestic support and fund accordingly

In addition to funding locally owned and directed CSOs, funders should consider earmarking funds to be used to develop support from and engagement with the local community.

This should go further than merely helping to ensure that beneficiaries are represented and should have as its goal the developing of a support base that will ensure the organisation continues to grow and thrive long after the funding ends. Such funding should be seen as helping to ensure organisational resilience against financial but also political stresses. Many are now recognising that the best defence against attempts to close the space for critical voices in civil society is to build a wide base of supporters.

Governments should:

3 Make sure that civil society organisations are regulated in a fair, consistent and open way

CSOs are not immune to the current trend of falling trust in institutions. It is crucial that this trend is not only abated but reversed if we are to ensure that the billions of people entering the middle classes in the next generation are able to enjoy the benefits of engaging in and giving to a vibrant and effective civil society. However, in line with the findings of our report Building Trust in Charitable Giving, we call on governments not to attempt to manufacture trust through heavy-handed policies, but to create an environment in which CSOs can earn the trust of future donors.[37]

Whilst the report makes many recommendations, there are some crucial areas where governments should focus. Firstly, allowing a wide range of public benefit causes under which organisations providing a public good can (but are not mandated to) register can help CSOs to differentiate themselves from other institutional forms. By offering tax benefits and official legal status in exchange for the submission of information on finances and activities which is proportionate and not overly burdensome, CSOs can telegraph their trustworthiness to the public.

It is however crucial that the process for registering and receiving status is open to all and that the process is transparent. Finally, fair, open and consistent regulation can help to improve standards in the sector and minimise the donors perception of risk. Ensuring that regulators act independently and in the interests of donors and CSOs is thus crucial.

4 Make it easy for people to give and offer incentives for giving where possible

Tax incentives have been shown to positively influence both the value and the frequency of donations around the world. A meta-analysis of 138 studies comprising a combined sample size of over 1.4 million people found that the weighted price elasticity (responsiveness of donors to incentives) for charitable giving (in the United States at least) was -1.11. This effectively means that adding an extra 1 per cent in the value of incentives offered would result in an increase in donation size of 1.11 per cent.[38] In addition, Rules to Give By - a report CAF produced with Nexus and McDermott Will & Emory, which analysed tax incentives in 193 nations - found that people in countries which offered tax incentives for giving were 12 percentage points more likely (33 per cent); than those that offer no incentives (21 per cent) to have made a donation in the past month. In addition, we found that more generous incentives generally lead to higher donor responsiveness.[39]

Whilst the fact that no incentives are offered to individual donors in 34% of countries should be a primary concern for governments seeking to encourage mass engagement in giving, ensuring that where they are offered, incentives are designed be as effective as possible is also crucial. In analysing in depth the incentive systems of 26 key nations our 2016 report Donation States: An international comparison of the tax treatment of donations identified a number of recommendations which we believe governments should aspire to meeting.[40] Essentially, we found that as well as making sure that incentives are generous, they should ensure that they are easy to claim, equally available across charitable causes and simple to understand to ensure that people from all walks of life are encouraged to give to the widest range of good causes possible.

5 Promote civil society as an independent voice in public life and respect the right of not-for-profit organisations to speak out on important issues

Governments should recognise that enabling CSOs to criticise and influence policy adds legitimacy to the State, drives improvement in standards of governance and turns civic disagreement and discord into constructive public debate. Indeed, the world has agreed to prioritise promoting just, peaceful and inclusive societies and specifically the development of effective, accountable and transparent institutions at all levels (target 16.6) ensuring responsive, inclusive, participatory and representative decision-making at all levels (16.7) as part of the SDGs and civil society must necessarily have a role for this to be achievable. [41]

Though the advocacy and campaigning of CSOs is crucial and should be protected, it is also true that such activities must be covered by rules in order to protect the sector from being used by those with vested interests to lobby for their own gain or on behalf of a political candidate or party. Our report, Enabling an Independent Not-for-profit Sector sets out a number of clear recommendations that strike a balance between empowering CSOs to speak out whilst protecting against abuses. [42]

Civil society organisations should:

6 Ensure good governance and be honest about impact to build public trust in civil society organisations

Civil society cannot rely on others to create an environment in which more people engage in giving, it must lead by example. In order to challenge negative narratives about poor governance and ineffective programmes, CSOs must actively demonstrate that they are false by being transparent about their successes and failures and then showing that they can learn from both.

