According to the Organisation for Economic Co-operation and Development (OECD), philanthropy is reshaping the development landscape like never before. Although the overall contribution of philanthropy to development is hard to quantify, OECD-DAC statistics suggest that it has multiplied by nearly ten times over a decade. We asked the opinion of several consultants regarding the role of philanthropy in financing for international development.
What are the main advantages of philanthropic actors compared to other development finance providers?
“Flexibility and structure. This may seem like a contradiction but philanthropic foundations are usually problem-driven and look towards successful solutions for the beneficiaries – not themselves. In the end, it is always about the end-beneficiary impact and, for the most part, philanthropic foundations do not need to worry about funding their own salaries or the many political challenges that traditional development aid institutions often face. Philanthropic foundations also do not restrict themselves to pre-selected or single party partners. Instead, they can engage the stakeholders that are best equipped to help them get the job done. In this sense, they can establish unique partnerships that are fit for purpose.”
“Philanthropic actors have historically had several advantages. They can enter partnerships with other donor institutions but they can also go alone where they identify and fund the non-profit partner who they believe in and who is aligned with their mission. They could give a range of grants from one-off to five years and beyond grants. They have great flexibility in that they can fund campaigns, operations, programming etc. While development finance providers focus on a large scale, public-private partnerships that emphasize infrastructure and small business development, philanthropists can fund social issues, including poverty alleviation, health and education and political and religious issues that might be contentious in some countries. Ultimately, philanthropists are guided by their own mission and vision which, in many cases, are established by their founders.”
What are the main reasons for the rise of the importance of philanthropy in international development?
“International developments have primarily been financed by international NGOs, such as OXFAM, ActionAid, Band Aid, Save the Children who mainly raise their funds from individual citizens and by organizing resource mobilization events or activities, and bilateral and multilateral aid agencies etc. These funding sources have been weakened or have decreased from time to time in the new millennium due to a number of reasons. For example, individual’s donations fatigue as they don’t see any changes on the ground, donor agencies who want to support initiatives that are aligned with their own development agendas and conditions and there have been challenges in applying and following up the five principles of the Paris Declaration on Aid. Hence, due to these and other related problems and globalization challenges, more importance has been given to philanthropic finance for international development.”
“Philanthropy has always played a role in international development when I consider institutions such as the Ford and Rockefeller Foundations. What has shifted is that there is greater recognition that all societies are connected. A case in point is the response to Ebola that involved civil society, governments and donors in developing and distributing the vaccination. Disruption as a result of war, famine and instability will lead to migration towards areas deemed stable and secure and, with this movement of people, the challenges – poor education, healthcare, lack of housing, access to water – move with them.”
What is the impact of this rise in international development?
“Much of the recent attention of philanthropic organizations in international development has been driven by the emergence of a new breed of philanthropists. These foundations, often founded and led by technology entrepreneurs, are hoping to bring a structured business approach to philanthropy. This does not necessarily imply that they advance exclusively market-based solutions for development problems. Instead, philanthropy’s business approach to development — often referred to as ‘philanthrocapitalism’ or ‘venture philanthropy’ — is a more innovative and agile way to achieve international development. Philanthrocapitalism need not be concerned with archaic public accounting structures, political election cycles or government bias or corruption. This allows this new breed of philanthropists to innovate, evaluate and manage non-conventional risks that traditional development aid institutions might find impossible to do.”
How do you see the future of philanthropic organizations in international development?
“One: Development should be considered as a basic human right for less developed countries whose citizens should have the right to basic services such as the provision of a water supply, access to basic education, health services, etc. as their right. Two: Philanthropic financing for international development has been growing tremendously. According to the OECD-DAC statistics, the philanthropic financing contribution has multiplied by nearly tenfold over a decade, from around USD 3 billion in 2003 to USD 29.73 billion in 2013. Three: In most less developed countries, such as Ethiopia, private business organizations (especially the indigenous ones) do not clearly understand the idea of Corporate Social Responsibility (CSR) which they consider to be an additional cost burden for their company. To make these private business companies understand CSR and the advantages they would gain from financing development would require motivational factors such as tax incentives and other provisions to encourage them to get involved in financing development.”
Philanthropy consists of “private initiatives, for the public good, focusing on quality of life”. Philanthropy sometimes overlaps with charity. Charity aims to relieve the pain of a particular social problem, whereas philanthropy attempts to address the root cause of the problem.
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