Philanthropy in India: Indians give just 1.5-3% of their annual incomes

Indians still give just 1.5-3% of their annual household incomes, as against 9% by Americans. But the Indian Philanthropy Report 2011, put out by global management consulting firm Bain & Company earlier this week, indicates that, under the right conditions, giving in India can reach significant and impactful proportions.

MUMBAI: Indian philanthropy is at a critical juncture in its evolution. Amid recent attempts to consolidate, renew and redirect giving practices, revelations on the expansion of private-charity contributions from 0.2% of GDP in 2006 to 0.3-0.4% show Indian philanthropy is pregnant with possibilities.

It’s in keeping with the surge of wealth creation in India. The number of high net-worth individuals (HNIs) increased 50% between 2008 and 2009 to 127,000, and crossed 150,000 in 2010. The top 20 Indian billionaires doubled their combined wealth since 2008. In 2006, there were only 85 companies with a market capitalisation of over $1 billion; today there are 152. And all, individuals and corporates, indicate they would like to do more.

While it will be a long way for India to reach the total private giving at 2.2% of GDP in the US or 1.3% in the UK, the bulk of which is individual giving, the future does appear promising.

At least 40% of the 300 wealthy individuals polled by Bain, across three Indian cities, stated they wanted to increase their contributions over the next five years. This figure, according to Bain, could even jump to 70% if a vibrant philanthropy ecosystem and facilitating conditions emerge.

Some of the biggest barriers to giving, as indicated by 60% of those surveyed, are the apparent lack of accountability and transparency among NGOs and tax laws. NGOs are key recipients, accounting for 52% of the money flowing out from donors. Religious institutions absorb another 18%. The social and philanthropy sector has been alive to such concerns, as can be seen in initiatives in selfregulation among NGOs like the Credibility Alliance, and very recent attempts to bring together, synergise actions and create a network of players in Indian philanthropy -from donors to NGOs.

Even the government is debating a new law: the Charitable and other Voluntary Organisations Regulation Bill is expected to simplify and streamline regulations. The attempts to infuse a new direction to giving, apparently is not limited to Indian shores alone. The Edmond De Rothschild Foundation, part of the Rothschild banking family in Europe, is busy putting together an international platform to connect high networth business families.

India, with its burgeoning numbers of the wealthy, is part of its plans. “We have contacted 15 business families in India, whom we will invite to this private family think tank for philanthropy,” says Firoz Ladak, CEO of Edmond de Rothschild Foundation. Ladak, an investment banker of Indian origin, joined the foundation six years ago.

The Foundation hopes to bring together private philanthropists from Europe, Asia and Africa to share best practices and experiences in their philanthropic work. Ladak admits it is an ambitious project and expects to launch this founplatform in the next six months.

The US has ‘The Giving Pledge’ and the billionaires ‘Givers Club’. The Edmond de Rothschild Foundation would like to be the fulcrum for such an initiative in Europe. It will not be much different in character from what Samhita Social Ventures of NS Raghavan, co-founder of Infosys, and the Centre for Advancement of Philanthropy (CAP) have set out to do recently: create an ecosystem to take philanthropy to the next level.

“The foundation, now in its fifth generation, is making a transition from traditional charity giving to strategic philanthropy,” says Ladak. “With the expertise we have gathered over the years, we want to promote a vertical for philanthropy development.”

Aditi Kothari, executive vice president of DSP BlackRock Investment Managers and daughter of investment banker Hemendra Kothari, says: “Joining such a forum would be of interest to us because we believe in sharing best practices.” According to Kothari, they have not been formally approached by Rothschild, but she says that they know Ladak. Deval Sanghavi, co-founder and CEO of Dasra, the Mumbai-based philanthropy foundation, thinks it might actually take another year to launch. He says: “Of the 15 families they have contacted, maybe only three to five families will see value in attending this forum.”

Dasra has a network of 120 HNI members who form a part of their Indian Philanthropy Forum (IPF). The 2011 Bain report was released at the forum’s annual event, the second, held in Mumbai on Wednesday. It brought together some of India’s leading high networth families like Hemendra Kothari, Kishore Biyani and Sangita Jindal.

The report reveals that annual private charitable giving is estimated to be between $5 billion and $6 billion, almost tripling from $2 billion in 2006. The most popular causes are education, housing and shelter, and food. At the event, over a dozen players in philanthropy and social investing like Dasra, Piramal Foundation, Acumen Fund and Omidyar Network discussed the road ahead and strategies to be adopted. “IPF members are still cautious, but they are keen on learning about best practices in the philanthropy space,” says Sanghavi. The cautiousness stems from the fact that these philanthropists first want to learn from what is being done in the country before joining Rothschild Foundation’s initiative and going all out to loosen their purse strings.

“With growth of private wealth and flow of funds into family foundations, everyone is realising the need to learn from each other’s experiences,” says Noshir Dadrawala, CEO of CAP. “More importantly there is value in collaborative philanthropy with special focus areas. Impact can be leveraged far more with synergy.” The report also indicates that along with soaring wealth, there is a definite change in attitudes. “We are also finding that HNIs are getting involved in philanthropy at much earlier stages of their careers. It is not an afterthought for when they retire,” says Arpan Sheth, head of private equity at Bain and co-author of the report.

Second, a younger generation of HNIs is much more interested – and involved – in philanthropy. “It is important to keep creating a sustainable corpus and running the foundation’s work more professionally,” says Aditi Kothari. She is involved in seeking out new NGOs, especially in the area of education and giving more to the cause.

Tanvi Jindal, daughter of Sajjan and Sangita Jindal of JSW Steel, after completing her two-year fellowship with Teach for India, has joined the NGO Akansha to teach in one of their schools. “I worked in the family foundation for eight months and left to pursue my passion, which is to teach children,” says Tanvi Jindal. Mother Sangita Jindal says, “I sit in my airconditioned office at the foundation and she goes to the field to feel the pulse of her work.”