Flexible funding: The catalyst for India's development story

The philanthropic landscape in India is at a pivotal juncture. A recent report by Accelerate India Philanthropy (AIP) and Boston Consulting Group (BCG) has unveiled a staggering potential for philanthropic capital in India. If India¡¯s Ultra High Net Worth Individuals (UHNIs) were to donate 5% of their annual incremental wealth, they could collectively contribute a monumental ?75,500 crore annually. This figure is a staggering five times of what Indian companies spend on CSR in FY2023.

The question now is how to harness this untapped wealth to make larger positive changes in society. The answer lies in the power of ¡®Flexible Funding¡¯.

India¡¯s NGOs are key drivers of change through innovation and dedication. These organizations are at the forefront of addressing complex challenges such as poverty, education, healthcare and climate change. However, traditional funding mechanisms often limit their potential, as they operate on a project-based model with fixed timeframes and deliverables tied around them for each funding cycle. A 2022 Bridgespan study reveals a critical gap that 70% of Indian NGOs do not have funds for organizational development. Moreover, only 61% receive less than 25% of their funds unrestricted.

On the other hand, flexible funding empowers NGOs to make strategic decisions based on ground realities, which is more flexible and efficient in problem-solving. These funds can be used to:

• Investing in Innovation: Test new approaches, pilot innovative programs, and learn from failures, ultimately leading to more effective solutions.
• Strengthen Organizational Capacity: Build robust infrastructure, hire skilled personnel, and invest in technology to enhance operational efficiency and sustainability.
• Build Financial Resilience: Create financial reserves to weather economic downturns and unexpected challenges.
• Respond to Emergencies: Mobilize resources swiftly to provide immediate relief and support long-term recovery efforts during crises.

India¡¯s burgeoning UHNI population presents a unique opportunity to catalyse this shift. According to Knight Frank¡¯s 2024 Wealth Report, India is set to witness a 50% increase in the number of UHNIs ¡ª the highest for any country ¡ª in 2023-28. The report expects the number of UHNIs in India to rise to nearly 20,000 in 2028 from 13,263 in 2023 This trend extends beyond metropolitan areas, with smaller cities like Vadodara, Nagpur, and Udaipur experiencing a rise in UHNI numbers. These individuals possess the financial capacity to create a profound social impact.

In recent years, a new narrative has been emerging¡ªone that recognizes the collective power of NGOs working alongside philanthropists toward a shared vision. Philanthropists today are listening more to NGOs and are willing to shift their practices to be more collaborative. Philanthropists, like MacKenzie Scott, are making significant changes by providing large unrestricted funds to NGOs, sometimes even exceeding their annual budgets, which is transforming traditional philanthropy. This approach offers philanthropists worldwide a chance to rethink the balance between oversight and giving NGOs the freedom to allocate funds where they are most needed.

Govind Iyer, Founding Board Member and All India Chairperson, SVP India

Here are some ways UHNIs can champion the cause of flexible funding:

• Advocacy and Awareness: UHNIs can use their influence to advocate for the importance of flexible funding among their peers and the broader philanthropic community. By raising awareness, they can shift the funding paradigm towards a more balanced approach that values both project-specific and unrestricted funding.
• Leading by Example: By committing a portion of their philanthropy to flexible funding, UHNIs can set a precedent for others to follow. Their leadership can inspire a ripple effect, encouraging more donors to adopt flexible funding practices.
• Capacity Building and Mentorship: Beyond financial contributions, UHNIs can offer their expertise in business and management to help NGOs build their capacities. This can include providing mentorship, facilitating training programs, and supporting the development of strategic plans.
• Creating Philanthropic Funds: UHNIs can establish dedicated philanthropic funds focused on providing flexible funding to NGOs. These funds can be managed with transparency and accountability, ensuring that resources are used effectively to strengthen the NGO sector.

Philanthropy is a growing area of interest for India¡¯s UHNIs and has the potential to be a powerful catalyst for socio-economic transformation. Studies by AIP-BCG show that discerning philanthropists understand the critical role of flexible funding in supporting high-risk, innovative initiatives. Each philanthropic journey is a unique path to self-discovery, and every UHNI has the opportunity to make contributions that more meaningful and transformative.

Flexible funding is more than a financial strategy; it is a critical enabler for NGOs striving to create lasting social impact. By adopting this approach, UHNIs can support the creation of a stronger and more resilient NGO sector in India, contributing to the nation¡¯s inclusive growth and sustainable progress.

(This article is authored by Govind Iyer, Founding Board Member and All India Chairperson, SVP India)