The $841 billion that flowed across borders from 47 countries during 2020 was certainly welcomed by recipients. But, focusing on local philanthropic systems, structures that stimulate local philanthropy in response to global challenges and developing international data tracking and transparency practices would boost the donations’ impact, according to a new study.
According to Global Philanthropy Tracker 2023, a research study from the Indiana University Lilly Family School of Philanthropy, funding sources that year — the first impacted by the coronavirus epidemic – included:
- $590 billion in remittances (cash and goods sent by individuals to their home country);
- $180 billion in official development assistance (government aid given with the intention of promoting and targeting the economic development and welfare of developing countries);
- $70 billion in philanthropic outflows (financial contributions sent by funders to beneficiaries in different countries); and,
- $400 million in private capital investment (purchase of capital assets expected to generate income and/or appreciate over time).
The $841 billion represents a 2% decline from the $859 billion tracked in 2018. Nearly all of the decline can be attributed to private capital investment as a funding source coming to a near-halt in 2020. In 2018, that source accounted for $112 billion in funding. While two other sources showed slight declines (official development assistance declined by 1%, from $181 billion in 2018 and philanthropic outflows slipped 0.5%, from $71 billion in 2018), remittances made up nearly all of the shortfall, growing by 19% from $496 billion.
The changes in the funding mix are understandable, given the disruptions of the coronavirus pandemic. “Global investments and trade were severely constrained during this period of shutdown,” Lilly Family School of Philanthropy Associate Dean for Research and International Programs Una Osili told The NonProfit Times. “In contrast, private remittances proved to be very resilient during the crisis. Similarly, private philanthropy which is usually targeted in terms of need, also proved to be quite resilient.”
Private capital, just like trade, “tends to respond more drastically to these economic shocks,” Osili continued. While the report did not cover the period between 2021 and 2023, “foreign direct investment has come back in some parts of the world,” she added. However, “It has been a bit uneven. We have also noted changes in terms of where the investments are going post-COVID.”
Some foreign investors are looking at different places to invest, Osili added. “We have seen some foreign investment going to sub-Saharan Africa, some interest in southeast Asia. More are looking outside of China for alternatives because of the pandemic and the geopolitical issues that have come up,” she said. “In India, we see more foreign investment going there because of the population growth. There is a lot of interest in in looking more broadly at places to invest.”
The functions of philanthropy are becoming increasingly critical, alongside sources and destinations of funds. The report outlines three suggestions for making contributions more effective in generating sustainable development.
First, the report’s authors call for enhancing local philanthropic ecosystems via regional collaborations. Local grassroots organizations often provide first responder functions in times of crisis. Through regional collaborations, philanthropic organizations can provide knowledge sharing, local capacity building and advocacy work. Collaboration-focused organizations can also facilitate connections and communications between international donors and recipients.
“What the Global Philanthropy Tracker allows us to do is see where those opportunities are, and also see where the gaps are, and where there is more collaboration needed,” Osili said. “How those global funders, governments, regional, national and even multilateral organizations can work together. When you look at the size of the challenges, anything from vaccine research to climate to racial and gender equity, one source alone is not going to be enough to solve the problem.”
The report’s authors also recommended establishing mechanisms for mobilizing local philanthropy in response to global challenges. “In the past, one of the challenges with cross-border giving in particular is that it tended to go to larger organizations, and not necessarily local grassroots organizations,” Osili said. “COVID has been somewhat of a catalyst for changing this, because during the crisis, it was often those local grassroots organizations that were getting the work done. Technology is allowing donors to connect with those. There are platforms GlobalGiving, where you can work directly with an entrepreneur, social entrepreneur on the platform, [entities] working on an issue that you care about, whether it’s climate change, gender equity or health care, and support the project. GlobalGiving is one example, but there are many other platforms like that.”
The report’s authors also advocated for developing international standards for data tracking, and promoting data transparency. Improving data resources would be especially helpful in combating emerging causes such as climate change or the heightened focus on racial injustice and equity.
There has been movement on data collection efforts. “Several countries started publishing information on how much was coming from individual donors, private philanthropy funders, and multilateral organizations,” Osili said. “Not just here is how much is being collected, but also where the funding is going, and how much is going to specific areas’ [United Nations Sustainable Development Goals]. Governments in the past haven’t necessarily taken the lead on that, but what we’re seeing is in the wake of COVID is some of that taking place.”
Some nonprofits are ahead of the curve in implementing these suggestions. “There was a World Health Organization (WHO) foundation that was kicked off during COVID,” Osili said. “There was an online piece where you could donate, but [the WHO] also provided a lot of data on who was contributing, where those contributions were going. This is a good example of how there is movement on the collaboration side, because in the past, the World Health Organization worked in that sort of UN framework. But increasingly, they are building partnerships and working with governments, but also working with individuals and the private sector.”
A full copy of the report is available here: https://scholarworks.iupui.edu/handle/1805/32365
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