giving in india. a guide for funders and charities

8/3/2019 Giving in India. a Guide for Funders and Charities

1/68

Giving inIndia

September 2009

Simon BlakeTara Chand

Nilanjana Dutta

Adrian Fradd

Gaurav Gupta

A guide for funders and charities


2/68

Cover photograph supplied by Justin Canning/Comic Relief Ltd.

Giving in

IndiaA guide for funders and charities


3/68

1

Contents

Contents 1

Introduction 2

Background 2

Purpose 2

Process 3

Mainfindings 3

Nextsteps 4

Anoteonterminology 5

1.Theproblemandsolution 6

Theproblem 6

Thesolution 14

2.Developingaframework 19

Factorsingiving 19

Internalvariables 19

Externalvariables 21

Wheredoesthisleaveus? 30

3.Waterandsanitation 31

Stage1:Needs 31

Stage2:Whatworks? 37

Stage3:Governmentandotherfunders 42

Stage4:Voluntarysector 48Lessonsfordonors 53

Conclusions 57

Acknowledgements 58

References 60


4/68

2

Introduction

Background

This report looks at the nature and role ofphilanthropy in India, and explores ways toincrease its impact. It grew out of the premisethat private giving in India has considerablepotential to tackle the countrys entrenchedproblems, and money is not being allocated aseffectively as possible.

With its roots in religious giving, philanthropy inIndia has long tended to mean donors fundingtemples and schools in their villages of origin.This kind of activity is laudable but it can only

be a modest step towards tackling Indiaschallenges. It is the contention of this report thatdonors need to think more strategically aboutthe best use of their philanthropy.

This report argues that giving in India needs toimprove and can be made more effective. TheIndian voluntary sector is large, including over1.2 million non-governmental organisations(NGOs). Within this, certain issues should beprioritised and charities chosen on the basisof their outcomes. This will ensure that privatefunding has a greater impact on peoples livesin India.

Underpinning this work is research from a year-long joint venture between NewPhilanthropyCapital (NPC), a London-based NGOspecialising in improving the effectiveness ofthe voluntary sector, and CopalPartners, aleading provider of financial analytics, businessintelligence and research services.

NPC was set up in 2002 to improve theeffectiveness of the voluntary sector in the UK.It was founded by philanthropists from thefinancial services industry who felt that too little

information was available on charity impact andon effective funding. They decided to found anindependent charity to provide an objective andanalytical perspective on the role and prioritiesfor private giving.

NPC has developed a tailored methodology foranalysing social issues, identifying priorities forphilanthropy and judging the effectiveness ofindividual NGOs. In the past seven years it hasapplied this approach to over 20 social issuesin the UK, including homelessness, autism andex-offenders. It also carries out cutting-edge

analysis of general voluntary sector issues,such as governance, effective grant-givingand results measurement tools. NPC makes

all of its reports freely available on its website(www.philanthropycapital.org) and uses thisresearch to provide strategic consultancy andadvice to funders and charities.

In March 2008, NPC produced the reportPhilanthropists without borders, whichhighlighted the challenges facing philanthropistsworking internationally, and explored NPCspotential international strategy.1 Based onextensive interviews and focus groups withinternational donors, it showed significantdemand for independent advice on how to giveeffectively. This was mirrored by growingad hocdemand from funders, other intermediaries and

NGOs, asking NPC to apply its methodology tothe international voluntary sector.

Copal Partners (Copal) is a financial researchand consultancy firm that has its main officein Delhi. It started its own charity analysisteam in 2006, in response to demand from itsclients for advice on their philanthropy. Theseclients included banks, other corporations andhigh net worth individuals. This developmentalso reflected Copals senior managementsown philanthropic interest in improving theeffectiveness of the Indian voluntary sector. The

team has produced an overview of the Indiancharity sector, as well as analysis of severalof the larger NGOs in India, such as HelpAgeIndia and the Children in Need Institute. All ofthese reports are available on Copals website,www.copalpartners.com.

In March 2008, NPC and Copal decided to pooltheir efforts and set up a joint venture to explorethe effectiveness of philanthropy in India. Theaim was to draw on the skills of both partners,and contribute to a growing debate on theeffectiveness of the Indian voluntary sector.

Purpose

The purpose of this report is to explore thecurrent status of philanthropy in India and totest ways of using and synthesising availableinformation to improve its effectiveness. Thisbuilds on NPC and Copals previous experienceof voluntary sector analysis, and looks totransfer NPCs methodology and approach tothe Indian context. This core methodology isset out in Funding success, which is availableat www.philanthropycapital.org.2 An update tothis report will be launched in the second halfof 2009.


5/68

3

Introduction

Giving in India I Introduction

This report explores four main hypotheses:

Funding for NGOs in India is not workingproperlythere is a funding market linkingfunders and charities, but it is in importantsenses broken.

Analysing social issues and individual NGOscan help fix this broken market.

Using NPC and Copals analyticalframework, donors can prioritise issuesand NGOs for funding based on analysis ofpotential impact.

It is possible to do in-depth analysis ofNGOs in India.

The information and framework set out inthis report are presented as useful tools forfoundations and donors who are new to givingin India. Using these tools can help structureand inform their giving. NGOs can also drawupon the information in the report to think about

their role in the sector, and how to improve theiractivities and impact measurement.

Beyond this, NPC and Copal aim to stimulatefurther action and debate. We hope thatby demonstrating the potential benefits ofusing an analytical framework on voluntarysector effectiveness, more organisations andindividuals will grapple with these issues. Thiscould either involve applying our approach to abroader set of topics, or proposing a modifiedor different analytical approach. We believe thatIndia needs a broad-based effort to analyse

social problems and the role and success of thevoluntary sectors response.

Process

Between March 2008 and May 2009, theNPC and Copal joint venture based a teamof analysts in Delhi. The analysts looked atthe voluntary sector as a whole, as well asresearching two issues in depth: early childhooddevelopment, and water and sanitation. Thesetopics were chosen based on an analysisof different factors, including level of need,

donor interest, and the potential impact of theresearch.

In order to explore different approaches, theresearch process used varied slightly for eachissue. It roughly shadowed the approachpioneered by NPC in the UK, which follows fivemain stages:

1. Literature review and interviews with experts,such as government, academics and NGOs;

2. Development of a database of over 100NGOs working in the sector, including core

information and data;

We hope that bydemonstratingthe potentialbenefits of usingan analyticalframework onvoluntary sectoreffectiveness,

moreorganisationsand individualswill grapple withthese issues.

3. Telephone calls with a shortlist of NGOs,selected on the basis of their potential;

4. Field visits to a sample of NGOs (2030),including in-depth interviews withmanagement; and

5. In-depth analysis of four to six high-performing NGOs.

The whole years research has fed into thisreport and its understanding of the voluntaryand philanthropy sector in India. However,the findings specific to the research on earlychildhood development are being published asa separate report, Starting strong. The analysisof the water and sanitation sector is includedin this report. It is presented as an exampleof how to use an analytical framework tounderstand a particular social issue, prioritiseissues for donors, and provide a context forthe analysis of individual NGOs.

Main findings

This report is divided into three parts, each ofwhich explores and develops different aspectsof the four main hypotheses.

1.Theproblemandsolution

The first section explores the importance ofphilanthropy in India, in terms of both its scaleand its distinctive role in addressing socialissues in India. It examines the evidence to seewhether philanthropy is working effectively. NPC

and Copals judgement is that it is not. Fundingdoes not appear to be prioritised optimally andgood information on the impact of individualNGOs is rarely available. This is not unique toIndia, but is consistent with NPCs experiencein the UK and with reports from other nationalvoluntary sectors.

Dealing with this problem is not straightforward,and there is no magic bullet. NPC and Copalpropose that a comprehensive solution will needto focus on at least three areas: encouragingdonors to demand information; supporting

charities to capture their impact; and improvingthe flow of information. Seen in this light, it ispossible to start creating an argument in favourof the reports second hypothesisthat analysingsocial issues and individual NGOs in India canhelp improve the effectiveness of philanthropy.

NPC and Copal suggest that deeper analysiswill improve the flow of information andencourage donors and NGOs to concentratemore on evidence-based decision-making.Specifically, it will provide a more rational set ofcriteria for donors to choose which issues to

fund, which organisations to support and howto improve the quality of funding.


6/68

4


2.Developingaframework

In the second section we look in greater detailat what an analytical framework could look like,setting out a structured methodology basedon the approach that NPC has developed in itswork on the UK voluntary sector. This focusesanalysis on four main factors:

level of need;

evidence of what works;

activity by other actors; and

the nature of the voluntary sector.

