It matters how philanthropy in Asia will develop in the coming decade. Despite economic progress having lifted millions out of poverty in the last 20 years, half of Asia’s 1.63 billion people live on incomes of less than $2 a day. Personal wealth is being created in Asia Pacific at unprecedented levels – the number of high net worth individuals grew by 1.6 per cent in 2011 to 3.37 million, overtaking the number of wealthy in either North America or Europe – but wealth alone is no guarantee that the region’s philanthropy is risk-taking and transformative.
A study about to be published by the Asia Centre for Social Entrepreneurship and Philanthropy, supported by Fondation Lombard Odier, suggests that philanthropy innovation in Asia is driven by a new generation of wealth-creating entrepreneurs searching for high-impact models of giving that connect with their commercial acumen; by family-based philanthropies wanting to overhaul their traditional giving patterns; and, perhaps most of all, by the rise of social entrepreneurship.
Entrepreneurial social finance
Financial services group Edelweiss wanted its corporate philanthropy to align with its entrepreneurial culture, so the EdelGive Foundation (see below) intuitively adopted a venture philanthropy approach by supporting social enterprises in education and livelihood development with funding and management support. Company executives and project teams volunteer their skills to offer non-profits a level of professional expertise normally beyond their reach.
The venture philanthropy approach is growing in Asia. ADM Capital Foundation, the philanthropic arm of a Hong Kong-based investment management company, provides finance coupled with hands-on strategic and operational advice to 28 non-profits in eight Asian countries. In Shanghai, Non-Profit Incubator has pioneered venture philanthropy in China since 2006 and today has ten initiatives covering four major cities.
The US network of giving circles Social Venture Partners International (SVPi) has slowly expanded in Asia, with affiliates in Tokyo and Bangalore, and there are now circles inspired by the model in Singapore, Seoul and Hong Kong. Social Ventures Hong Kong (SVhk), for example, was founded in 2007 to offer young professionals a platform for pooling time and money to help the island’s social entrepreneurs. SVhk seed-funded Diamond Cabs, a new high-quality, safe, wheelchair-accessible taxi service for the island’s 100,000 wheelchair users, and has a 51 per cent equity stake in the business.
Venture philanthropy and impact investing share a ‘venture capital’ model of finance plus management support. Avantage Ventures in Hong Kong estimates the potential demand for impact investing in Asia as US$74 billion in the ten years up to 2020. India has led the way in Asian impact investing since 2002 with Aavishkaar, now raising its second fund of US$120 million. Its first fund of US$14 million is deployed in 22 small and medium-sized companies across a range of sectors. With 30 per cent of global impact investing India-centred, and a large underserved market for low-cost goods and services, there are ample opportunities for impact investing and venture philanthropy to build capable non-profit and for-profit ventures.
Elsewhere in Asia philanthropists are experimenting with impact investing. Richard Chandler’s investment company makes impact investments ‘to transform health, education and leadership opportunities’. Richard Chandler Corporation directly builds social businesses in eight Asian countries to offer affordable healthcare and education services. Rumi Education, for instance, provides low-cost education in India and Pakistan.
Real estate entrepreneur William Schoenfeld invests in existing small social businesses with growth potential through Transist Impact Labs, a Shanghai-based fund making early-stage investments in Asian social enterprises. The fund makes one new investment each month, mostly in China. Transist favours technology-based enterprises, with low-cost ways of scaling up. One investment, Micro Benefits, is a turnkey employee benefits package aimed at blue-collar workers in small towns and cities across China.
China poses unique opportunities and challenges for venture philanthropy and impact investing. Non-profits are a fairly new idea and establishing one is fraught with regulatory hurdles. Creating businesses and wealth, however, has ideological blessing in China and many social entrepreneurs establish private businesses to deliver social mission rather than non-profits or hybrid social enterprises. The very restrictions that inhibit the growth of non-profits could be the touchpaper for an explosion in Chinese socially oriented businesses funded by impact investing.
