Bridging the chasm between Philanthropic capital and high need states: What does it take?

For to every one who has will more be given, and he will have abundance; but from him who has not, even what he has will be taken away — Matthew 25:29

Here's a question for you: Which district in India gets the most CSR funding in the country? Here's a clue: Below is the distribution of CSR funding mapped against current development status of states (Source: India Data Insights).

The summary: The richer the state is, the more CSR money they will receive. And there is a good chance that the evolving domestic philanthropy is going to follow the same trend. What does this mean? That Philanthropy increasingly is avoiding areas where there is the greatest need for funding. Worse still, Philanthropy is widening the gap between the rich and the poor states creating a more dissonant future for the country. I want to share my thoughts on why that is the case, what has been tried and what we need to do to reverse this trend.

The funding patterns have shifted

Let's start with the obvious insights: Firstly, the funding flows have shifted. Earlier, if capital sought cause and hence the NGOs, NGOs seek the capital today. Six years ago in Bihar, NGOs spoke about how funders came to the ground to meet a wide range of NGOs to find who to fund. Recently, a funder told me how they don't fund anything a flight away because "monitoring becomes difficult". Secondly, the profiles of donors and recipients have both evolved. There are more bankers, engineers and metro-based decision makers on the donor side as much as cross-over talent in fundraising roles in metro-based NGOs. Despite all the veneer of professionalism, philanthropy is still personal - People fund people they know and can relate to. And there is a much greater chance for the donor in Mumbai to know and relate to fundraising person based out of Mumbai.

Opportunities for donors to meet NGOs beyond metros in events and other gatherings are also dwindling. Barring the XLRI event organised by Madhukar Shukla, almost all events are based out of Mumbai and Delhi and so are the predominant number of speakers.

There is increasing friction in funding NGOs in the poorer states

Even if funders want to fund NGOs in the poorer states, there are growing frictions. On the donor side, Philanthropic capital has become more risk averse and is constantly looking for projects with limited externalities. So social (naxals), political (instability), environmental risks (floods) are often roadblocks. Secondly, thanks to the CSR law and the current donor mindset, there is a greater propensity to fund neighbourhood projects among a large number of companies (though there are notable exceptions).

On the NGO side, there are compliance gaps - NGOs often need to meet a wide range of compliance requirements and build internal systems to ensure effective reporting. In the absence of any funding, NGOs don't have the resources to build the systems. Also, given the type of funding they receive, most NGOs focus on diverse sectors, have shifted to service delivery and transactional activities and in the process have not built any expertise in specific sectors. All of this perpetuates a vicious cycle, where as the Matthew effect implies, these NGOs stand to gain lesser and lesser chance of receiving capital.

Lack of distributed leadership development

Another key challenge has been the lack of distributed leadership development in the sector. The recent spate of emerging entrepreneurs have been from a large number of social impact fellowships. And a large number of these fellows are from urban areas. While fellows from metros have gotten an opportunity to understand the challenges in these poor districts by working there, it has not resulted in them staying back to solve these problems in the poorer states (as had happened before with Joe Madiath, Vijay Mahajan, Ved Arya and the like). We lack leadership development models that truly create distributed leaders across the country, and especially in the poorest states.

Saviour syndrome funding has had limited long-term impact

Every once in a while emerges an entrepreneur in the social sector that all funders choose to fund. She / he is seen as the emerging hope in the sector until a few years later they are forgotten and there is a new entrepreneur. I refer to this as a Saviour syndrome where we irrationally place our hopes on one individual over the system. While, over the years, there have been such saviours who have emerged from the poorer states, that has not resulted in more funding to these states. While these funding opportunities offered donors opportunity to understand the extent of challenges, it did not always result in more funding to other NGOs working on similar challenges in the region.

Current enablement models are not being effective

I have had a chance to work with incubators, who have been supported by funders to strengthen non-profit talent in these regions. One of the organisations admitted that they have to become a different organisation to enable entrepreneurs from these states since they bring a different thinking and vocabulary to social change. Another academic institution always arranged in person workshops (this was pre-COVID), unaware of exorbitant flight costs that the NGO entrepreneur from Bihar had to incur every time there was a workshop.

Closer home, I am part of a consulting engagement for an organisation based out of Uttar Pradesh and I am acutely aware that I can make so many wrong assumptions about the social context in which the organisation operates in and make recommendations from the lens of an urban organisation of the same type.

We need to strengthen the infrastructure in these states

It is futile to advocate that the median CSR and domestic foundations need to shift their funding behaviour to address this challenge. We need a few strategic donors to take a long term view to build the infrastructure in the poorest states that helps build the foundation to attract capital to solve the deep rooted problems in these states. I believe that the following principles are critical in such an effort -

• Networks not Individuals: We shouldn't fall back to funding saviours again but build a network of NGOs. Some of them will choose to scale, some might specialise but a network approach offers a critical mass for these organisations to grow.
• Long-term and not short-term: Social outcomes in these states will take longer and so will building the median capability of the NGOs. Hence, it is important for donors to take a multi-year view to building this infrastructure.
• Build distributed leadership: We need local talent and local leadership to drive this change. Hence, investing in building a talent pipeline in the regions. Rather than parachuting talent from metros to these states, local editions of fellowships, leadership schools and entrepreneur support networks have to be established.
• Shift the centre of gravity: Let's shift the events and gatherings to some of these states more often. Let's have more Hindi and regional sessions in our events. Let there be regional focused sessions that talk specifically about challenges in the poorer states.
• Scalable approaches for ensuring readiness: It is important to find scalable ways to strengthen the compliance and internal systems of the NGOs so that they are not excluded due to the same. The work done by Dhwani Foundation in North Karnataka offers a great model to build such capabilities.
• Ensure funding rigour: In solving some of these problems, there is often an approach to throw a lot of capital in the immediate term. However, it is important to understand that most organisations in these states don't have the absorption potential. Hence it is important to be frugal and rigorous (but not prescriptive) but funding and stay focused on the relevant outcomes that need to be achieved.

In case you are still interested, Pune receives the most CSR funding today. It is possible for Bastar to be that district. But it needs us to build that infrastructure. Do you think it is possible? Do you think it is necessary? What do you think we should do?