We explore these criteria within the context ofthe Indian situation. We go into particular detailwhen looking at the fourth areathe natureof the Indian voluntary sectoras there area number of features and challenges that arerelevant to all donors interested in giving toNGOs in India.

Donors interested primarily in sharing NPC andCopals insights into the voluntary sector couldturn straight to this section (page 6).

The overall framework is not proposed as adefinitive single approach to analysis, but ratheras one possible model. Any funder has to makechoices between different causes and differentorganisations, but this sometimes happens onthe basis of implicit choices and judgements.NPC and Copals approach is distinctive in thatit makes the basis of our decisions explicit and

public. Accordingly, feedback is welcomed fromreaders on this report.

NPC and Copal hope that developing thisevidence base will encourage donors tobecome more effective. So, in addition to usingpersonal interests to determine their funding,donors will have access to objective criteria andadvice on how to prioritise where they give, andhow to choose individual charities to support.

A further benefit in making our approach andlearning transparent is that it stimulates andaccelerates further debate about the role andformat of analysis in the voluntary sector. Thehope is that it will provoke other organisationsto propose different models or suggestfurther refinements, in turn accelerating thedevelopment of knowledge in this area.

Finally, we hope that it will help funders becomemore transparent and share their knowledgemore. Pooling efforts and publicising successand failure means that costs can be shared andthe chances of success increased. This has nothappened enough in the past. A commitment topublic knowledge is a central part of NPC and

Copals approach.

Pooling effortsand publicisingsuccess andfailure meansthat costs canbe shared andthe chancesof success

increased.

3.Waterandsanitation

The third and last section is designed to testthe final two hypotheses of this report: whetherit is actually possible in India to prioritise areasfor philanthropy and identify effective charitiesbased on available evidence. While we havemade a case for the theoretical need foranalysis in Section 1 and also sketched out

what a possible analytical framework wouldlook like in Section 2, it is only by demonstratinghow this framework works in practice that itsvalue can really be brought to life.

NPC and Copal have chosen the water andsanitation sector as a test case, applying toit each of the four stages of the analyticalframework (the need; what works; activity byother actors; and the nature of the voluntarysector). With this, we hope to show how wecan use available information to identify criticallessons and guidance that are evidence-based

and focused on maximising the impact ofprivate giving.

We have highlighted four priority areas forphilanthropy in relation to water and sanitation:

mobilising communities around hygienepromotion;

piloting technical and financial models forimproving water quality and sanitation;

strengthening the voluntary sector; and

influencing government.

People may disagree with the exact priorities ofthe research, and new evidence may changethese findings, but NPC and Copal neverthelessbelieve that this section demonstrates theunderlying pointnamely that it is possibleto use the existing evidence base to channelfunding to areas where it is likely to have thegreatest impact.

This section can also be read alongside NPCand Copals sister report, Starting strong, whichapplies the same analytical framework to the

early childhood development sector.

Next steps

This document is intended as a modest steptowards better information and analysis ofNGOs and social problems in India, and as adiagnosis of a large-scale problem: a brokenfunding market.


7/68

5


Introduction

Fixing the way NGOs are funded in India is notin the hands of any one organisation. What isneeded is a coalition of efforts. So this reportshould also be seen as a call to arms forindividuals and organisations to support thecause of improving the effectiveness of thevoluntary sector.

One part of better funding in India might be a

research and analysis organisation dedicatedto improving NGO effectiveness. Over the pastyear, NPC and Copal have begun to sketch outhow this might work and what it could achieve,but for it to really work we believe that thisinitiative should be taken on by a coalition ofIndia-based organisations.

PhotographsuppliedbyTaraChand

We hope that this document can be aninspiration to Indian philanthropists and NGOsto take up the baton. NPC and Copal willcontinue to lend their knowledge and support tohelp increase the effectiveness of Indian fundersand NGOs.

A note on terminology

NPC and Copal have used the terms NGO andcharity interchangeably in this report.

Conversions have been done on the basis of1 = Rs.79 = US$1.65.


8/68

6

Despiteitsscaleanditspotentialrolein

tacklingIndiansocialproblems,philanthropy

inIndiadoesnotappeartobeworkingto

fulleffect.

Thesituationispartlyobscuredbecauseofa

lackofdata.Whatevidencethereissuggests

thatmoneyisneitherbeingallocatedtothe

mostimportantareasofsocialneed,nor

giventothemosteffectiveorganisations.

Instead,fundingisdysfunctional.

Onewayofconceptualisingthisisasa

brokenfundingmarket,wheremoneyisnotallocatedonthebasisofitspotential

socialimpact.Themarketscharacteristics

include:donorswhodonotaskfortheright

information;charitiesthatdonotsupplyuseful

information;andpoorflowsofinformation

aroundthesector.InNPCsexperience,these

arealsocommonfeaturesintheUKyetthey

arguablyhavemoreseriousconsequencesin

Indiaduetothehighlevelofneed.

Betterinformationcanhelpconstructa

moreeffectivephilanthropymarket.We

suggestthatresearchandanalysiscanhelptoallocateassetsproperly,direct

fundingtothemosteffectiveorganisations,

andimprovethequalityofthatfunding.

Undertakencollectively,thiswould

maximisethechancesofphilanthropy

havingasignificantimpactonthelivesof

disadvantagedpeopleinIndia.

The problem

To some external observers, India is rapidly losing

its tag of being a developing country, bolsteredby high levels of economic growth and its recordas the worlds largest democracy. However,scratch the surface and beneath the countrysvast market and impressive entrepreneurialpotential, it is clear that it still faces serious socialchallenges. Most visibly it is scarred by poverty,with hundreds of millions of people living withoutadequate healthcare, education or shelter. Lookat almost any area of human welfare and thestatistics remain startling. For instance:

India is more than 30 years behind China

in terms of the proportion of the populationwith completed secondary and post-secondary schooling.3

Private givingphilanthropyhas a vital

role to play intackling socialproblems.

455 millionpeople in Indialive on less thanUS$1.25 a day.

Despite decades of effort to improve nutrition,45% of under-threes in India are stunted (ineffect, malnourished), a rate worse than thatfound in sub-Saharan Africa.4

455 million people in India live on less thanUS$1.25 (0.76) a day.5

Why is progress not quicker, and who shouldbe fixing these problems?

A key cause is simply scale: the breadth, depthand complexity of poverty in the country. Clearlyit is India itself, working through market forces

and through its government, that has primaryresponsibility for economic and social development.Ask Indians, though, and many are sceptical aboutthe capacity of government or markets alone todeliver the type of change that is needed.

Government is good at doing things at scale butit is often bad at innovation, weak at reachingexcluded groups and scrutinising itself, andsubject to short-term electorally-driven priorities.

Market solutions also offer scale, and they areresponsive to consumer demands in a way that

government struggles to be, but market-basedapproaches for the chronically poor at thebottom of the pyramid are difficult to develop.Some needy people get priced out of goodsand services, and markets themselves areprone to failure.

To make progress on development, somethingmore than government and markets is needed.Private givingphilanthropyhas a vital role toplay in tackling social problems. It is important,not primarily because of its scale, but becauseof the things it can do.

Collectively, philanthropic spending is tinycompared with the power of government butrelative to other spending, philanthropy canbear risk. It can kick-start innovation. It canfund unpopular causes. It can support voicesthat hold government and business to account,building the civil society structures that makedemocracy work. It is free from the pressure ofthe electoral cycle that can prevent long-termsolutions to social problems. It is free from thepressure to generate a financial return that canlimit the reach of markets.

So how much private giving is there in India,and how much difference is it making?

The problemand solution


9/68

7

Giving in India I The problem and solution

Ch

apter1:Th

epro

blem

an

dsolu

tion

GivinglevelsinIndia

Information on giving levels in India is scarce,partly because the giving landscape iscomplex and partly because information ondifferent sorts of donors is held in differentplaces. Mainly, however, this information isscarce because many donations are neverformally captured. The information that is

available does not give a single figure. Itdoes though suggest an order of magnitude:hundreds of millions of pounds of privatecapital, possibly billions, are being spent withthe express aim of tackling social problemsin India. A significant amount of this goes toNGOs.

The main types of private donor are:

IndividualsThese include Indian nationals,non-resident Indians (NRIs), or citizens ofother countries with ethnic or emotional

links to India. They range from small one-offdonors to major philanthropists.

In 2006/2007,

overseas trustsand individualsgave Rs.123bn(1.6bn) tocharities inIndia.

