Alliance Online - May 2008

Philanthropy in Asia – the glue that binds

Interview with Terry Farris

Terry Farris has been working with individual and corporate philanthropists in Asia Pacific for ten years. ‘Philanthropy in Asia is different from that of North America and Europe,’ he says, ‘Philanthropy is so engrained in the family culture in Asia that it is hard to tell where philanthropy begins and ends in the family structure.’ What are the distinctive features of Asian philanthropy? How is it changing? And are philanthropy advisory services emerging to support the growth of philanthropy in the region? These are some of the questions put to him by Alliance.

Alliance Magazine is the official media sponsor of the 8th International Workshop on Resource Mobilisation (IWRM), 22-25 May 2008, Kuala Lumpur, Malaysia. Organized by the Resource Alliance, the conference is designed to help build the capacity of non-profit organizations in the Global South through a programme of practical workshop sessions and inspiring case studies. Terry Farris will be a panellist at a funders’ forum considering what funders are looking for in the way of measurement of results.

Traditional Asian philanthropy

Terry Farris likens Asian philanthropy to a circle, rippling outwards, with the family at the centre. For an individual philanthropist, traditionally philanthropy starts at home. Taking care of family members and those closely connected to the family is always the starting point. From there the individual focuses on the ancestral home, then the communities where the family now resides, and then the wider region where their business is located.

Another key influence in giving has been religion. Almost 70 per cent of all philanthropy in Asia is given through the temple or through religious organizations. The influence of these religions and their impact is engrained in the Asian family and the Asian way of life. The importance of the balance of life, the focus on karma, and the value of taking care of other individuals and creatures play into the role of giving.

Traditionally, Asian philanthropy has been extremely quiet and very personal. Most philanthropists were just cheque writers and focused on their businesses. They were not systematic or strategic as you would find in other parts of the world. This does not mean that Asians are not philanthropic. Actually they are one of the most philanthropic groups of people in the world. This view is also validated by the Cap Gemini Meryll Lynch study of giving around the world, which shows that wealthy Asians give back around 12 per cent of their estate to philanthropy compared to 8 per cent in the US.

Changes over the last few years …

In the last five years philanthropy has become more strategic. According to Farris, philanthropists are moving away from being purely grantmakers to a more market-based approach. They are taking a more businesslike approach to their giving. The new philanthropist could be compared to a venture capitalist. They are taking a more strategic approach to their philanthropy, looking at engaging other partners to create a greater multiplier effect, and they expect non-profits and charities to produce clear milestones and deliverables where they can measure success.

What has also taken place in Asia is a large increase in wealth. More individuals and families have cash. In years past most money was tied up in their business and in property. Each year philanthropists would decide how much money to give to charity and place it in their trust or foundation. These funds would come in at the beginning of the year and would be given out by the end of the year.

With the increase in cash, philanthropists are now starting for the first time to develop foundations and trusts that have endowments where funds can be long term and more sustainable.

Benefits to families

Philanthropy can have benefits for families, as Farris explains. The Chinese proverb that the first generation builds, the second generation maintains, and the third generation destroys can be seen in every culture. For families who want to last beyond the traditional three generations, one of the key elements of success is wealth succession. And one of the best tools for wealth succession is philanthropy. It creates the opportunity for setting the family mission, sharing the family story, and embedding family values which can be carried from one generation to another. As more and more families move towards professionalizing their businesses, the second and third generations begin to look at how to keep the family together and how to engage the following generations. ‘Philanthropy can be that purpose for the family; it can be the glue that binds.’

Influence from North American and Europe

How much are the trends towards venture philanthropy and the emphasis on legacy and succession planning among wealthy Asians influenced by North American and European trends and how much are they happening independently?

Asians are aware of the giving culture and the philanthropic sectors in Europe and North America, says Farris. In fact, many second and third generation family members attended universities or worked in western countries. These influences are now having an impact as these individuals return and are becoming the CEO or Chairman of their family businesses. They see the need to be more focused and to take a more businesslike approach.

With the growing demands of consumers in North America and Europe for companies to be more socially responsible, there has been greater pressure for Asian business leaders to evaluate how they will approach corporate social responsibility. The best models they have found have come from western cultures. This new pressure has helped philanthropists to look at how they engage their philanthropy into their business also.

Traditionally philanthropists in Asia set aside an amount to support their philanthropy on an annual basis. With the reawakening of the mega-philanthropists who leave up to 80 per cent of their estates to philanthropy, like Bill and Melinda Gates and Warren Buffett, Asian philanthropists started to evaluate for themselves if they should also leave a portion of their estates. What we have seen is a number of major philanthropists in Asia now publicly declaring that up to half or a third of their estates will be left for philanthropy.

What about the philanthropic infrastructure?

How is the infrastructure to support this growth of philanthropy developing? Before answering this question, Farris points out that philanthropy has always been a key component of Asians’ lives. From his 18 years working in the philanthropic sector around the world, he believes they are one of the most generous groups of individuals in the world. Of the individuals or families he has advised, over 80 per cent already had a charitable structure in place. But it is only in the last few years that wealthy Asians are starting to become more public with their giving.

The UK has had a huge influence in countries like Singapore, India, Australia, Hong Kong and Malaysia, which are all Commonwealth countries. These countries continue to follow common law charity rules and regulations, which create a strong and accountable foundation for the establishment of charities and charitable structures. Countries like Taiwan and the Philippines have been influenced more by the US.

Because of this long history many financial institutions and trust companies have been advising their clients and helping them set up philanthropic structures and manage their philanthropic initiatives in the Asia Pacific region and around the world.

Terry Farris has himself has been one of the key players in helping to enhance philanthropy advisory services in Asia Pacific. He started his own philanthropy consulting business eight years ago in Hong Kong, focusing on advising non-profits and family foundations. He then founded and launched MeePierson/Foritis Bank's philanthropy services for Asia. Two and half years ago he was asked to develop UBS's Philanthropy Services for Asia Pacific.

Will Asian families begin to need consultants more as they become more strategic and focused? While philanthropy consultancy in Asia will undoubtedly grow over the years, Farris points out that Asian families are still not prepared to pay for or to engage outside philanthropy consultants on a large scale. Many families still support programmes and projects where their family and business are located. They believe that they understand the needs better than an outsider. But there has nevertheless been an increase in interest around the region.

As philanthropists look to become more professional and set up larger foundations, there will be a natural growth of philanthropy advisory services. This growth will be steady for the next five to ten years. The demand for greater accountability and transparency from charities and NGOs in Asia Pacific from donors and philanthropists will also help spur the growth of advisers to the charity sector, Farris believes.

Terry Alan Farris is the head of UBS Philanthropy Services for Asia-Pacific. Email terry.farris@ubs.com

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