Charity & Its Return on Investment
Giving to social causes is much like investing your money — the ‘how’ is as important as the ‘how much’
Indians have a poor track record of giving money to philanthropy. According to a study by Johns Hopkins Comparative Non-profit Sector Project, Indians give only about 0.4 percent of the GDP to social causes. Compare this to the 2.2 percent that is given in the US. A very common reason that is cited for not giving is that people don’t know where to start. Here is a ready reckoner.
How much should you give?
“Any middle-class individual should give about 1 percent of his or her income for social causes,” says Dhaval Udani, chief information officer of GiveIndia, a not-for-profit organisation that aims to direct resources to Non-Governmental Organisations across India. “A ‘high net worth’ individual can up that to 5-10 percent. And for people who can be called rich, 10 percent is the minimum.” This is an amount that has to be sustainable, substantial, and not so large that it is impossible to monitor.
How should you choose a cause?
Most people tend to give to causes that are close to their hearts. Ami Thakker, owner of Landmark Automobiles in Ahmedabad, and her husband have begun giving regularly through GiveIndia. She says that word of mouth plays a very important role in how people choose charities. Alternatively, organisations like GiveIndia, Dasra, United Way, etc. which act as links between NGOs and people looking to give, can help one choose a charitable organisation.
To research the organisations, you can study Web sites, browse through their financial statements and research on the Net, much like you’d do for a company if you were an analyst.
How do you monitor your money?
Everything depends on how much time you have. Venkat Krishnan N., director of GiveIndia says, “Irrespective of what you do, it is critical to define the ‘outcome metrics’ one wants to achieve. Depending on the time available, research organisations, probe and ask questions, agree on the exact activities to be funded, the outcomes to be achieved and the milestones to be tracked. Set up milestones and break the payments into two or three disbursements scheduled over six months to a year, monitor actuals in review sessions every two months and disburse further if happy with the progress.” In India, the percentage of the money that actually reaches the deserving is about 60 percent on average. This can be improved to about 90 percent. Donors must insist that the percentage retained by intermediaries or spent by the NGO is less than 15 percent.
What is your return on investment (ROI)?
According to Krishna, for money given for philanthropy, ROI should be calculated on the basis of Impact per Rupee. This can be calculated by describing the impact in detail and explaining how much it costs. For example, ensuring a child can speak fluently with a vocabulary of 3,000 words will cost about Rs. 3,000, etc. Once the impact measurements are articulated, then you, as a donor, can decide what is important: Fluent English, restoring eyesight, or creating a livelihood?
(This story appears in the 14 January, 2011 issue of Forbes India. To visit our Archives, click here.)