Ministry of HomeAffairs6

Table1:PhilanthropyinIndia

Segment Scaleofgiving

Domesticfunding

Domestic corporateand individualdonations

In 2004, the domestic Indian fundraising market was measured atUS$500m (303m), excluding religious and untracked donations. 80%of donations were from individuals.7

Domestic individualdonations

A 2008 phone survey of 1,012 people in urban India found that 41.2%of respondents gave in the previous year, with an average contribution of

US$11 (6.70) (excluding religious and family donations).8

Domestic corporatedonations

In 2000, it was found that domestic corporations gave Rs.2bn(25m).9

Foreignfunding

Foreign remittances,from non-residentIndians (NRIs) directto individuals in India

Unknown. There are over 400,000 Indian-born remittance senders in theUK. A survey of 150 Indians in Washington State in the US found thatthe average Indian living in the US gives US$300 (182) a year to socialcauses in India. If this were true of even half of the 1.7 million Indians inthe US, social causes would be getting 157m from Indian migrants inthe US alone.10

Registered foreignfunding

In 2006/2007, overseas trusts and individuals gave Rs.123bn (1.6bn).6

Total foreign fundingto voluntary sector

Combined foreign funding flows is unknown, but in 1997/1998 it wasestimated at Rs.25.7bn (326m).9

Cross-cuttingsegments

High net worth (HNW)giving

Unknown. Conditions, until recently, were good. India led the world inHNW population growth at 22.7% in 2008. Sunil Mittal, Anil Agarwal, ShivNadar and Rohini Nilekani are Forbes 2009 heroes of philanthropy.11

TotalfundingtoIndianNGOs

Total funding toIndian NGOs: foreign,domestic and public,and self-generated

Unknown. In 1999/2000, it was estimated at Rs.179bn (2.3bn).12

Note: these categories are overlapping and therefore not cumulative.

* INGOs are increasingly establishing stand-alone country organisations (eg, Oxfam India). But these remain, in part, funders of other local NGOs.

TrustsandfoundationsAgain, these aresplit between India-based and overseasorganisations (although the biggerinternational foundations, such as theBill and Melinda Gates Foundation andthe Michael and Susan Dell Foundation,have offices in India). International Non-Governmental Organisations (INGOs), suchas CARE and Oxfam, can also be seen in

part as specialist foundations, as they fundIndian partners to deliver programmes.*

CorporatesThe growing global trend forcorporate social responsibility initiatives hascoincided with the expansion of the indigenousprivate sector and an increased presenceof multinational corporations in India. Anumber of corporates have also set up theirown foundations, such as the GoodearthFoundation, which was established by theEicher group of companies.

Some different estimates that NPC and Copal

have heard cited are in Table 1.


10/68

8


Trendsingiving

The numbers in Table 1 suggest a significantorder of magnitude: at least hundreds of millionsof pounds. While it is difficult to make projectionsbased on the current data, it is the receivedwisdom among donors and commentators thatthe numbers have only grown bigger, at leastuntil the recent global economic downturn. This

is derived in part from expectations heightenedby Indias spectacular GDP growth over thepast decade and the growing prominence ofphilanthropy from the Indian diaspora.

Increases in philanthropy are also reflected inthe rise in foreign donations coming into India,all of which have to be reported to the Ministryof Home Affairs under the Foreign Contributions(Regulation) Act (FCRA). This legislation requiresall organisations wanting to receive foreignfunds to register with the government andsubmit audited accounts on a yearly basis; they

also have to provide details of each individualcontribution. Records show that registereddonations have increased by almost 150%between 2002/2003 and 2006/2007, fromRs.50bn (0.6bn) to Rs.123bn (1.6bn).6

Growth here also seems consistent with wideractivities in the field of philanthropy. For instance,there has been an increase in the number ofhigh-profile initiatives supporting philanthropy. InIndia, activities include the work of Charities AidFoundation India and the emergence of payrollgiving initiatives, such as that of GiveIndia, which

has channelled Rs.550m (7.0m) to 150 IndianNGOs over the past eight years.13

Overseas philanthropy appears to be growing,particularly from NRIs. This is being stimulated by agrowing number of organisations. In the UK, theseinclude the Asian Foundation for Philanthropyand the British Asian Trust, both of whom seek tofoster giving to South Asia. In the US, Give2Asiahas channelled US$100m (61m) from UScorporates and individuals since 2001, 29% ofwhich has gone to India.14 Similarly, the AmericanIndia Foundation has almost trebled its income

over the past five years, from US$3.4m (2.1m) in2003 to US$9.8m (6.0m) in 2008.15

NPC and Copals own work on the Indianvoluntary sector, of which this report forms apart, is another result of growing interest in Indianphilanthropy, from both NPC and Copals clients.

Trust activity has also been on the up. Therecent IT, retail and finance booms have ledto a new wave of family and corporate trustsand foundations, such as the ICICI Foundation,which was established in 2007. Traditionalfoundations are also increasing the amountsthey give. Funding from the Sir Ratan Tata Trust,one of Indias oldest foundations, grew fromRs.48m (608,000) in 1995/1996 to Rs.601.6m(7.6m) in 2007/2008.16

India has benefited from globalphilanthrocapitalists, including the Bill andMelinda Gates Foundation and the Michael andSusan Dell Foundation. These organisationsbring large sums to the country. For example,since 2003, the Gates Foundation hascommitted more than US$330m (200m) totackling HIV/AIDS in India.17

The growth of social investment in India,although outside this reports focus onphilanthropy, is also indicative of increasingflows of capital that are influenced by socialconcerns. Box 7, in the following section,provides a brief overview of current activity inthis area.

However, there are worries that giving levelsmay decrease.

Most obviously, the global recession is likely tohave an impact on giving, even as it increasesthe social need that philanthropy is meantto address. NPC and Copal have seen nodata on this related to India but there arereports of NGOs and UN agencies developingcontingency plans to deal with a possible1520% drop in income in 2009.18

In addition, even during the boom, the amountsof money going to NGOs tackling social issuesmay have been lower than the hype warranted.Individual giving in India is still predominantlyfocused on religious causes, and someevidence exists that this comes at the expenseof other voluntary organisations. A surveyof 6,400 Indians in 2000 found that a highproportion gave to religious organisationsthehighest of four Asian countries covered.19 Italso identified low rates of support to othervoluntary organisations. Almost half of the highto middle-income Indians who support religiousorganisations do not support other voluntaryorganisations.19 This is consistent with a morerecent 2008 survey that found that India hada lower proportion of urban retail givers thanBrazil, Russia and China, with 41% giving in theprevious year.8

All this tells us that India has a lot of money tryingto make a difference and there is scope for it togrow, both from within India and from abroad.However, this trend has come up against theglobal economic downturn and potential fundinginstability as corporates and individuals scaleback their giving and foundations investmentincome falls. If this is right, then giving is at acrossroads. With existing and new funding underpressure, there is renewed urgency in usingthe money that is available to make as muchdifference as possible. So how does currentgiving measure up against this test?


11/68

9


Ch

apter1:Th

epro

blem

an

dsolu

tion

Theproblem:givingisnotachieving

maximumimpact

How much difference is giving making?

The short answer is: not as much as it should.

It is challenging to assess the effectiveness ofgiving because donors give their money away

in different ways and because there are notagreed benchmarks against which to measureit. Even in the UK, where there is a relatively well-developed philanthropic sector, funders struggleto demonstrate the effectiveness of their work.

But two possible indicators of philanthropymaking a difference are: first, that privatefunding is targeted on need, and second, thatit goes to effective organisations. On either ofthese measures, the evidence that NPC andCopal have seen is that philanthropy is often notdelivering on its promise.

Moneymaybegoingtothewrongneeds

Logically, one would expect funding to flow to areasand issues of greatest need. Yet this does notappear to be happening. Consider formal flows offoreign fundingone of the few areas where wehave relatively good levels of data (largely due to theFCRA legislation mentioned above). Analysis of thisfunding suggests that money is going to relativelywealthy, high-performing states in India, and not toweaker, poorer places.

For example, when looking at levels of infant

mortality, NPC and Copals analysis of data showsthat in 2006/2007, the five worst performingstates in terms of high infant mortality rates (UttarPradesh, Madhya Pradesh, Jharkhand, Assam,and Orissa) received 11.7% of foreign funding.Conversely, the five best performing states(Kerala, Tamil Nadu, Mizoram, Nagaland, andMaharashtra) received 35.4%.6, 20 The patternholds for other indicators and, as a whole,Indias poorest statesBihar, Orissa and UttarPradeshlanguish near the bottom in terms oftotal receipts of foreign donations.6 These statesare often called the BIMARU statesa pun

on the Hindi word for sick, coined from BIhar,MAdhya Pradesh, Rajasthan and Uttar Pradesh.

