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Launch Issue
Giving Magazine
Can A Country's Policies Drive Philanthropy? Yes, And They Should!
by Crystal Hayling
In what ways is public policy encouraging or discouraging the growth of strategic philanthropy?

Princeton University alums are well known as big spenders, or, more specifically, as big givers. Starting from freshman year—before they have reached alumni status—contributions are solicited and celebrated. In this way, the school grooms and encourages every philanthropic impulse. Princeton creates a culture where giving is the norm. Pride in supporting the institution reinforces the school’s ability to excel and flourish.

Is it possible for a country to be like Princeton?

In their much lauded book Nudge, University of Chicago and Harvard Law School authors Richard Thaler and Cass Sunstein break down the way policies impact the behavior of individuals and groups. While remaining firm advocates of free will, Nudge shows the way the presentation of policy options can encourage positive behavior and discourage negative ones. When the book came out in 2009 foundation CEOs like myself spent a great deal of time discussing applications of its theories to increase immunization rates, encourage retirement savings, and create ease of exercising through refurbished parks and biking paths.

In kind, our behavior as philanthropists is as clearly shaped by philanthropic public policy. The United States is widely recognized as an exceedingly charitable country. And a large part of that charitable giving has been stimulated by a sophisticated blend of tax and nonprofit laws that encourage such behavior. No one can quantify the exact financial impact the nation’s generous tax policy has on giving, but there is rarely a question that it plays an important role.

So when I moved to Singapore, a country where public policy wonks feel right at home, I became interested in digging deeper on this correlation between public policy and philanthropy to see if it held true here as well. The Lien Centre for Social Innovation, on whose board I sit, received funding from the Canadian International Development and Research Centre to conduct a study of philanthropic policy in four Southeast Asian economies—Indonesia, the Philippines, Singapore, and Thailand—to better understand the issue. We set out to answer the question: in what way is public policy encouraging or discouraging the growth of strategic philanthropy in the region? As a part of the report, entitled “Levers of Change: Philanthropy in Select Southeast Asian Countries” and released in February of last year, we conducted in-depth interviews and surveyed focus groups with key stakeholders.

The study’s findings reveal consistent linkages between thoughtful public policy and increases in philanthropic giving, but also found many gaps in policy and practice that hinder philanthropic growth, particularly strategic philanthropy focused on addressing social problems.

This is not an academic question. The spectacular growth in wealth in Southeast Asia is matched only by the stark unevenness of its distribution. Many chroniclers of the super-rich seem to assume that philanthropy will automatically increase in tandem. But the charitable impulse on its own will never be sufficient to form the building blocks of a strong civil society necessary to address social inequity. The culture of philanthropy can be nurtured to become vibrant, strategic, and effective.

Though data is limited (indeed the lack of proper data was found to be an inhibiting factor to developing the philanthropic sector across all countries), Singapore clearly emerged as a leader in the region as a driver of increased giving through policies that encourage domestic contributions to voluntary organizations. Donors receive a 250% charitable deduction for contributions made to specific nonprofits. That policy has paved a consistently growing trend of cash contributions in the country.

The other three countries studied have had more mixed focus on philanthropic policy with less clear-cut outcomes as a result. None of the other countries offered such bold tax benefits for charitable giving, but the study showed why: the personal income tax is a weak policy tool in developing and emerging economies because the pool of income tax payers is relatively small, effective tax rates relatively low, and tax capture rates modest by most counts. Thus, the political challenge of providing tax breaks for the wealthy, a heated debate even in the US where it has been a policy for decades, is a non-starter in countries where tax breaks are unlikely to be significant enough to sway donor behavior.

Innovation in philanthropic policy and practice is correspondingly an imperative in the region if private wealth is to achieve its potential to catalyze systemic change and social improvement. In the Philippines, for example, a unique debt-for-nature loan forgiveness scheme created the Foundation for the Philippine Environment that supports biodiversity conservation and sustainable development.

In Indonesia, there are new approaches to zakat donations led by innovative nonprofit organizations that offer the emerging middle class in the largest Muslim nation options to support community development to combat poverty.

The symbiotic, yet sometimes uneasy, relationship between nonprofits and donors was highlighted as a challenge in all four countries. Nonprofits would prefer donors to offer longer-term support to build institutional capacity, while donors cite weak accountability as a reason many create their own projects rather than working with NGOs. Robust networks of donors and nonprofits, as evidenced in the Philippines and increasingly in Singapore, can begin to help overcome these challenges through knowledge sharing of best practices.

All four countries would benefit from concerted donor education to advance strategic philanthropy and move beyond checkbook charity. A promising sign is the nascent development of community foundations and giving circles where donors, large and small, can pool financial resources and match funds with expertise on community needs to support worthy NGOs. The enabling environment for strategic philanthropy can be improved through policies that encourage innovation in civil society, increase non-profit and philanthropic accountability, improve data collection, and celebrate risk-taking leaders.

Some argue that the culture of giving in Asia, which has been characterized as individually driven, family-clan oriented, and private or anonymous in nature, does not lend itself to being influenced by public policy. However, the evidence from this report suggests otherwise. The stage is set for new philanthropic leaders to come to the fore and public policy can go a long way to create the enabling environment for those strategic philanthropists to make a real impact.

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