Private philanthropy's global reach

Global philanthropy sports a multitude of faces. Bill Gates stands out, of course. But there's also the college student clicking a small online donation, the church contributing to microloans in Africa, and the Italian soccer team bringing "the beautiful game" and educational programs to kids living in the rubble of war.

The changing nature of private giving and its emergence as a worldwide phenomenon are spotlighted in a report to be released Monday by the Hudson Institute – The Index of Global Philanthropy 2008. The Index is the only comprehensive source on the scope and magnitude of private giving to the developing world.

Philanthropy is being transformed as technology opens the door to speedier, less costly forms of giving and inspires people of all ages and incomes to get involved. Wealthy corporate leaders and foundations are urging innovative approaches, from social entrepreneurship to combining for-profit and charitable enterprises. New tax laws are encouraging philanthropy in Europe and elsewhere.

"What I find exciting about private giving is that it's reinventing foreign assistance," says Carol Adelman, director of Hudson's Center for Global Prosperity, "and e-philanthropy is [creating] 'ordinary Oprahs' around the world."

But there's no sign yet that this dramatic change means a significant increase in resources for developing countries. Part of the reason may be the incomplete reporting of private giving, which is a work in progress in many countries. The most positive note for poor nations appears to rest instead in the surge in remittances sent by migrants to their families (see charts).

"They are tackling a big job no one else has wanted to tackle," says Melissa Brown, associate research director of the Center on Philanthropy at Indiana University. "It's a huge data-collection problem."

The Index offers no global total for philanthropy, but estimates that investment and philanthropy together reached $209 billion in 2006.

In the US, private giving shows an uptick. Yet total American dollars flowing to the developing world would have decreased significantly over the year had it not been for remittances.

Comparing index reports for 2007 and 2008 reveals that US private philanthropy increased about 4 percent, rising from $33.5 billion in 2005 to $34.8 billion in 2006. At the same time, government aid decreased by 15 percent (from $27.6 billion to $23.5 billion). Private capital investments, too, decreased by 10 percent, from $69.2 to $62.3 billion.

Remittances rose by 16 percent to $71.5 billion, twice the amount of charitable giving. They account for 37 percent of private flows. Total dollars for economic dealings with the developing world remained the same, at $192 billion.

The largest growth in philanthropy came from foundations and religious organizations. Foundations gave $4.4 billion, almost 70 percent more than in 2005.

The first-ever random-sample survey of US religious congregations' giving to developing countries helped boost religion figures to $8.8 billion in 2006. The survey, done for the Index by the University of Notre Dame, found that 57 percent of congregations gave an average of $10,700 to US organizations involved in relief and development. More than 30 percent made direct donations to foreign programs or joined in short-term service trips (evangelism resources were excluded).

For instance, River Road Unitarian Church in Bethesda, Md., sponsors an annual trip to Santa Marta, El Salvador, to work on community projects (such as building a computer center and planting trees). "We've been going there for 13 years," says church member Don Chery in an interview. "We focus primarily on education programs."

Churches also developed their own programs: Five Talents International, a microfinance organization based in Virginia, was founded by the Anglican Communion to respond to the challenge of poverty. It provides business loans, education, and technical aid to women's groups in 12 nations.

"We work with local churches," says executive director Craig Cole. "It allows us to reach into villages where other organizations may not be able to go as quickly because they have no relationship there." With loans of about $100, they have improved the lives of 20,000 clients and their families. "The return on investment is pretty phenomenal," he says.

The report highlights new styles of giving backed by wealthy businessmen. Ashoka financially supports "social entrepreneurs" in developing countries – people who address social problems in entrepreneurial ways. The Acumen Fund aims to prove that "small amounts of capital combined with large doses of business acumen can build thriving enterprises that serve vast numbers of the poor." It invested in a firm that uses innovative technology to purify and deliver affordable water to half a million people in India.

European initiatives include Inter Milan, the professional soccer team with a program for Lebanese children, and the Fair Trade Foundation, through which British universities and students commit to fair-trade foods and products on campus.

European nations focus more than the US on governmental aid. But official development aid from the 22 donor nations decreased from $106 billion in 2005 to $104 billion in 2006.

The importance of money sent home by migrant workers is clear. Developing nations received $122.4 billion in remittances from donor countries in 2006, boosting family incomes, and spurring economic growth and democratization, the report says.