Of course, this evidence is not conclusive. Thedata has significant weaknesses. For example,many foreign donations that look as thoughthey are going to urban areas, such as Mumbaiand Delhi, are in reality channelled via the

headquarters of organisations on to poor areasacross India. Funding through FCRA is also onlyone flow among the many that make up thetotal philanthropy in India.

But this case is supported by anecdotalevidence about the giving behaviour ofindividuals, suggesting that the flow ofphilanthropy is biased towards certain areas.

Many NRIs, who tend to come from Gujaratand West Bengal, give back to villages or areaswhere they were born.

Also, funding tends to focus on certain typesof tangible activity, such as building physicalstructures and providing direct services (particularlyfrom private individuals). Within the early childhooddevelopment sector, NPC and Copal found thatthere is high donor interest in constructing schools,while for water and sanitation, donors tend tofocus on wells and toilets. Yet often this giving canrisk substituting for government responsibilities.

Moreover, it leads to the neglect of other areas,such as lobbying and campaigning, whicharguably can have a higher impact and which, bydefinition, government rarely funds.

Moneymaybegoingtothewrong

organisations

The relationship between funding andorganisational effectiveness is often weak. Here,the evidence is more indirectspecifically, theabsence of the features one would expect tosee if donors were using objective criteria tochoose the best organisations to support.

Donors generally support NGOs to achievespecific goals or outcomes, be it improvingeducation for children, managing water resourcesbetter or providing treatment for HIV/AIDS. Yet itis unclear how most donors are able to make anobjective decision on which NGOs they shouldfund based on their effectiveness. The evidencesimply does not appear to be there.

During 2008 and 2009, NPC and Copal spoke tomore than 150 grassroots NGOs, mostly in theearly childhood development sector or working

in water and sanitation. We wanted to know twothings: first, what they were trying to achieve withthe funding they had received, and second, howthey knew that they were being successful.

The striking thing we found was that NGOs aresuccessfully attracting funding and undertakingactivities to achieve social change withinadequate evidence of the impact they are

It is unclear howmost donors are

able to makean objectivedecision onwhich NGOsthey shouldfund basedon theireffectiveness.


12/68

10


having. Most report back on some informationto donors, but often this information is partial,misleading or not meaningfully related tosignificant changes in the lives of the peoplethey work with. Box 1 describes the situation inmore detail.

Only a handful of organisationsless than 3% ofour samplemeasure their impact in ways we

would consider as robust. This means that they:

have a clear theory of change, setting outa logical model of how their activities lead toconcrete outcomes;

Box1:NGOimpactwhatdifferenceareorganisationsmaking,andhowdotheyknowit?

NPC and Copal looked at over 150 NGOs to find out what difference they were making, and how theyknew it. This was not a formal survey but part of an effort to identify high potential organisations in twosectorsearly childhood development, and water and sanitation. Charities were identified on threemain criteria:

their sizean income of over Rs.500,000 (6,300);

their presence in directories available from organisations like GiveIndia and Indianngos.com(see p. 13); and

recommendations from experts in the field.

All three of these factors make it likely that the NGOs seen are better-established and adhere to higherstandards than the average charity in India.

Our main finding was that only a minority of organisations have information easily available thatclearly describes their activities, let alone the difference they are making. Where information wasavailable or (in its presence or absence) where NPC and Copal analysts were able to speak tomanagement, information quality was mixed. Charities primarily describe what they are achieving

by talking about what they do and/or providing case studies and anecdotes about people theyhave worked with.

But this information is inadequate for a number of reasons.

Focus on outputsWhen charities describe what they do, they talk about outputs (the quantificationof their activities), not outcomes (what those activities achieve). A strong example of this is NGOsrunning primary schools, many of which track enrolment and, in some cases, attendance. Relativelyfew track the difference that school makes to pupil attainment. This matters. NPC and Copal sawa number of educational establishments where each could boast high enrolment rates, but wherelearning was clearly inadequate (teaching by rote; disengaged students; absent teachers). Surveyevidence establishes this as a problem for India as a whole. Outputs are useful to know, but only rarelyis knowing what a charity does enough, and this information can in fact be misleading.

Focus on case studies and anecdotesCase studies and anecdotes are useful to give a sense ofan organisation, but they may be unrepresentative. Charities rarely draw attention to their failures.Anecdotes risk generalising, misleadingly, from success. They also present a more subtle problem.Out of 100 people in a programme, the odds are that some of them will see their lives improve, justby chance, regardless of what programmes they are or are not enrolled in.

Lack of long-term dataEven when charities collect outcomes data, this is usually extremelyshort term, measuring impact immediately after the end of an intervention and with verylittle follow-up to judge the sustained impact of their work. For example, measuring examattainment, but not what this means for future employment, livelihood and health. Of course, newinterventions will be unable to do this, yet for more established projects, measuring long-termimpact is vital in judging the full scope of their work.

Some organisations measure progress against particular indicators of interest to donors, but theytend to see this as a compliance exercise rather than an integral part of the way that they helptheir beneficiaries.

are able to record project data and capturetheir main outcomes using embeddedinternal monitoring systems;

commission external evaluations for specificprojects or at regular intervals; and

capture the long-term impact of their work.

Very few organisations met more than one ortwo of these criteria, with particular challengesin relation to embedding internal monitoringand capturing long-term impact. Box 2 looksin more detail at why NGOs do not measuremore consistently; while Box 3 sets out someexamples of what good measurement looks like.

Only a

handful oforganisationsless than 3% ofour samplemeasure theirimpact in wayswe wouldconsider asrobust.


13/68

11


Ch

apter1:Th

epro

blem

an

dsolu

tion

funders radar; and the influence of marketing andpromotional material. This is particularly relevant forindividual donors who, in examples NPC and Copalhave encountered, rarely think about impact at all.

The picture on corporates, INGOs and trustsand foundations is more mixed. Some ask forevidence of effectiveness and base decisionson it. INGOs, for instance, increasingly havestructured partner assessment tools that touchon impact within a wider framework of analysisconsidering an organisations capacity.

There is an irony here. All kinds of donors inIndia are very conscious of some sort of risk totheir funding: corruption and waste. To addresssuch concerns, there has been a marked

response from within the NGO communityto improve transparency, accountability andstandards of governance (see Box 4). Yet thereis much less awareness of a different risk: thatfunding may be going to organisations that arenot making good use of it.

Box2:WhydoNGOsnotmeasuremoreconsistently?

During our research, NPC and Copal came up against six main reasons why NGOs do notmeasure their results more.

1. Because they do not think they need toA lot of grassroots organisations are values-drivenand rely on proxies for understanding their impact. For instance, the belief that staff havehigh quality personal relationships with beneficiaries. They rely too on intuition, assumingthat scholarships for girls or a place in an orphanage or a rainwater harvesting system are

good in and of themselves. This may be right, but without measurement it is impossible to besure. Moreover, it is easy to overlook weaknesses in an approach if you just rely on whethersomething sounds or looks like it should work. For example, scholarships may only be goingto better-off groups; an orphanage may not be improving childrens life chances; and theproblem with water may not be volume, but contamination.

2. Because funders do not ask for it, or do ask, but for different things, or the wrong thingDifferentsorts of donors have wildly different expectations of NGOs. Many fund on the basis of historicalrelationships where they feel an affinity with the cause or the mission, and do not seek resultsinformation. Demands for specific data, where NGOs are implementing particular programmes forfunders, are increasingly common. But these are often imposed from above and sometimes promptresentment where NGOs cannot see their relevance, or where they conflict with other fundersrequirements.

3. Because it seems difficultMany development organisations see their work as a processthat is non-linear. They feel that the results of this are hard to quantify and cannot be easilyreflected in numbers. One example offered to NPC and Copal was how one would capturethe impact of a teacher, who previously stood over the class, now sitting at their level. NPCand Copal would argue that it is possible to capture this sort of impact and, in any case,qualitative changes should ultimately be reflected in improved hard outcomes. There are realchallenges in measurement: around proportionality; around attribution; in relation to avoidingselection biases. But, with care, these can be overcome.

4. Because they lack the skillsThis is discussed below in more depth. Grassroots NGOs suffer fromshortages of key skills and infrastructure (such as IT). These are substantial barriers and even if NGOslook for external evaluators, they struggle to find individuals or institutions of the necessary quality.

5. Because it seems expensiveDonors and charities are often reluctant to divert resourcesaway from core activity but, without measurement, it is likely that resources will not beused properly.

6. Because of organisational complexityNGOs often manage large numbers of projectsand it can be hard to design a framework that will adequately capture the results in severaldifferent domains.

