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Strengthening Philanthropic Giving & Impact Investing for Development of India

Strategic Philanthropy | May 2, 2016

This is an edited version of a panel discussion on Strategic Philanthropic Giving & Impact Investing in India, with Rohini Nilekani, Moutushi Sengupta, Vineet Rai, Deval Sanghavi, and Seema Chowdhry at DPW 2016: Philanthropy Day.

Within the social sector, many people have been working towards bringing traditional philanthropy and impact investment together. There are certain public services that markets can provide, if not to the very bottom of the population pyramid then at least to the population with some ability to pay. In a country where the government is not able to deliver those services, and the nature of which prevents them from being delivered by typical nonprofits, there certainly is an opportunity for a third agent to step in.

The Risks and Rewards of Impact Investing
Motushi Sengupta notes that while donor and institutional interest is focused on verticals, we also need to think about philanthropy and impact investing as a whole, in order to assess what needs to be done to push the sector forward. Traditional philanthropy involves providing support in terms of money, effort, and time, without seeking personal return. Impact investing differs in that people are asking whether market sustainable models are available, which would also serve the bottom of the pyramid population groups as well.

It’s an interesting space for markets to play in the social sector in India. In fact, there is a whole group of impact investors who are not even expecting financial returns for themselves, but rather financial sustainability in the business model of the social service. So in a way, it’s still patient capital like any other philanthropic capital that gets reinvested. This is especially interesting to me because it means that the investor has taken greed off the table and miracles happen when you take greed off the table, especially when it comes to development.

As Sima Choudhury points out, impact investing in media outlets, for example, would make a huge difference. There are a lot of under-reported stories that need to be told. Unfortunately, the media has decided that readers like to read only certain kinds of stories, and I don’t think they test readers enough. The media is probably not doing enough to tell us what is happening in the rest of India. What we really need are publications who will shine a light and focus on issues and areas that we don’t know about, so that we are more aware and can make smarter choices about who we vote for or where we spend our money. Media houses and publications need to be supported so that they can do more of that work, and cover aspects of impact investing and philanthropy as well. Deval Sanghavi gives the example of Sneha, an organisation that spoke to the New York Times in 2012 on malnutrition in the slums in Mumbai and the different models and theories of change. That’s what we need our media to do — to share learnings and what it’s actually like on the ground.

However, there are also risks and one that Deval Sanghavi mentions is in relation to CSR. With CSR, the people who are likely in charge of allocating large amounts of capital to the sector may also have full-time jobs in PR, HR, or communications. They may not have access to information, time, or resources and so just like any other uninformed investor, they might go with the wrong entrepreneur and risk the reputation of their company as well as the reputation that the impact investing sector has been building over time. So there needs to be more information and self-regulation, both from nonprofits and social businesses, as well as from impact investors.

How to Professionalise the Sector
When we talk about philanthropy, there are certain inherent risks to it. It’s why transparent data and accreditation is so critical. Deval mentions that the reason why Dasra launched Dasra Philanthropy Week was so that organisations could share practices, and experiences in a forum, educate themselves, and not repeat those mistakes. From the microfinance crisis, we learnt a lot of lessons and those need to be encapsulated and shared quickly. People are looking to invest in public services which were usually handled by the state, like water, health, housing, and education. We don’t want the mistakes that Vijay Mahajan made to be repeated again in those areas.

In terms of nonprofit accreditation, I think that over the past few years we have realised that we need many ecosystem organisations that bridge the gap between investors and grassroot nonprofits. Many organisations like CAP, Dasra, and GiveIndia are functioning as that bridge, but we need more because people want to give, but they don’t know how or to whom. The trust element is missing, and you need to build that trust between the giver and the receiver. So we need more of these institutions and we need them to be stronger, so that the sector can grow faster and professionalise quicker.

The catch is that in order to do that, we need to draw more professionals into the sector. So it’s a bit of a chicken and egg scenario. The new generation of professionals working in the sector pose different challenges as well. In the 70s, all my mentors were working in the nonprofit sector for a pittance, because they were doing it out of passion and commitment. I think these young people who are coming into the sector are not going to be willing to do that and it is a problem.

How do we not look at everything in monetary terms? How do we celebrate that you get a lot more non-monetary benefits from being in this sector? Perhaps we need to share more stories. People want to come in, but there’s been a lot of distortion, and some of the bigger foundations pay good salaries. But in a corporation, if you don’t meet your sales targets, you’ll be looking for another job. How do you do the same in this sector? These are real issues. How do you judge the impact of people’s work? It’s very hard and we have to be able to figure out some middle ground between monetary compensation and something else.

Moutushi agrees that accreditation will have a major role to play in terms of building that trust as well. However, we need to then define what we mean by accreditation. Do we use the same type of metrics that are used in a corporate framework or do we need separate types for this particular sector? We can’t mainstream or take a model that will work everywhere. There are certainly challenges, but having platforms that provide information to potential givers could phenomenally change the scale of the game.

Fostering a Culture of Giving
We need to improve the culture of giving, across economic classes. There needs to be much more public pressure on the wealthy in India, including myself. Wealth in this country has been allowed to be created at a runaway rate over the past 25 years and that’s good, but that wealth must be used more responsibly. The public needs to put pressure on the wealthy to say, “What you’re doing with that wealth? How are you giving back to society?” The media has to play a role in that, as well as thinkers and influencers — all of us have to hold the wealthy accountable to society. Once that happens, not only are people paying their wealth forward, but they will also have to talk more frankly and explain who they are giving to, how they are giving, and their reasoning behind it. This needs to be shared, honestly and transparently.

The problem occurs when the wealthy mistakenly believe that it has something to do with our own greatness. When that happens, the kind of relationships that we develop with the people and causes that we give to become too much of a patronage model rather than a partnership. This is a real danger because the donor-driven programs that we know or we think are working in the interest of the poor, actually may not be. We won’t have permanent change if money is being poured into sectors with the motive of self-interest. Instead, we need people working towards changing the structure of power in society, and enabling people to become capable of finding their own solutions. As the wealthy, we need to be self-aware and check our own motives when we give.

I agree with Moutushi that events like the Daan Utsav are helpful in this respect, because they create awareness across various sets of stakeholders as to what they could constructively do to participate in the country’s development. It’s a powerful tool with a wide reach, and we need more events like this where we don’t necessarily try to monetise it. We also need to put out more research in the ecosystem that is accessible and easy to explain to people, because sometimes it is difficult to communicate the challenges and roles within the sector to people who are outside of it.

Giving brings a lot of joy, and we need to share that with people. More of our wealthy should talk about that. I try to do so in my own way, and I think that will encourage more people to give. At the other end of the spectrum, we must also celebrate ordinary people giving, because in India people actually give all the time. It’s almost reflexive, the way people give, financially and through other means. But we need them to give a little more strategically now. For that, we need platforms at local levels across different parts of the country, where you can share and learn. We’re starting to see organisations like Dasra do some of that work, and celebrating ordinary people’s act of giving.

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