It used to be easier. You would come home, open the mailbox and find an anonymous looking envelope. Inside, you would find a card with despondent children, or cute tiger cubs, and a prefilled check. Alternatively, you could always count on your sister’s crochet friend to ask you for money for the local group distributing meals to the homeless. And finally, you would leave a bequest in your will to a couple of charities, usually an animal shelter or some organization you had heard about throughout your life but had never had the chance to really investigate. Formany, philanthropy would be just that. Although it would be wrong to suggest this sort of giving is pointless, it does end up being relatively ineffective in achieving transformative impact.

But times are changing in the world of private philanthropy. Over the last few years, there has been much talk of ‘philanthropy 2.0,’ and buzzwords like ‘venture philanthropy,’ ‘strategic philanthropy,’ ‘Silicon Valley philanthropy’ and ‘philanthrocapitalism’ are becoming ever more common. Despite certain nuances, all refer to the same widespread phenomenon: even if you are not planning to give millions, philanthropy has become a considerably more thorough, professional and transparent process, which does not end with having your name carved on a brass plate in a hallowed university courtyard, or on the hand-painted sign of a rural hospital in Ethiopia.

We are moving away from responsive, opportunistic charity, and increasingly towards a thought-out, engaged and proactive form of giving, which is aimed at accelerating the pace of social change. Donors tend to give at a younger age, to be personally involved in the causes they support, and often in conjunction with friends and family. They wish to understand, to learn and to see the results of their giving. Finally, they are ready to experiment, to try out new approaches and to bring more than just their money to the table. Because of this shift, there are a number of changes that are starting to appear in the philanthropic ecosystem – all of which will become vital in the years ahead.

The first trend, which has actually been slowly taking off in the last decade or so, is a growing pressure on those at the receiving end of donor funds to become more professional, accountable, transparent, and ultimately, more efficient. Donors want to know how their money is being spent, and what impact it is having. Of course, there are certain downsides. Beneficiary organizations often complain about devoting too much time – and too many resources – to writing proposals, filing reports and auditing accounts. While it is true that answering the growing demands of donors means an additional investment, in a world of shrinking philanthropic capital, the adapt or die rule applies. This may be a hurtful process, but it is also an inevitable evolution, which is ultimately more positive than negative. Sadly, however, standards of reporting remain too low – a fact just as true of larger, more established organizations as for smaller, volunteer-based groups.

As always, there is a balance to be struck: if you are giving $200,000 to an organization, the sophistication of reporting you should expect as a donor is correspondingly more than for a oneoff contribution of $200. In either case, however, the donor is entitled to know how the money was used, and what the grant helped to achieve. On the other hand, donors – even enlightened ones – still fail to grasp the importance of funding the operational costs of their beneficiaries. Clearly, this conflicts with demands for professional standards of administration and governance. Slowly but surely, donors will have to understand that in order for an organization to blossom, grow, professionalize and achieve its full potential, it will have to invest in qualified and talented staff, as well as smart fundraising, marketing and capacity building. On average, organizations dedicate approximately 15 percent of their resources for such operational expenses. While this means a portion of donor funds do not always flow directly to a specific project, it ultimately helps to enhance the overall efficiency of the organization, thus allowing for even greater impact.

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by Martina Castro

Photo © UN/Albert Gonzales Farran