Funding from family philanthropy triples since 2019

While all other sources remained stagnant, funding from family philanthropy has tripled its corpus, growing to approximately Rs 12,000 crore in fiscal year (FY) 2020, accounting for almost two-thirds of the increase in funding since FY 2019, according to the India Philanthropy Report 2021, co-created by Bain & Company and Dasra.

This report, the 11th in an annual series, shares a comprehensive perspective on the growing philanthropic space in India.

It notes that in FY 2020, private-sector funding totalled about Rs 64,000 crore — close to 23 per cent more than in FY 2019. Private sector funding stems from four sources including foreign, corporate, retail, and high-net-worth individuals (HNIs) or families.

While foreign contributions account for a quarter of all funding, domestic corporation donations also known as Corporate Social Responsibility (CSR) account for 28 per cent and retail investors account for another 28 per cent. The remaining 20 per cent comes from family philanthropy, also the biggest source of growth, accounting for almost two-thirds of the increase in funding since FY 2019.

Despite this growth in funding, the social sector remains underserved. In addition, the pandemic-induced setback to the social sector clearly indicates that India will continue to face a significant annual funding deficit in the near term. Domestic corporations have seen a decline in profitability during the past year and therefore a reduction in the corpus available for CSR. Compounding this challenge, the CSR corpus has shifted away from traditional nonprofits and sectors to other Covid-19 relief initiatives. International nonprofit contributions had already declined by nearly 30 per cent over the past five years too. This part of the ecosystem is unlikely to make up for shortfalls elsewhere.

“It is indeed heartening to see that something that is too integral to Indian culture — ‘giving’ to those who need it is coming of age. 2020 has been a year of hard truths. This is a wake-up call to reimagine our approach towards strategic and collaborative philanthropy and the impact it can have. The case for family philanthropy is clear and so is its transformational potential,” said, Dinkar Ayilavarapu, partner, Bain & Company.

Family philanthropy, however, has proven resilient throughout the pandemic and has the potential to grow, the report illustrates. Philanthropic capital in this space is primarily funded by personal family wealth — family givers are individuals or families who self-identify as such. They give either in a personal capacity or through self-identified “family foundations”.

“Family Philanthropy can collectively shape India’s development agenda. Having partnered closely with over 300 family givers in the last 22 years, Dasra has seen the pivotal role that families play in addressing some of India’s most complex challenges. Nurturing the nascent family giving ecosystem with enhanced support can be transformational for India.” said Neera Nundy, co-founder of Dasra, a strategic philanthropic organisation.

Family businesses have outperformed non-family businesses in India for more than a decade- the result of this business performance has been the creation of new wealth. Families are also giving back to society sooner and their interest in philanthropic activities is deepening. Besides, family philanthropy has fewer constraints as compared to other sources, shows greater flexibility in funding and capability building and therefore in enabling a broader impact on the social sector.

However, family philanthropy has its biases. Education and health-focused funding dwarf other causes and continue to receive a higher share of family giving at 47 per cent and 27 per cent, respectively. This bias is especially stark given India lags in several sectors, we are further behind on gender equality indicators than on indicators related to health and education, which receive a significantly higher share of domestic philanthropic funding compared with gender equality which sits at only 1 per cent. Wealth is also concentrated in a few cities- most wealthy families are based in Mumbai, Delhi, and Bangalore who channel their funding there, leaving a greater need in ‘aspirational districts’.

While there is immense room for growth with large untapped potential across other high-net-worth sectors, not all sectors benefit equally. For example, technology accounts for about 9 per cent of family net worth but is the focus of 26% of all family philanthropic giving. Indian philanthropists also donate a smaller portion of their wealth relative to countries such as the US, a result of the tax advantages that philanthropy confers to donors in the context of estate and inheritance taxes in other countries.