Impact investing in Asia is limited by the small number of social enterprises with sufficiently robust business plans and execution skills to satisfy investor demand for both financial return and social impact. To build an adequate pipeline requires ‘enterprise philanthropy’, a niche of venture philanthropy focused specifically on helping non-profits and early-stage social enterprises become ‘investment ready’. LGT Venture Philanthropy has partnerships with local support organizations in Thailand, Vietnam, China and the Philippines to provide business incubation services.
Making grantmaking strategic
Asia also needs a strong, innovative grantmaking sector, which is strategic in outlook and complements venture philanthropy and impact investing. Our study revealed pockets of innovation in the relatively small and underdeveloped Asian grantmaking sector, driven by intrapreneurs who maintain a sharp edge to established foundations; by families who are revitalizing their giving; by entrepreneurial philanthropists in ‘green field’ markets like China; and by those adapting well-known western models like community philanthropy to local needs.
In addition to being a leading financial centre, Singapore is also a global leader in casino gambling. The Singapore Totalisator Board (the Tote Board) is both a gaming regulatory body and a major grantmaker funded by gambling revenues. The Tote’s Outcome Fund encourages Singapore’s non-profits to build outcome measurement into their programmes, backed by workshops that promote a cultural shift from only reporting activities to disclosing social impact. The Tote Board has also been at the forefront of microcredit and social enterprise incubation in Singapore.
The recent study by INSEAD and UBS on family philanthropy in Asia reinforces the role of giving in family cohesion and the philanthropic opportunities arising from intergenerational transfer of wealth and business ownership. Originally from Switzerland, the Zuellig family has made the Philippines the centre of its commercial interests. Over the last 15 years the family’s philanthropy has evolved. Instead of coming through the company’s CSR arm, much of it is now done by the Zuellig Family Foundation (see below).
Many Asian countries have virtually no modern history of philanthropy. In China, one of the first foundations to appear in the 1980s, following new legislation, was Amity Foundation, established as the response of Chinese Christians to devastation brought about by the Cultural Revolution. In addition to its highly respected social development work, Amity is today one of several progressive foundations that actively promote and fund the development of philanthropy in China. Several new private foundations in China are focused on promoting social entrepreneurship. YouChange is developing university curricula on social entrepreneurship and promoting social innovation at major events such as the Shanghai World Expo.
Community philanthropy is little developed in Asia. There are probably no more than 20 community foundations in the region, outside of Australia and New Zealand, and clearly there is scope for expansion. The Phuket Community Foundation in Thailand was a response to chaotic relief coordination during the 2004 Tsunami. The Community Foundation of Singapore offers tailored donor services to a country where one in every six households has US$1 million of disposable wealth.
An effective ecosystem
Grantmaker support organizations and networks, an important part of the landscape in the US and Europe, are largely missing in Asia. The recent arrival of the Asian Venture Philanthropy Network (AVPN) aims to foster learning in their community. Data on philanthropy is very short in Asia, with little transparency about grantmaking policies and activities. One organization that aims to fill this gap is the China Foundation Center (see below).
Data and analysis are essential to the infrastructure of philanthropy but for a more effective matching of philanthropic capital to demand, donor-led initiatives like the Artha Platform in India are needed. Artha is an online ‘matchmaking service’ initiated by Rianta Capital, a family office-linked impact investor. Such platforms help reduce the duplication and effort of screening potential investments, saving time and money for both fund and investee, and provide opportunities for co-funding and syndication.
More ambitious is the attempt by the Singapore-based Impact Investment Exchange (IIX) to create stock market-like efficiency in the social enterprise marketplace in Asia. Launched in 2012, IIX is conducted through Impact Partners, a private online platform that connects accredited investors to pre-screened social enterprises. Like a traditional stock exchange, Impact Capital will provide liquidity to investors by supporting listing, trading, clearing and settlement of securities issued by social enterprises.
Imitation or innovation?