Developing good governance practices and demonstrating impact can present significant barriers to organisations and writ large across the whole sector, they can hold back the development of trust in CSOs generally. This is because many organisations lack the financial resources to pay for training for trustees and staff or the time to measure and report impact. Unfortunately, without improving in these areas, organisations will fail to access sustainable resources as donor expectations on governance and impact are not met. As such, more funding needs to be made available and more services ought to be offered that can help CSOs to address this issue.

7 Meaningfully engage local communities in decision making so civil society becomes locally owned

Funding for social good in some of the worlds poorest nations inevitably relies heavily on foreign donors. Whether work on the ground is conducted by INGOs or local CSOs, there is a danger that accountability will flow upwards to the source of funding. With massive long term growth forecast for many developing economies, governments should be holding INGOs to account for the extent to which they are engaging beneficiaries – who may one day be donors themselves – in civil society. All CSOs are encouraged to engage beneficiaries to aid impact measurement and to identify improvements in service delivery. However, funders should consider this local engagement to have an even more important role; building trust and interest in civil society and giving and cementing a sense that civil society is locally directed and owned.

The advantages of such engagement are well documented with participatory decision making being associated not only with an increased sense of trust and legitimacy but also with improved outcomes for programmes.[43] Funders may want to consider different models of local involvement, ranging from simple outreach programmes to advanced participatory decision making systems that allow local priorities to be fed into larger planning apparatus. Indeed, funders could seek to take advantage of local solutions to engagement like the Panchayat system in India.

8 Recognise and build on traditional forms of giving to create organisations and a culture of giving that works to the strengths of the local context

  • Fundraising portals & validation
    People and organisations are more generous when the process of giving is simple and convenient and when they have confidence in the system. By listing only validated charities, automating reporting, integrating with social media and facilitating mobile giving, fundraising portals improve the donor experience. Whilst such portals are increasingly crucial for driving donations in countries with a developed philanthropic market, they could be even more so in newly middle income countries, where trust in charities may be low but where access to financial services through mobile technology is widespread.
  • Governance
    If charitable giving is to grow sustainably, governance standards will have to improve to keep pace with donor expectations. As such, organisations which provide guidance and education on governance as well as representation for trustees are important for maintaining trust in the sector.
  • Research
    CAF’s World Giving Index provides some insight into public engagement in acts of generosity around the world, but it is not a substitute for comprehensive national data on trends in charitable giving and wider sector trends. The fact that the Index is currently the only data source for participation rates in giving in many countries is a barrier to policy development both for government and for the sector itself. Funding should be available for national research and the results made publicly available.
  • Donor services
    Like any market, philanthropy thrives when needs are catered for and the user experience is improved by a ranged of tailored choices and services. This is as true for ordinary working people who give a small amount every month as it is for major donors or large multinational companies. CSOs in the UK provide a wide range of services for donors, many of which are supported by a favourable legal environment. For instance, CAF provides charity accounts and trusts that allow donors to distribute funds from a central point without need to duplicate the administrative burden. Like other organisations, we provide advisory services to help donors plan their giving to ensure it is as effective as possible and we help donors and organisations manage grant programmes. Such services are vital to improving both the donor experience and the efficacy of their giving.
  • Representation
    All industries benefit from being able to pool their knowledge and influence. Membership bodies and associations enable CSOs to speak in a united voice to government. This benefits CSOs as it allows them to have greater influence. However, it also greatly benefits government too. Faced with trying to engage CSOs in policy development, governments often struggle to reach smaller organisations that don’t always have the time or policy expertise to provide useful insight despite their unparalleled access to communities and understanding of the issues and services which affect them. To this end, funding the capacity building of organisations that can represent CSOs and speak on their behalf could greatly improve communication between the sectors and improve levels of mutual trust.
  • Standards
    It is crucial that regulations are sufficiently robust to protect donors against malpractice and thus safeguard the reputation of the charitable sector. However, overregulation can stifle growth in a sector which needs to be agile in order to respond to the needs of beneficiaries. It is also true that increased bureaucracy can be damaging to the ‘warm glow’ that donors get from giving. Furthermore, increased compliance requirements for CSOs can create a barrier to entry for those wishing to set up small local organisations and can create significant financial overheads for others. As such, a best case scenario is for CSOs to come together and create and popularise their own standards and principles to augment regulation.

