Based on what I see as the evolution of giving habits within the high-net worth families in Asia, here are the four categories of philanthropists I have worked with:
Usually the patriarch of the business family, who has seen poverty and life struggles during his early days, either as a migrant or during the struggles against colonial rulers. His philosophy on giving is based mainly on altruistic motives- of giving back. Extended family, needy individuals, basic health and education, places of worship are the main focus of his contributions. Even when he sets up a foundation to channel his family’s contribution to the community, it is based on who asked for help rather than what it was asked for. They generally always try to respond with some form of financial help to the above stated causes, with no expectation of recognition or reporting.
The patriarch’s sons/ daughters then go on to be educated, some with business management qualifications. When they join the family business, they tend to align their philanthropic focus with their business motivations. At this stage, the philanthropist is more interested in ‘sponsoring’ projects that provide them or their business with the visibility and recognition they seek within the relevant circles, the media and receive tax benefits where relevant. The relationship is mainly transactional. The location of their philanthropic activities is usually focused around the regions that are relevant to their business. They also provide time, effort and influence by helping on fundraising committees of charities and nonprofit organisations.
As many of the business-focused philanthropists begin to engage with the community where they have sponsored projects or helped to raise funds, they understand the developmental realities on the ground. They become more committed to their philanthropic endeavours. From merely being a donor to projects, they build a strong relationship and trust with the community and the non-profit entities that they have been making their philanthropic contributions through. They begin to play a role in finding sustainable solutions to the local, national or global problems. Their community involvement helps them become more strategic in their philanthropic efforts. Their focus shifts towards ensuring impact through their philanthropic efforts.
I find more high-net worth women in this segment across Asia, which I believe is due to the fact that this form of philanthropy needs patience and the ability to collaborate at all levels of the community. The community-involved philanthropists are also more aware of and willing to support policy advocacy and research, addressing the root-cause of a social problems and keen on bringing about systematic changes in the community / country, than on donating to address mere symptoms.
Most of Asia’s newly rich individuals are self-made and have got there through their astute business sense. They are goal-oriented and some of them would rather invest in incubating or developing innovative ways of addressing social problems, than to giving to large charities where they have no direct control of how their funding will be used. Many high-net worth individuals in Asia have leap-frogged the philanthropy stage and have gone on to become social impact investors, or are at least marrying philanthropy with commerce. These venture philanthropists and impact investors are looking to address niche causes and working with small, agile entities, some that they have incubated themselves, where they find greater transparency, efficiency, and prioritisation of impact. They also focus on issues that their grant-making counterparts mentioned about, may not find attractive eg: clean energy, fair-trade, IT-enabled services among others.
While any form of generalisation would be unfair, especially in multi-faceted Asia, I hope these categories help, both the philanthropists and non-profit leaders, understand some of the giving behaviours in our philanthropic landscape.
Developing the philanthropist’s portfolio
With the rapid changes around us, including the stations on the philanthropic journey, I find that many donors are seeking the philanthropic model best suited to them. Those engaged in philanthropy are becoming more discerning and diligent about how they manage their philanthropy, just as they are about many life choices. Hence I believe they should treat their Philanthropic portfolio just like they do their investment portfolio. The 3 Ps – of Philosophy, Process and People can be applied to their philanthropic portfolio management too.
Philosophy: The beliefs and values that directs philanthropic decisions. Are you looking for reach (touching as many lives as possible) or depth (few lives touched but high impact)? Do you rely on external input (through an NGO, development agency or an intermediary) or prefer to do the research yourself through personal contacts and experiences?
Process: Refers to how the philanthropists translate the philosophy into a community engagement plan. Who makes the decision? Do you understand the social issues that are to be addressed? What is the potential risk associated with the philanthropic direction (eg: impact risk, reputational risk, operational risk etc.)
People: Refers to the network of people involved in the philanthropic engagement. Who are they? Eg: younger members of the philanthropist’s family, nonprofit leaders, intermediaries like philanthropy advisors etc.
Based on the 3-Ps that inform the philanthropist’s ability to produce social impact relevant to them, the philanthropist can build their philanthropic portfolio. Just like their investment portfolio is made up of various asset classes, based on their investment philosophy, the philanthropic portfolio should also reflect their philosophy and risk appetite. Hence while the philanthropists may still make altruistic donations, contribute towards more measurable causes that address poverty, health and education, they could allocate resources to address more long-term and subtle influences and causes like research and advocacy to effect policy changes or systemic social changes at local or national levels, building the governance and leadership skills of non-profit collaborators, among others.
[Editor’s note: Usha Menon will present a masterclass on major donor development at IFC Asia, The Resource Alliance’s premier event in the Asia Pacific region, taking place 26-28 June in Bangkok. Check it out. We also wouldn’t hate it you’d help spread the word!]