U.S. Philanthropy Transforms Developing Countries

The 2010 Index of Global Philanthropy and Remittances was released by the Hudson Institute earlier this month. The Index shows that U.S. philanthropy in 2008 to developing countries held steady at $37.3 billion, compared to $36.9 billion in 2007. The Index defines philanthropy as contributions from foundations, corporations, private and voluntary organizations, individual volunteers, religious organizations, and colleges and universities.  Private philanthropy remains the most important sources of funding in the developing world.

Foundations $4.3 billion (12%)

Corporations $7.7 billion (21%)

PVOs $11.8 billion (32%)

Volunteerism $3.6 billion (10%)

Universities & Colleges $1.7 billion (5%)

Religious Organizations $8.2 billion (22%).

The Index documents how private philanthropy is transforming developing countries. In essence, private philanthropy is more effective than foreign aid in addressing issues. So why is private philanthropy more effective than foreign aid? Is it  the overheads and indirect costs, bureaucratic and drawn out processes, and non-collaborative and top-down approaches? Does it lack measurements or perhaps it is that foreign aid implementation methods do not foster innovative programs? What do you think?

I had written a piece on Philanthropy in China for Tactical Philanthropy and it was quoted in the Asian philanthropy section of the Index.

Philanthropy in Asia has registered significant growth in the past few years, largely due to increased engagement by individuals in China and India. A report conducted during 2008 by the UK-based Charities Aid Foundation shows that 41% of Indians and 80% of Chinese gave money to charitable causes during that year.  Another report prepared for Give2Asia’s Beijing Philanthropy Forum showed that in the years leading up to 2008, charitable donations in China had sustained annual growth above 65%. In 2008 giving increased to three times that level as a result of the humanitarian response to the Sichuan earthquake that killed 70,000 people and left five million homeless. Dien Yuen, Director of Philanthropy at Give2Asia, wrote recently that the humanitarian reaction to the earthquake “fast forwarded China’s charitable sector development and activated ideas of how and what Chinese philanthropy could become.”

The philanthropic environments of donor countries such as Australia, New Zealand and Japan are significantly ahead of China and India. The Charities Aid Foundation in Australia reports that the amount given by individual donors has increased by about 88% since 1997—12.5% on average per year. On the other hand, New Zealand’s $1.2 billion philanthropic sector receives proportionately few funds from private individuals. Only 20% of nonprofit funding comes from direct individual donations.

Ninety percent of Japanese individuals give, with an average donation of about $30 per household per year. Most of those donations go to community organizations. There are only about 1,000 organizations in Japan that enjoy tax exempt nonprofit status, a consequence of Japanese policy that makes it difficult to achieve nonprofit status and difficult to keep it. It is also culturally prohibited to solicit donations from the public. As a result, individual philanthropy represents a very small percentage of society’s engagement in social issues.

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