9 Fund local organisations directly to improve the accountability and efficiency of aid

CAF's World Giving Index has consistently shown that economic development is far from being a reliable predictor of the level of public engagement giving. Indeed, in terms of the proportion of people giving money to charity, volunteering or simply helping a stranger on average per month, the most generous country in the world is Myanmaar, a lower middle income country with a history of repression and conflict.[44] In many countries our task is not the building of a culture of giving but rather the development of institutions within civil society which can augment the forms of civil society that already exist.

Take the case of South Africa for example where CAF is fortunate enough to have a presence on the ground through CAF Southern Africa.

Our research found that a remarkable 94% of respondents gave goods, 85% donated money and 56% volunteered for charitable causes in the past three months. However, it also found that of the 64% of people who gave to “organisations”, only 16% gave to “NPOs/NGOs”. Strikingly, 37% of organisational donors gave to self-help groups and 42% gave to stokvels.

It has been estimated that as much as half of the adult population in South Africa is a member of a stokvel and that they have a combined worth of R25 billion (US$2 billion). If not directly “charitable”, the service that they provide without profit to members – by connecting communities, promoting solidarity and offering an alternative financial services industry for those not served by private sector banks – certainly amount to charitable outcomes. It could be possible to work within a local context to build on such traditional models to deliver CSOs which are locally grounded and trusted.

This potential is highlighted in Kenya by Akiba Mashinani Trust (AMT), the financing facility for the Kenya Federation of Slumdwellers – who’s leaders were awarded the inaugural Olga Alexeeva Memorial Prize in 2013.[45] Comprising more than 700 community savings schemes consisting of 300,000 people, it is able to use some of its members’ money to invest in larger projects such as building homes.

Taken together, these recommendations represent the Groundwork for Growing Giving that if implemented could help to give civil society the capacity and resources it needs to deliver sustainable development that works for everyone.

REFERENCES

[1] Pickering, A. (2013) Future World Giving: Unlocking the Potential of Global Philanthropy. Charities Aid Foundation Future World Giving

[2] The Sustainable Development Goals are a set of 17 Goals and associated targets which build on the successes of the Millennium Development Goals, while including new areas such as climate change, economic inequality, innovation, sustainable consumption, peace and justice, among other priorities.

[3] Price Waterhouse Cooper (2016) The World in 2050: The long view: how will the global economic order change by 2050. [Accessed June 2017] Available at: PWC.com The World in 2050

[4] Price Waterhouse Cooper (2016) The World in 2050: The long view: how will the global economic order change by 2050. [Accessed June 2017] Available at: PWC.com The World in 2050

[5] Roser, M (2017) – ‘Global Economic Inequality’. Published online at OurWorldInData.org. Retrieved from: https://ourworldindata.org/global-economic-inequality [Online Resource]

[6] Pew Research Center (2012) Fewer, Poorer, Gloomier: The Lost Decade of the Middle Class

[7] Ultra-High Net Worth Individuals are defined as having a net worth of in excess of $30.

[8] Frank Knight (2017) The Wealth Report: The global perspective on prime property and investment.

[9] Oxfam (2017) 5 shocking facts about extreme global inequality and how to even it up. [Accessed June 2017] Available at: Oxfam.org 5 shocking facts about extreme global inequality

[10] Ibid

[11] Karabarbounis, L & Neiman, Brent (2013) The Global Decline of the Labor Share. The Quarterly Journal of Economics (2014), 61-103, Oxford University Press.

[12] T. Piketty (2014) Capital in the Twenty-First Century, Cambridge: Harvard University Press.

[13] Ostry, J. D, Berg, A, and Tsangarides C. G, (2014) Redistribution, Inequality, and Growth, International Monetary Fund.

[14] Milanovic, B (2015) Trends in global income inequality and their political implications [Lecture slides] LIS Center; Graduate School City University of New York

[15] Roser, M. (2017) Global Economic Inequality. [Online] Available at: OurWorldInData.org. Retrieved from: Ourworldindata.org Global economic inequality [Online Resource]

[16] Pickering, A. (2013) Future World Giving: Unlocking the Potential of Global Philanthropy. Charities Aid Foundation; Future World Giving

[17] Kharas, H. (2010) Working Paper No. 285, The Emerging Middle Class in Developing Countries, OECD Development Centre

[18] Middle class is defined in the 2010 research as households with daily per capita incomes of between USD10 and USD100 in PPP terms. This has been updated in the 2017 research to reflect inflation to USD11 and USD110 respectively.