It is important to note that this is by no means aproblem confined to India. NPCs work in the UKhas come across exactly the same situation, ashave other intermediaries in different parts of the

world. Moreover, a lack of results measurementwould not really matter if each NGO was doingequally valuable work in an equally effectivemanner. However, this is logically unlikely tobe the case and, based on NPC and Copalsvisits to programmes on the ground, NGOperformance varies widely. Without objectivemeasurement criteria to understand thesevariations, it is highly unlikely that funders willchoose the most effective NGOs to fund.

NPC and Copals concerns are underlined by theway that funders choose NGOs in practice. Our

experience is that in the absence of adequatedata, the main drivers of funding to particularorganisations are largely a mixture of subjectivefactors. These include: personal relationshipsbetween funders and organisations; the fact thatan organisation happens to have come across a

In the absence

of adequatedata, the maindrivers of fundingto particularorganisations arelargely a mixtureof subjectivefactors.


14/68

12


Box3:Examplesofmeasurement

A need for a focus on measurement is one reason why donors interested in supporting grassrootsorganisations are often well advised to work through intermediaries. Though their performanceis mixed, some INGOs do excellent work in monitoring and evaluation. CARE India and USAIDrecently released a working paper series on Women and Child Health, highlighting the results andlessons of five years of a massive programme, known as RACHNA.21 Measurement of its resultshelped both to establish the value of the programme, and to highlight areas for improvement. Forinstance, early on in the programme, it seemed that replication of demonstration centres being

run by CARE Indias partners was going well. But introduction of a household survey of the targetareas found low levels of coverage and little change in key behaviours the programme was tryingto bring about. Ultimately the programme was corrected, and later evaluation proved it to beextremely promising. Overall, it is thought RACHNA averted 13,356 deaths and was responsiblefor a gain of 380,719 DALYs (Disability Adjusted Life Years) over its lifetime at a cost of US$1,098(665) per death averted and US$39 (24) per DALY gained.

Recently, some NGOs have been involved in the gold standard of measurementrandomisedcontrol trials (RCTs) conducted through partnership with MITs Poverty Action Lab (J-PAL). RCTscreate two groups that are identical in all respects except one is exposed to a particular intervention.Any difference in the group outcomes can therefore be attributed to the intervention. RCTs are usefulto correct or change beliefs as they provide clear evidence of what works. However, they need to bebased on a clear theory as to the basis of interventions and why they work.

J-PAL has worked with a variety of large Indian NGOs including Pratham, an education NGO,and Seva Mandir in Rajasthan, which focuses on integrated rural development. A recent studyevaluating an experimental programme to promote uptake of vaccinations has established robustlythe effectiveness of using incentives for immunisation. People spend very little on preventativecareoften because of small practical obstacles or just not getting around to it. J-PALs study withSeva Mandir has found that they increased take-up rates by a factor of ten, by buying a kilo of lentilsto reward mothers who ensure that their children complete vaccination programmes.

This kind of work is expensive, but by doing it, NGOs can validate existing or new approaches,contribute to the evidence base on how to tackle serious social problems, and attract new funding.

NPC and Copal talked to a range of differentgrant-makers during our research. The viewsof some of the most strategic and professionalamong them are captured in a comment madeby Barun Mohanty of the Michael and SusanDell Foundation: One of the biggest challengesfacing Indian NGOs is not a lack of capital, but

funders who give money without asking for

measurement of impact on the final recipient.22

NPC and Copal believe that when funding isnot linked to results evidence, this matters.Most obviously, it matters because where

people are giving capital away without anobjective basis it is likely to go to the wrongorganisations. There is an opportunity cost forthe funding itself. It could have improved morelives being spent somewhere else. But lazyfunding is also a problem at a structural level.Where funders and NGOs are not focused oneffectiveness and measuring their impact, thereis little market reward or discipline affectingNGOs: organisations that do measure maybe disadvantaged relative to ones that do not(for example, because they bear higher costs).Good projects cannot grow; bad projects arenot challenged.

One of thebiggest

challengesfacing IndianNGOs is not alack of capital,but funderswho givemoney withoutasking for

measurement ofimpact on thefinal recipient.

Barun Mohanty

NPCandCopalsthesis:thefunding

marketisbroken

Although patchy, the evidence outlined abovesupports the first of NPC and Copals mainhypotheses: that the philanthropy market inIndia is not working effectively. While in anideal scenario, philanthropy should be flexible,versatile, risk-bearing and a promoter ofinnovation, in practice it is not being spentin ways likely to maximise its social impact.Rather, NPC and Copal were told that it is often

spent conservatively and thoughtlesslywithoutconsideration of the urgency of particularneeds, or the likelihood that the organisationfunded will really make a difference.

NPC has found it helpful in the UK toconceptualise this problem as a broken fundingmarket. By the term market we mean simply thatthere is an implicit economic system governingphilanthropy. There is both demand for fundingfrom NGOs and a supply of funding from a widerange of donors. The market is broken because itis unlikely that money is flowing to where returns

are highest. Funds are being spent, but withoutknowledge of where they can be allocated forbest effect. Indicators of successwhich in this


15/68

13


Ch

apter1:Th

epro

blem

an

dsolu

tion

case are the social impact a charity is havingarenot available or are not being used to determinefunding allocation.

As NPC and Copal conceive it, the problemis circular. Funders are either not asking forinformation about impact or are asking for thewrong information. NGOs in turn are unable toprovide comprehensive information on whatthey are achieving. Even when monitoring iscarried out, little is made public, particularlywhen it is negative. Organisations can repeattheir mistakes, not learning from the past orfrom each other, and all of that is likely to meanwaste on a large scaleof money and of lives.

Box4:TransparencyandregulationintheIndianvoluntarysector

NPC and Copals joint venture in India was partly prompted by NPCs March 2008 research report, Philanthropists without borders,which surveyed 122 philanthropists and carried out in-depth interviews with 19 based in the UK.2 It found that the main barriers togiving in developing countries were lack of trust, lack of transparency and concern about corruption.

These are not trivial concerns. Waste and corruption are real risks in a country where some NGOs are not real charities but vehiclesfor political ambition. Even where outright fraud is not practiced, there are more subtle shapes it can take. NPC and Copal haveheard of hospitals being built with donors funds where part of the expenditure has been dedicated to constructing permanent on-

site housing for the chief executive and other key staff.

The good news is that a number of in-country initiatives in India are being established to promote good governance, transparencyand honesty. Encouragingly, these are from the sector itself.

TheCredibilityAlliance (CA)www.credall.org.inis a national consortium of Indian voluntary organisations concerned to establishbetter self-regulation. It has established a set of norms to which NGOs can subscribe, designed to operate as industry standards.Minimum norms include: that an NGO is registered; that it has some defined indicators; that it has a board that meets at least twicea year; that it practices full disclosure on board membership and remuneration; and that signed audited accounts and annual reportsare available. Desirable norms include that at least two thirds of the board are unrelated by blood or marriage; that salary is brokendown by gross monthly level for all staff; and that all international travel is disclosed. Currently, 462 organisations are enrolled asmembers. The possible flaw in the approach is that certification is based primarily on self-certification, and CA staff just check overdocumentation. This is clearly not a cast-iron regulatory approach. Recently however, CA has introduced a full assessment process

involving a visit from an external assessment team. This allows members to become officially accredited.

GiveIndiawww.giveindia.orgis an online giving portal and philanthropy exchange that allows donors to give online to NGOsthat have been validated against CA minimum and desirable norms, with an additional requirement that they commit to report backannually on any donation they receive. It has more than 200 NGOs online, covering 14 states and 27 causes. Validation here includesa visit and in some cases references from partners.

CAFIndiawww.cafindia.orgprovides services to donors and charities and includes on its website a directory of organisations onwhich it states it has carried out due diligence.

In addition to these bodies serving a quasi-regulatory function, there are a number of databases being established, simply to listdifferent NGOs and improve access to data about the sector as a whole. Guidestar India, a large online database of NGOs (based onself-reporting), is currently being established, with the initial aim of covering at least 1,000 organisations. Indianngos.com comprisesa database of 36,000 NGOs, but with much more uneven quality of information available. Another player is Propoor.org, which says

it lists over 14,000 NGOs from across South Asia.

All of these initiatives are positive steps towards improving the flow of information about NGOs in India, and they are helpingto channel resources. Funds channelled directly to NGOs by GiveIndia comprised Rs.267m (3.4m) in 2008/2009. CAF Indiadistributed Rs.23m (291,000) in 2007/2008.

