My most memorable encounter with a donor client happened around ten years ago, in my native town of Krasnodar in the south of Russia. Briefly, Krasnodar is a 300-year-old provincial city near the Black Sea, very conservative, very religious and deeply rooted in the black soil on which it was built. The potential client, a heavily built, grim-looking man, was a wealthy agricultural ‘oligarch’, a local entrepreneur.
I started talking about CAF Russia and how we could help him and his company to set up his giving. He listened for about a minute and then said: ‘Shorter!’ Slightly taken aback, I nevertheless went directly into my proposal. ‘Shorter!’ he repeated. Somewhat confused, I cut even further: ‘Shorter!’ I took a deep breath and went for it: ‘Ten thousand dollars a year for your local schools.’ He looked at me again and then nodded approvingly: ‘Agreed.’
Of course, this radical style of negotiation was a one-off, but working with donors in emerging markets brings you a lot of unusual experiences. In order to reach out to new wealth, one has to be flexible, innovative and accepting. My clients are who they are and we start where they start, sometimes with the very basic understanding that charity does indeed exist.
Looking beyond the obvious answers to basic questions
So, when talking about donor support infrastructure in emerging market countries, the first question we should ask is: who are the donors? Though the answer initially seems obvious – wealthy people, the companies they own or manage, the middle class – when we look further, matters are less straightforward. I often used to leave conference sessions on indigenous giving in Eastern Europe fuming. Instead of talking about local entrepreneurs or companies, speakers talked about the European Commission and the German Marshall Fund, USAID and other international funders. The donor market was foreign aid and that was that. The situation has changed somewhat in the last five years in Eastern Europe, especially with the growth of middle-class giving, but still the major donors, and therefore the major source of income for donor services organizations, are foreign funders.
A similar situation exists in many African, South American and Asian countries. They are still dependent on foreign aid, whether public or private, institutional or individual. Such donors are much easier to serve: they know what they want, they are more flexible and strategic, they support issues that local donors do not want to support such as advocacy and policy change or social welfare reforms. As a result, the focus of many donor support organizations in all those regions is on ‘easy’ Northern donors and sometimes on more enlightened diasporas rather than on complicated, confused and prejudiced local entrepreneurs.
Religious organizations as donor services leaders
The second question we should ask is: which are the donor support organizations in emerging markets? Again the obvious answer – the ones that refer to themselves as such, like Charities Aid Foundation (CAF) or community foundations – is largely wrong. The most popular donor services organizations in emerging markets, and the most productive in terms of volumes of supported giving, are churches and other religious organizations. Temples and other religious institutions in India receive and process nearly 80 per cent of all giving and are sources of aid for millions of people. One can argue about the quality and accessibility of such aid and the percentage that goes to temples themselves rather than to local communities. But the fact remains: temples in India are indisputable leaders in the donor services industry there. In the former Soviet Union and China, government institutions also play this role.
Of course, they don’t provide expert advice nor do they do formal due diligence on beneficiaries, but temples and churches do guide and enlighten, promote and encourage private giving. Their access to the emerging middle and wealthy classes is unrivalled, trust in them is high, and their role in translating community needs for local donors is significant. In my experience, enlightenment, encouragement to give in the first place and the push to overcome distrust and hopelessness in the face of the problems around them are much more important than more technical advice on models and methods of giving.
Local donors, in my experience, inevitably start seeking alternative solutions to traditional giving routes after a while and gradually – still in a trickle, not a flow – come to non-governmental and non-religious donor services organizations. But a large majority still choose to give to institutions they are familiar with, not just because of pressure or custom but because of convenience, accessibility, public acceptance and trust. If other donor service organizations can obtain similar levels of those things, they will win the markets. But that day is yet to come …
Business associations, too, especially in South America, often play a donor services role, guiding their members towards specific projects, sometimes setting up joint funds (like a kind of prehistoric community foundation) or just making recommendations and referrals – such and such in our circle supports this charity, so it’s OK. Informal community networks, especially in Africa or China, mostly of either internal or external migrants, also play a role. People are more inclined to trust advice from a former neighbour than from an acknowledged expert.
This issue of trust is probably the key criterion for choosing who will guide emerging market donors in their giving. I once asked a number of my Russian clients what was most important in the projects they supported: their effectiveness in addressing their cause or their honesty in dealing with money. All said honesty.
Therefore, one of the major mistakes that I would register in growing donor support institutions in emerging markets is the nearly total ignorance of traditional channels of wealth redistribution and philanthropy promotion. Another mistake is to think that donors in emerging markets want the same things from donor services organizations as donors in the UK or the USA. Honesty, public acceptance and trust are much higher on the priority list than effectiveness and impact, which are still rather vague concepts for them.
Donor advice in a dynamic environment
So, when we talk about donor support organizations in emerging markets, we are looking at a very diverse group of organizations. On the one hand, we see religious institutions and the state; on the other hand, so-called ‘professional’ donor services institutions which, with some exceptions, largely still serve foreign donors and only recently started reaching out to local wealthy and middle classes. In between there are a variety of charities that raise funds, but in the process of fundraising they sometimes also encourage, enlighten and channel local giving by opening up new forms of giving. Examples are the Donate Life programme in Russia, which massively expanded online donations in the country, or CRY India, which redefined for local donors the protection of rights and transformed it from a remote political agenda to a serious issue demanding public support.
