Endowment-based giving can provide charities and marginalised communities the consistency they need in a time of social and financial instability.
The pandemic has been tough for charities and non-profits, with many suffering a drop in donations at the exact time their services are more in demand than ever.
This is the problem with much traditional giving. It is short-term, reactive and unsustainable. It can also be, as we have seen in the last year, self-defeating: when times are hard, donations dry up, but demand spikes.
Endowment-based giving provides an alternative. For much of modern history, this has been the norm for sustainable philanthropy.
In Islamic history, for example, a ‘waqf’ is when an individual or group donates an asset that creates its own sustainable returns, rather than just cash. For example, a farm could be given to charity. This was the case with the first waqf, a date farm.
This kind of sustainable giving is what non-profits need, and in my experience, savvy donors increasingly want to support.
For example, if property or a business—rather than cash—is donated to a non-profit, its dividends or rental income can be generated sustainably, even indefinitely. Often that income is used as an ongoing donation, while the asset itself is untouched and itself appreciates in value over time, creating added security for the non-profit.
At a time of social and financial instability, endowment-based giving can give charities and communities the consistency they need.
Donors and organisations are embracing this, despite them being more familiar with the traditional, reactive ‘donate to a cause’ model of charity.
A donor may see a heart-wrenching photo of an orphan or a natural disaster, and be moved enough to send a one-off or recurring donation. But when the donations stop—for example if the donor loses his or her job—the work stops.
The traditional giving model does work. In 2019, Americans donated $450 billion to charity. This approach is especially effective in times of acute crisis, for example when American donors contributed approximately $587 million alone to support the victims of Hurricane Katrina. In short, empathy is a powerful purse-string loosener.
But we have to think about long-term effectiveness as well as short-term emotion. For most people, empathic charitable giving is the first monthly outgoing to be cut when the going gets tough.
Gallup found that during 2020, charitable giving in the US was at an all-time low, with 73 percent of adults saying they were donating to charitable causes. The previous all-time low for charitable giving in the 21st century was recorded in 2009, the year after the financial crash.
This unpredictability means that many non-profits think twice before committing to long-term projects. But it is long-term, or even generational projects that can create the most change, as opposed to reactive, short-term responses.
Whilst the concept of endowment-based giving can be seen as relatively novel within the context of contemporary non-profits, the idea is certainly not new - particularly in the Islamic tradition.
The Ottoman Empire, one of the largest and most successful empires in human history, was built on endowments, or waqfs. All public services, including infrastructure, education and health care were provided by them.
The same method is commonly used to support marginalised communities today. Research shows how the waqf infrastructure can be critically important in alleviating poverty in India, Somalia and Bangladesh.
Other religious traditions adopt a similar model; endowments are used in both Orthodox Judaism and Catholicism to support local communities.
Between 1991 and 2016, Atlantic Philanthropies invested $570 million in Northern Ireland in the form of endowments, which helped with bolstering cooperation across communities, education and economic regeneration. For tackling generational issues like the Catholic-Protestant divide in Northern Ireland, it is endowment-based giving that can have the best impact.
Long-term problems need long-term solutions: in a post-conflict society like Northern Ireland’s, the generational change required for a lasting peace requires generational, sustainable and strategic philanthropic investment - not short-term donations.
These scenarios, of specific marginalised communities and long-term challenges, play out in the British Muslim community, of which I am part. In the UK, 50 percent of Muslim households are in poverty, compared with the national average of 18 pecent. That won’t be solved overnight, or with a single campaign.
Increasingly, donors want to create big shifts in the world, not nibble around the edges of a problem. Even if a small donor cannot donate an entire property, technologically-enabled platforms have made it easier to invest a smaller stake in endowment funds.
Changes like this will allow non-profits to survive and thrive even at these most uncertain of times.
Disclaimer: The viewpoints expressed by the authors do not necessarily reflect the opinions, viewpoints and editorial policies of TRT World.
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