What none of them do is put much visible emphasis on impact or results. CAF goes furthest in this direction, quoting some evidenceon impact for organisations it has worked with. GiveIndia highlights impact as a concern but does not have the resources to do itsown research. For the other organisations, impact is a level above their area of focus, which is establishing basic information.

NPC and Copals view is that donors should not focus alone on the r isk of corruption. It is one of a range of risks to the effectiveuse of philanthropic capital, but one that already attracts a good deal of NGO energy and attention. It would be ironic if the need forassurance about the tangible problem of money being safe blinded philanthropists to the wider possibility that money is not being

used effectively. Equally, it is not enough for NGOs to improve transparency without improving effectiveness.

This problem is clearly not unique to India.NPC was established as a charity in 2002precisely because its founders noticed thatcharitable funding was being decided on thebasis of brand and personal connection, withlittle consideration of impact. Subsequentresearch has confirmed this impression: manyUK charities do not produce strong evidence oftheir results.

That said, having a broken funding market inIndia arguably matters more than in the UK, dueto the much higher level of need. Charities inthe UK are often about well-being and qualityof life. In India, they are fundamental to the


16/68

14


social safety net that allows people to survive.The issue has been brought into stark relief bythe economic downturn, which puts a renewedpremium on generating the biggest possiblesocial returns.

The solution

The importance of analysis in fixing the broken

funding market in India is this reports secondhypothesis. We argue that information canimprove the allocation of resources. Knowingmore about the impact of an NGO, its capacity,the risks it faces, and the context in which itoperates is helpful for any individual donor. It canimprove the quality and impact of substantialprivate funding streams, highlighting what worksand ruling out options that do not work.

Beyond this however, analysis and researchare public goods that can have leverage. Bysharing insights, donors not only improve their

own funding but also enhance the impact of themuch larger sums being brought to the table byeveryone else.

Following on from the model of a brokenfunding market outlined above, NPC and Copalsuggest that a comprehensive solution wouldfocus on each of the main points of failure:

encouraging donors to demand and pay forinformation on impact and results;

ensuring that NGOs measure theiroutcomes; and

improving the flow of information within thesector and beyond.

Figure 1 gives a representation of a properlyfunctioning philanthropy market.

We argue that

information canimprove theallocation ofresources.

Altogether, constructing this market is a largeundertaking, and NPC and Copals work in Indiahas concentrated on testing the potential of onefacet of this solutionanalysing particular socialissues and NGOs. We explore these below.

Yet, it is important to suggest what a morecomprehensive solution to the broken fundingmarket would look like. This can help readers

understand the theoretical context for NPCand Copals activities, including why wehave chosen to focus on analysis and how itcontributes to the larger goal of building a betterphilanthropy market. Also, by setting out this fullmenu of things that need to be done, we hopethat readers will be encouraged to develop theirown responses.

Donordemandforinformation

Donor demand for information cannot bemandated or forced. Rather, there needs to be

an effort to win hearts and minds by buildingthe social business case. A significant part ofNPCs initial work in the UK was making thecase to donors of the need for evidence-basedfunding decisions.

In India, evaluating the quality of existing fundingthrough research could be a first step. There isa negative component to the information thatneeds to be gatheredthat money is going tothe wrong places and being squandered. Thereis also a positive componentshowing thatusing evidence to allocate resources leads to

higher social returns.

Underpinning these components are twoaims: one, to show that information matterswhether it is used to help prioritise funding,or to choose the most effective organisation

We need aphilanthropicfunding marketSupply of

Information: NGOsneed to measure their

outcomes in ways that

can be subject to

external validation

Flow of Information:Independent

information on what,where, and to whom to

give needs to be

publicly available

Demand forInformation: Funders

need to ask about

results; intuition is not

good enough

Figure1:Functioningphilanthropymarket


17/68

15


Ch

apter1:Th

epro

blem

an

dsolu

tion

to fund; and two, to show that the quality ofinformation is important. After all, some donorsalready receive information, but it is often eitherincomplete or relating to the wrong metrics ofsuccess. For example, donors in both the UKand India often focus on administration costs orfundraising ratios (money spent on fundraisingvs total raised). Yet as we will go on to explainbelow, these are often unhelpful proxies of

impact, and are only useful within a much widerset of data.

Instead, more useful information would include:

anorganisationsactivities, includingits areas of focus, stage of intervention,number of people it reaches, and basicoutputs and costs;

evidenceforitsresults, such asevaluations and internal monitoring systems;

organisationalcapacitytodeliverresults,

such as the strength of its management,strategic vision and governance; and

risksthreateningresults, such as financialinstability and potential external factors.

In addition to information, more could be doneto provide practical support and networkingopportunities to donors so that they canleverage existing knowledge better. In the UK,NPC offers a wide range of advisory services toprovide this support to funders thinking abouttheir strategic objectives and mechanisms forgiving. NPC and Copal are increasingly playing

a similar role in India.

NGOsupplyofinformation

Increasing donor demand for information shouldin theory influence NGOs willingness to supplyit. Strategic donors prompt organisations theyfund to capture better data. This in turn helps topromote a culture where charities that measuretheir impact and are more transparent in theirwork receive more funding. This is a key part ofestablishing a social business case for NGOsto supply more information, demonstrating its

financial benefits.

Yet the most important part of promotingmeasurement is proving to NGOs how it canhelp them function more effectively. With betterdata, charities are able to identify projects thatare working well and those that should beimproved or dropped. They are able to makebetter use of their resources, improving morelives in more profound ways.

Some NGOs recognise this already and thinkcarefully about measurement but others do

not, regarding it as a compliance burden.One barrier to improving the situation is theexisting dysfunctional reporting requirements.

By sharinginsights,donors notonly improvetheir ownfunding, butalso enhancethe impact ofthe much largersums brought

to the table byeveryone else.

The mostimportant part

of promotingmeasurementis proving toNGOs how itcan help themfunction moreeffectively.

As mentioned above, donors often ask forthe wrong thing or make requests that aredisproportionately bureaucratic or time-consuming to comply with. Some NGOs feelan acute power inequality. They say that theycannot think about measuring what mattersbecause they are busy reporting on what doesnot. Grassroots NGOs in India, a long wayboth literally and figuratively from some of their

funders, find this a particular challenge.

NPC carried out research in Scotland onthe reporting burden for NGOs, highlightingnumerous incidences of unnecessary andtime-consuming reporting requirements.23 A lotof this data never even ended up being usedby donors. The situation in India may well beworse. For some NGOs that NPC and Copalhave spoken to, the extra burden of fundingrequirements has tainted the very process ofmonitoring and evaluation.

The other crucial component for NGOsmeasuring their impact and providing a supplyof information is supportpractical help,money, tools and people. As outlined above,NGOs often have a weak grasp of what shouldbe measured beyond basic output data, anddo not know how to go about it. It can bechallenging to construct measurement systemsto capture complex outcomes in a statisticallyrobust way.

NGOs may also lack proper administrative andcentral office support that can help them to

collect, collate and present information in anaccessible manner. Surprisingly, for a countrywith such a strong IT sector, NGOs websitesare almost uniformly poor.

Achieving all this might mean working withwell-resourced partners (like INGOs, engagingconsultants or academic researchers),leveraging mother NGOs, or encouragingthe secondments of skilled volunteers. In theUK, NPC has set up a measurement team tohelp NGOs to capture their outcomes. One ofits projects is developing a tool for charities touse when measuring their impact on childrenswell-beingan intangible outcome that charitiesoften struggle to capture. Indian NGOs alsoneed this kind of support.

Crucial to all of this, of course, is money.Donors hold the purse strings and need to beprepared to pay for organisations to gatherand distribute information. The benefits ofmeasurement are considerable: NPC and Copalbelieve they significantly outweigh its cost. Thisis because measurement helps to improvethe effectiveness of NGOs that donors fund; itcan provide a way for donors to allocate theirfunding in the future, and it adds to the lessonsand good practice of the sector as a whole.


18/68

16


Flowofinformation

Finally, there is the flow of information.Increasing supply and demand should lead toimprovements in the flow of information in any

case. But to have full impact, it ideally needs tobe publicly available so that other donors andNGOs can use it; so that lessons are learned;and so that mistakes are not repeated. This iswhy everything that NPC and Copal producesis freely available. We also seek to encouragedisclosure and build an environment whereorganisations and funders will share bad newsas well as good.

Ultimately, the goal is the development ofpublic utility information sources on NGOs andsocial problems where donors and NGOs can

identify who is doing what, how well and withwhat certainty of success.

Analysis andresearch canoften look liketransactioncosts, butin fact, theyare crucial toachieving socialchange.