The philanthropy landscape is developing rapidly across Asia, yet the region must face the challenges of rising income disparity and environmental pressure. Professional Asians increasingly live and work in countries with longer modern philanthropic traditions; they will import and adapt models. Whether philanthropy in Asia is developed through imitation and adaptation or local innovation is irrelevant as long as it is risk-taking, focused on outcomes, collaborative, accountable and transparent.
1 Beyond the Margin (2011) Avantage Ventures http://www.avantageventures.com
2 S Dichter, R Katz, H Koh and A Karamchandani (Winter 2013) ‘Closing the Pioneer Gap’, Stanford Social Innovation Review.
Rob John is a senior visiting fellow at the Asia Centre for Social Entrepreneurship & Philanthropy, NUS Business School, Singapore, and a co-founder of AVPN. Email email@example.com
Edelgive Foundation, India
Founded in 1997, Edelweiss went public in 2007 and decided to set up a charitable foundation. Named EdelGive, the foundation had ‘the same DNA that created the company’, using 1 per cent of pre-tax profits set aside for social responsibility. CFO Vidya Shah intuitively hit upon what she later learned was a venture philanthropy approach: rather than just fund their projects, EdelGive would help Indian non-profits become stronger organizations. ‘We start with dialogue,’ says Shah, ‘just like Edelweiss does. Beginning with a “dashboard” exercise, we ask what the organization sees as its key challenges and ambitions over 6-month, 24-month and long-term horizons. We explore strategy, fundraising, hiring and social impact.’
Moreover, Edelweiss staff have skills that are potentially valuable to non-profits, and have so far volunteered 4,000 hours of their time. EdelGive is now considering ‘investing in larger portfolio organizations, especially appropriate in India where scale is needed’.
Zuellig Family Foundation (ZFF), Philippines
In 1901 Frederick Zuellig moved from Switzerland to Manila, where he built a healthcare business that today is one of the largest privately held corporations in Asia. Family members remain active in managing the Zuellig Group and its philanthropy. From the early 1990s the group companies made humanitarian donations for disaster relief, and in 1997 a company foundation was established to coordinate CSR activity.
The family wanted to overcome the divide that left the poorest in society without access to health services, so in 2008 organized its own philanthropic programme, independent of the CSR activities of the group companies – the Zuellig Family Foundation (ZFF). Focusing on the Philippines’ high maternal mortality ratio (MMR), the foundation developed an innovative programme to build civic leadership at municipal level, and in two years saw a significant fall in MMR to levels that would help the Philippines meet Millennium Development Goal targets. ZFF expanded the pilot to more challenging rural settings, including Mindanao. Each municipality designed ‘scorecards’ to monitor the changes in key health indicators in their location. The programme is expanding to cover 20 per cent of the country’s priority municipalities, and from 2013 ZFF will collaborate with the Department of Health to roll out the programme nationally.
China Foundation Center, Beijing
Organizations recognizable as philanthropic foundations have existed in China only since the 1980s, and until 2004 all were strongly linked to state institutions. Over the last eight years legislation has allowed for the establishment of ‘private foundations’ endowed by individuals or companies. These now make up over half of China’s 2,882 registered foundations. The China Foundation Center (CFC) was set up to map this emerging sector and to encourage accountability and transparency. Conceived by philanthropy entrepreneur Xu Yongguang, a close partnership with the US Foundation Center, the Hauser Center at Harvard and the Ford Foundation helped bring the initiative to fruition in 2010. When CFC started only 16 per cent of financial information and 1 per cent of project information on foundation activity was available publicly; after two years the figures have grown to 90 per cent and 50 per cent.
CFC launched its Foundation Transparency Index in 2012. This uses 60 indicators to rank all the private and public foundations listed on its website. The index is updated weekly, providing a real-time analysis of ‘who is up and who is down’ in Chinese grantmaking transparency. CFC’s pioneering work is potentially a model for other Asian countries.