The picture also constantly changes. Ten years ago, there was not a single private foundation in Russia or China. Now Russia has over a hundred and China over a thousand. Five years ago, middle-class giving in Russia hardly existed. Today it produces over $50 million in donations every year. Change is happening in India and other more traditional societies where a new generation of entrepreneurs look to US and European examples of giving rather than traditional ones, creating their own foundations and philanthropic programmes.
Let’s take a closer look at formal donor support organizations in emerging markets countries. They comprise a variety of organizations, largely non-profit, combining fundraising with fee-based donor services, grantmaking, and operating projects of their own. They include donor associations and networks like the Asia Pacific Philanthropy Consortium and also issue-based democracy and civil society development institutions such as the Eurasia Foundation, diaspora-focused boutique advisory services like IPartner India or international networks, such as the International Business Leaders Forum, for whom philanthropy is just one item on their agenda. In several countries, for-profit donor services institutions are emerging, especially in places such as Hong Kong or Singapore with a high concentration of capital where donors are seeking professional help and willing to pay for it. In Hong Kong, for example, two leading players in the private banking field – HSBC and UBS – both provide donor services to their clients.
New donor support organizations also include the growing army of community foundations, though some play more of a community development than a donor support role. Finally, they include organizations created specifically for donor support such as the CAF International network or the United Way International network.
However different they are, they face similar challenges and choices. These challenges and choices, I would argue, also haunt some Western donor services but they are more evident in Russia, China, India or Brazil.
One of the key challenges is of course sustainability. Donors in emerging markets have yet to formulate and understand their needs. Donor support organizations have first to educate their potential clients about those needs before they can respond to them with their services. Considerable outlay in philanthropy promotion and marketing, in donor education and enlightenment, is needed. These expenses will not be covered by donor fees, and most donor support organizations in emerging market countries cannot survive only on fees. They require grant support or direct donations for their own development, otherwise there is a danger they will simply die or transform into political PR companies or worse into money-laundering operations.
Those that decide to try the fees-only route have to face two other challenges. First, they have to choose whom they principally serve: donors or society. Second, they have to decide whether they are comfortable with the current level of their clients’ philanthropy and their understanding of social needs, or whether they want to challenge their clients’ views.
Clients or society? Giving to the donkey sanctuary
Whom to serve first? Many of us know the story of a donkey sanctuary in Scotland that, with the help of a donor services organization, received thousands of pounds of donations. We might smile at this story, but in the context of emerging markets it takes on a much more serious aspect. Emerging market countries almost all suffer from acute poverty, yet between 60 and 80 per cent of donations go to ‘donkey sanctuaries’ – meaning donor decisions based on personal preference, local custom or short-term business or political goals. Local donors seldom take into account the real needs of local communities or seek effective solutions to pressing problems. And because of the weakness or straitened nature of the state, if donor money does not go to address a problem, for example building schools in southern India, no money does.
So should donor support organizations spend their limited resources on donor education and enlightenment, or just charge a fee and move the funds to a donkey sanctuary? The question becomes more insistent when you consider that the majority of donor support organizations in emerging markets are registered as public benefit organizations. Should they pay attention to donor priorities at all? Shouldn’t they just fundraise for local issues or campaign like other charities?
One of the major challenges of donor support organizations in emerging markets is fundraising. Partly in order to serve their communities and fulfil their mission, partly in order to survive and raise funds for themselves, they often start their own programmes aimed at fulfilling a social need such as clean water or sanitation or issues related to AIDS. Instead of encouraging donors to give directly or through them to other charities and projects, donor support organizations take the place of those charities, develop their own agendas, and become the end beneficiaries of their clients’ donations.
However, fulfilling your mission does not mean that you consider that mission as the only credible way to solve society’s or your local community’s needs. It is tempting, especially for community foundations, to do everything themselves instead of making new money from local donors available to other charities. I would argue that such organizations cease to be donor support organizations and become regular aid charities.
I’ve been working in the donor support industry for nearly 20 years, largely with wealthy donors from emerging markets: Brazilians, Chinese, Eastern Europeans. From my experience, I have identified three lessons that I am taking with me to yet another donor support institution – the Philanthropy Bridge Foundation – that I am setting up to encourage and promote giving in emerging markets.
First, accept your clients as they are – even if it is with grim faces and rude retorts of ‘Shorter!’ to your well-prepared speech. That does not mean you always have to agree with where they are, especially if you feel they are moving in the wrong direction and their giving is mostly ‘philanthropic waste’. Invest in donor education, donor enlightenment, philanthropy promotion, even if it sometimes means having to fundraise for years instead of living off generous fees.
Second, put mission and society above donor interests, but do not replace the donor’s interests. Balancing social with donor needs is probably the major factor that makes a donor services organization creative, innovative and relevant. There is always a way to bring together social and clients’ needs. My experience shows that if you know how to do that, it brings more clients.
Third, provide services, don’t sell products. In the constantly changing environment of emerging markets, those who adapt fast, who can transform their offering to catch up with new trends, new donors, new reality, will win. Pushing off-the-shelf products, no matter how well designed and well packaged, does not work because donors’ interests and needs change so fast that you don’t even have time to turn around before your offering becomes obsolete.
Donor support in emerging markets is sometimes a roller coaster ride. But I always try to remember that on the Russian hills there are ups as well as downs and my skill is to catch the ‘up’ moment and maximize its benefit for society while I can.
Olga Alexeeva is chief executive of the newly established Philanthropy Bridge Foundation. She was previously head of CAF Global Trustees. Email firstname.lastname@example.org