In certain cases, intermediaries will benecessary to broker and mediate relationshipsbetween donors and NGOs, and also to provideindependent analysis of both NGOs anddonors impacts. Charities and philanthropistscan suffer from a failure to properly understandand articulate their own activities and results.They may lack the time, specialist skills or theability to take an independent perspective on

their work.

Beyond increasing the flow of informationbetween donors and NGOs, there is alsoa need to use wider sets of data to informdecision-making. This includes clearerinformation on the specific role of the voluntarysector and philanthropy in general. Funders andNGOs are not isolated actorsthey operatewithin a wider context of social needs andgovernment policy, and are part of broadervoluntary and philanthropy sectors. Withoutunderstanding this broader environment,

philanthropists are in danger of misinterpretingdata on charities impact.

WhatNPCandCopalhavebeen

doing:analysisandresearch

Where does NPC and Copals activity fit in toall this?

As noted above, fixing a broken funding marketis a vast agenda and not one that is in thehands of any one organisation to deliver. In theUK, NPC has developed a range of different

initiatives across each of these three areas,such as developing measurement tools andproviding strategic advice to donors and NGOs(see Box 5). It has also started developing itsinternational offering (see Box 6). For the pilot inIndia, the joint venture between Copal and NPCdecided to concentrate on one vital part ofthe puzzle.

The approach that NPC and Copal has soughtto test is sector and organisational analysisin India. This has traditionally been the mainfocus of NPCs work in the UK. It involves

analysing information on social issues and onindividual NGOs, using a public methodologicalframework, which is set out in NPCs reportFunding success.2

We think sector and organisational research haspotential to help overcome some of the fundingmarket flaws. Primarily, it will help augmentthe third aspect of fixing the funding marketoutlined abovethe flow of informationbringing together key data and presenting itin an accessible and useful way for a donor.Beyond this, it also aims to stimulate donor

demand for data and the supply of informationby demonstrating the utility and applicability ofevidence-based analysis.

Box5:NPCsworkintheUK

NPC and Copals work in India builds on a wealth of activity developed in theUK, where NPC has developed approaches to promote effective funding ineach of the three priority areas identified in this report. Some of the specificactivities are cross-cutting and international in approach.

Servicesforfunders

Helping donors get started: clarifying their objectives, developing effectiveprocesses and learning about areas of giving.

Building strategy and expertise: drawing on the research of NPC andothers to develop funders knowledge of social issues, identify gaps andopportunities, and develop funding strategies.

Improving grant-making processes: helping funders to improve how theyfind, select, fund and monitor the charities they support.

Reviewing giving: working with funders to conduct a strategic review(looking at their focus, approach and impact) to inform future funding.

Bespoke consulting: carrying out a tailored piece of consulting to meet afoundations particular needs.

Servicesforcharities

Charity health checks: providing chief executives or trustees with anoverview of the charity and its strengths and weaknesses to inform futuredevelopment.

Bespoke sector research and consulting: providing bespoke research andadvice on key strategic questions.

Measuring impact: helping charities to develop and implement clearframeworks to evaluate their impact, inform strategy and bettercommunicate to funders the impact of their work. Also helping charitieswith cost benefit analysis to determine the economic value of their work.

Improvingflowofinformation

Building and sharing public knowledge: building sector knowledge byanalysing particular social issues and identifying priorities for funding andways to increase the efficacy of funding.

Knowledge sharing: helping to establish the Association of NonprofitAnalysts, a global organisation to help build links and share information.


19/68

17


Ch

apter1:Th

epro

blem

an

dsolu

tion

Analysis and research can often look liketransaction costs. But in fact, they are crucialto achieving social change. While the successof this approach and its role in improvingthe effectiveness of philanthropy in India is along-term goal, it has the potential to make animpact in three ways:

Money will be allocated to priority areas and

not to areas that are low priority. NGOs will be chosen on the basis of

their results and wider organisationaleffectiveness.

Philanthropists will improve the quality oftheir funding.

Thecaseforanalysisandresearch:

howitcanhelppromotethefunding

market

Thewhat:Analysisandresearchsupports

assetallocation

NPC and Copal make the case for analysis andresearch first and foremost in relation to whatcan be termed asset allocationnamely, for adonor, how to choose which causes to support,and for a charity, how to choose which socialissues to tackle. Analysis cannot tell someonewith a blank piece of paper what to fund oraddress but it can help with choosing betweenthe competing passions a donor or NGO mighthave. Better information will in turn influenceand shape a donors interests.

One example of this is provided by TheChildrens Investment Fund Foundation (CIFF), anextremely strategic funder and one that achievesadded impact by making many of its resourcespublicly available. Many donors fund water andsanitation projects. Donors often like to buildpumps as a tangible thing they can point tohaving created but analysis carried out for CIFFreveals that, relatively speaking, these are notalways a good use of marginal resources.

Disease from lack of sanitation is a bigger

killer than lack of water in India. According toanalysis on CIFFs website, hygiene and washingeducation costs US$3.35 (2) per DisabilityAdjusted Life Year (DALY) averted* compared toUS$94 (57) per DALY for pumps.24 Clearly thereare always uncertainties in this kind of calculation,but the underlying message is a compelling oneand useful both for philanthropists thinking abouttheir spending, and for NGOs thinking about theirprogrammes. Using analysis can increase theprobability of impact.

As the second chapter of this report shows,

analysis can be more useful still where a widerange of relevant factors are brought in. Asnoted, the approach that NPC has developed

For an NGO,analysis of itsstrengths andweaknessesis vital toimproving itsperformance.

Box6:NPCsinternationalwork

While NPC is located in the UK and the majority of our sector research hasbeen focused on UK issues, there has been global interest in, and demand for,our frameworks and approaches. Because we are committed to helping NGOsand funders become more effective, we are extremely interested in pursuingand developing more opportunities and partnerships in Europe, Asia and theAmericas. As a result we have created several strategic international partnerships,made our methodologies freely available to anyone with internet access, spoken

at conferences around the globe and hosted interns from other countries.

In Germany, NPC has developed a strategic partnership with the BertelsmannFoundation to help it adapt our charity analysis framework and implement it intheir research into charities effectiveness. Staff from organisations in Estoniaand Canada have worked with NPC as interns to absorb and reflect on ourapproach and share lessons. In Korea, Singapore, Japan, Sweden, the USAand the Netherlands, other organisations with similar objectives have adaptedor built on aspects of the NPC approach.

As the global network of organisations analysing NGOs and their effectivenessgrows, so does the need for coordination and knowledge-sharing. To meet thisneed, NPC is helping to establish a professional development body/initiative, the

Association of Nonprofit Analysts. This idea was presented to 200 voluntary sectorprofessionals at a conference in London in May 2009, organised and planned byNPC with support from the Bertelsmann Foundation. The conference was attendedby delegates from over 20 countries and there was widespread agreement that theinitiation of the Association was a good idea that should be taken further.

in the UK, and which has been followed bythe joint venture in India, is based on sectorresearch. Sector research reports bringtogether in one place current information ona specific social problem, what governmentis doing to tackle it, what other funders are

doing, which NGOs are in the space, and whatis known about what works. Collectively, thisinformation helps to identify gaps for fundersand NGOs where additional or different activitycan make a difference. It also provides insightinto structural challenges to social problemsbeing solved, including policy failure, a lack ofcash, a lack of proven solutions, or a lack ofcredible implementers.

Thewho:Analysisandresearchsupports

organisationaldevelopment

A second area where analysis helps is

organisational development. For a donor, theanalogy here is with investment. In the absenceof price signals that a for profit investor mightuse, due diligence is even more valuable to thesocial investor. For an NGO, analysis of itsstrengths and weaknesses is vital to improvingits performance.

There are many different ways of doing thisand no single correct approach. NPC andCopal have a narrow and deep evaluationprocess that uses a structured framework toevaluate organisations. This can be carried

out for a donor or for an NGO but in ourwork in India, we have focused our analysison organisations working within two main

* DALY is a standard World Health Organization metric that combines mortality and morbidity costs.


20/68

18


sectors: early childhood development andwater and sanitation. This segmentation allowsunderstanding of context and makes it easier todraw comparisons between organisations.

Analysts make initial contact with a largesample of organisations recommended byexperts, and screen them by an analysis oftheir documentation and through phone calls.

They then visit 2025 NGOs and carry out aseries of interviews with management, trustees,finance directors and beneficiaries. There is thenextensive follow-up to dig deep in a number ofkey areas.

The aim is twofold. On the one hand, it is toidentify and analyse NGOs that are makinga real impact in order to increase informationflow to donors. On the other hand, it is to helpNGOs improve directly. Being analysed is initself a consulting-type service that can highlightareas for improvement.