[19] Kharas, H. (2017) The unprecedented expansion of the global middle class: an update. Brookings Institute.

[20] Coutts (2016) Million Dollar Donors Report 2016 [Online] Available at; Philanthropy.coutts.com/

[21] Charities Aid Foundation (2016) 2016 World Giving Index [Online] Available at; CAF World Giving Index 2016

[22] World Bank (2017) World Development Indicators database [Online] Accessed July 25th 2017. Available at; Databank.worldbank.org GDP

[23] OECD (2017) Development aid rises again in 2016 but flows to poorest countries dip. [Online] Accessed July 25th 2017;. Available at; OECD.org Development aid rises again in 2016

[24] Potential of Indian middle classed giving based on projected middle class consumption projections (in Kharas, M (2017)  rather than spending.

[25] OECD (2016) Social expenditure update 2016: Social spending stays at historically high levels in many OECD countries.

[26] KPMG (2017) Corporate tax rates table [Online] Accessed on 22 June 2017. Available at; KPMG.com Corporate tax rates table

[27] Charities Aid Foundation (2016) Gross Domestic Philanthropy: an international analysis of GDP, tax and giving

[28] United Nations (2015) Resolution adopted by the General Assembly on 25 September 2015. Addis Abbaba. Seventieth session Agenda items 15 and 116

[29]  Schmidt-Traub, G. (2015) Investment Needs to Achieve the Sustainable Development Goals. Sustainable Development Solutions Network. SDSN Working Paper Version 2.

[30] United Nations (2015) Transforming our world: the 2030 Agenda for Sustainable Development. Resolution adopted by the General Assembly on 25 September 2015. Seventieth session, Agenda items 15 and 116

[31] Middle income (lower-middle and upper-middle) are classifications of economic development as defined by the World Bank in: World Bank Country and Lending Groups: Country Classification (2017) World Bank [Online] Retrieved 26 July 2017. Available at; Datahelpdesk.worldbank.org World Bank country and lending groups 

[32] OECD (2017) Development aid rises again in 2016 but flows to poorest countries dip. [Online] Accessed July 25th 2017; Available at; OECD.org Development aid rises again

[33] CIVICUS (2015) State of Civil Society Report [Online] Accessed July 27th 2017. Available at; Civicus.org State of civil society report 2015

[34] Rutzen, D. (2015) Aid Barriers and the Rise of Philanthropic Protectionism, International Journal of Not-for-Profit Law / vol. 17, no. 1

[35] Edelman (2017) 2017 $Edelman Trust Barometer: Global Results [Online] Retrieved 28th July 2017. Available at; Edelman.com Global results

[36] Gore, E and Ford, K. (2012) Joe Public: The Most Important Partner in International Philanthropy,
Georgetown Journal of International Affairs, Summer/Fall 2012, pp.31-37.

[37] Pickering, A (2014) Future World Giving: Building Trust in Charitable Giving. Charities Aid Foundation

[38] Peloza, J. & Steel, P. (2006) The Price Elasticity of Charitable Contributions: A Meta Analysis. Journal of Public Policy & Marketing. Vol. 24, No. 2 pp 260-373.

[39] Quick, E. Kruise, T. A, Pickering, A. (2014) Rules to Give By: A Global Philanthropy Legal Environment Index. Nexus, McDermott, Will & Emery and Charities Aid Foundation (CAF).

[40] Pickering, A (2016) Donation States: An international comparison of the tax treatment of donations. Charities Aid Foundation. Available at: Donation States

an international comparison of the tax treatment of donations

[41] United Nations (2015) Transforming our world: the 2030 Agenda for Sustainable Development. Resolution adopted by the General Assembly on 25 September 2015. Seventieth session, Agenda items 15 and 116

[42] Pickering, A (2014) Future World Giving: Enabling an Independent Not-for-profit Sector. Charities Aid Foundation

[43] Page,S, E (2008) The Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies (New Edition). Princeton University Press

[44] Charities Aid Foundation (2016) 2016 World Giving Index [Online] Available at; CAF World Giving Index 2016

[45] The Olga Alexeeva Memorial Prize is awarded by Alliance Magazine to individuals who have demonstrated remarkable leadership, creativity and results in developing philanthropy for progressive social change in an emerging market country or countries. Information can be found on the Alliance website: Olga Alexeeva Memorial Prize