A distinctive feature of NPC and Copalsapproach is that it seeks to look at wholeorganisations. Our primary interest is ineffectiveness and high social impact but helpingdonors or NGOs deliver high social returnsneeds more than just evidence of impact.Executing an approach that is highly effectivealso requires other capacities, including stablemanagement and finances, good governanceand the ability to sustain a programme.

Efficiency

certainly mattersbut the keychallenge forIndian NGOsidentified byNPC andCopals analysiswas not waste,

it was talentparticularly forprofessionalroles.

Our framework looks at five factors to meet thischallenge, which collectively give a deep insightinto NGO effectiveness:

focusonneedthat it targets excludedgroups or neglected issues;

resultsthat it measures results in asensible way; that it uses its results toimprove its services; that its results comparefavourably to peer organisations;

managementqualitythat it is led well,has a strategic focus, and has strong seniormanagement;

ambitionthat it is committed to increasingthe number of lives it touches or having amore profound impact upon them; and

useofresourcesthat it is efficient andstable.

Thehow:Analysisandresearchimproves

thequalityoffunding

A third and final area where analysis makes adifference is on how to fund. Donors and NGOsoften have a lot of preconceptions about eachother and can form relationships under termsthat harm both their interests. Analysis of socialproblems and NGO sectors helps bring theseproblems to light.

One example commonly mentioned in India isfunding for central organisation costs, such asmanagement and central overheads. Project-based funders are often unwilling to meet this

part of the expense of NGOs with distortingeffectsNGOs end up having to chase projectsthat are outside their mission and competencein order to pay their central costs.

Associated with this, and discussed more in thenext section, is donor concern about admincosts and waste in the organisations that theysupport. Efficiency certainly matters but the keychallenge for Indian NGOs identified by NPCand Copals analysis was not waste, it wastalentparticularly for professional roles. Atleast until the downturn, many grassroots Indian

NGOs were crippled by retention problems andlong-term succession riskpartly because ofcompetition for staff during the boom and partlybecause of low funding. Analysis can help toexpose this kind of problem, establishing whenlow cost is not the same as efficiency.

A final area is the administration of funding:payment release and funding cycles. Short-term funding can impede long-term solutions.Payment in arrears can cause instability andmake it hard to manage and plan projects.

Photographsupplie

dbyJustinCanning/ComicReliefLtd.


21/68

19

Ch

apter2

:Dev

elo

pin

gafram

ew

ork

Developing a framework

The previous section made the case that

better information would help to improve

the effectiveness of the philanthropy

market and highlighted the importance

of analysing social issues and individual

organisations. Yet this still leaves several

questionsin particular, what exactly an

analytical framework should look like. It

also leaves open how it might relate to

other factors that affect donors and their

giving, such as personal interests and

available resources.

From NPC and Copals perspective,

philanthropy is sometimes overly

influenced by a donors subjective

concerns. Important issues, such as

where available resources can be used

for greatest impact, are neglected or

inadequately thought through. This is

not to say that personal interests are

unimportantthey are central both to

motivating a philanthropist and to setting

a general strategic direction for giving.

They should, however, be informed and

influenced by actual evidence of impact.

In this section, we outline a possible

analytical framework that can provide

donors with objective criteria on how

their funding can be most effective. This

is based on the methodological approach

NPC has developed in the UK, and on

Copals experience of the Indian voluntary

sector.

We set out the framework within the

specific context of the Indian environment.

This has a twofold aim: first, to start

demonstrating how this analyticalframework is of value for donors looking

to fund effectively in India; second, to

provide practical advice for donors. This

guidance includes a checklist of things to

work through as well as initial high-level

information that donors can draw upon

when thinking about their giving. It is

aimed particularly at those who are new to

giving in India.

Factors in giving

When thinking about giving, NPC and Copaltraditionally identify three key variables affectinga donor. These variables overlap, influence eachother, and produce a final funding decision:

the donors interests;

the available resources that the donor canbring to his or her philanthropy; and

where funds can have an impact.

The first two issues (interests and resources) areprimarily internal factorsthat is, answerablein the main by reflection on a donors values,beliefs, aims and assets. The third (where fundscan have an impact) is primarily externalthatis, answerable by reference to information aboutthe world. This third issue is the focus of NPCand Copals analytical approach. NPC andCopal believe that the focus of giving should bewhere these three factors overlap (see Figure 2).

Figure2:Factorsingiving

Where funds

can have an impact

Available

resources

Giving

Focus

Interests and

passions

Internal variables

So far, this report has not considered theinternal drivers of philanthropy, like individualinterests and passions. In one sense, it couldbe argued that they are part of the problemwhere funding is not targeted rationally onaddressing need and maximising impact.


22/68

20

Giving in India I Developing a framework

Yet, it is largely individual interest and passionthat underpin a donors involvement inphilanthropy and that provide the impetus andmotivation for continued giving. Neglecting oroverlooking these factors can make philanthropyless involving, less engaging and less satisfying.Over the long term, this may cause people towithdraw or scale back their giving.

Also, looking at it from a macro-perspective,there are many competing good causes. Asnoted above, analysis cannot on its own fillin a blank piece of paper. Internal drivers areimportant in helping donors choose betweencompeting choices of effective funding. YetNPC and Copal would distinguish betweenthose funders who let their personal interestsoverride evidence of effectiveness, and thosewho use evidence to shape and inform theirinterests. Data can tell us something about therelative merits of different options.

It is useful to look briefly at what some of theseinternal factors are. Many donors are not usedto articulating them in any structured way.

Interests

Donors interests can derive from multiplesourcesfor instance, a personal connectionto a cause, an issue or place, or religious orethical inspiration. There are often also groupor corporate motivations in play; for a family,bringing them together around philanthropy; fora business, finding a cause that is aligned withthe organisations goals and brand.

These interests can be understood on threemain levels:

Nature of need: A donor may have strong viewson focusing on a particular issue, geography orgroup. This can be at a general level, such as

NPC and

Copal woulddistinguishbetween thosefunders who lettheir personalinterestsoverrideevidence of

effectiveness,and those whouse evidenceto shape andinform theirinterests.

education or women, to more specific and oftenintersecting interests, such as the healthcareof slum children in Chennai. Because differentissues are heavily interlinked, some donorsprefer to focus on groups and take a holisticapproach in meeting their different needs. Otherslike the clarity of one issue, such as healthcareor education.

Nature of impact: Often a donor may beinterested in having impact at a particularlevel of scale. He or she may want to changethe entire policy environment, or converselywant to focus on improving the lives of asmall number of people. There tends to be atrade-off between the breadth and depth ofan intervention, and the certainty of outcome.NPCs triangle (see Figure 3) makes this clear.A fixed sum of money can do a lot for a smallnumber of people, or less for a large number.Funders can pay for services to be deliveredwith high certainty of impact but limited

numbers, or pay for campaigning and lobbying,where certainty of impact is lower but thepotential exists to change whole systems.

For example, a donor interested in livelihood workcould have sponsored a job creation programmein a village. Or he or she could have contributedto the campaign that eventually led to theNational Rural Employment Guarantee Act, a vastnational employment welfare programme.

Nature of project: Finally, donors may havespecific views on the nature and type of the

project they will fund. Some are prepared to payfor risky projects that might lead to innovations,while others want a safer, proven and trustedapproach. A key issue at the moment withmany international donors is the wish to fundscalable and replicable projects. An importantrelated consideration is exit strategy. Some

Figure3:TheNPCtriangle

Timerequiredtodemonstrateimpact


23/68

21

Giving in India I Developing a framework

Ch

apter2

:Dev

elo

pin

gafram

ew

ork

projects are time-limited. Others will needongoing funding, so provision needs to bemade for long-term sustainability.

Availableresources

The second important factor is donorresources. Each donor will have a particularset of assets that he or she can bring to bear

on social problems. Most attention is given tofinance, but often donors can use a range ofother resources as well.

Financial: Donors will have a certain amount ofmoney that they want to give. They may also havea clear sense of their level of financial commitmentthrough timewhether one year or multi-year.Increasingly, donors are thinking of different waysthat they can structure financial resources toimprove impact, away from the traditional grantallocation. Instead, they are exploring ways ofusing loans, revolving funds and microfinance. SeeBox 7 for examples of social investment in India.

Non-financial: Donors often have significant non-financial resources they can bring to bear. Theseinclude: time; skills; gifts in kind (space, venues forevents, transport); contacts; influence; and accessto networks. Despite their potential impact, thesecontributions are rarely considered, and bothdonors and NGOs tend to be less experienced atleveraging these resources con

giving in india. a guide for funders and charities

Documents