New Forms of Philanthropy -- With New Business Opportunities

Washington Matters

New Forms of Philanthropy --
With New Business Opportunities

Donors are no longer happy letting umbrella charities decide how their contributions will be used.

Several thousand people will decamp in Washington next week for the most important meeting you’ll probably never hear about. Unlike raucous Tea Party protesters or the big World Bank-International Monetary Fund gathering this weekend that will tie the city in knots again, expect hardly a tweet about a low-key confab of entrepreneurs whose goal is to build business ties with Muslim nations

The Presidential Summit on Entrepreneurship is billed as the fulfillment of President Obama’s pledge in Cairo last June to build trust in the U.S. and relationships with Muslim and developing nations. With a nod to the concept of President Eisenhower’s Cold War-era People to People program, the summit aims to build understanding by encouraging corporations, entrepreneurs and philanthropic groups to work together on development projects and to help people create small businesses.

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Headlines or no, the suits who powwow at the meeting, including Silicon Valley venture capitalists, are in the vanguard of activities that could profoundly change the geopolitical landscape and redefine how businesses do business with 4 billion people in the developing world.

It won’t be guided by a new Marshall Plan, Alliance for Progress or even Obama. His influence is mostly in leveraging changes that are redefining how assistance is given to the needy. In place of largesse by governments or large charities shipping food, seeds, medicines and more, a new model is emerging: "philanthrocapitalism." Companies donate goods and services to specific projects. Targeted assistance is viewed as more efficient than donating money to established charities with big overheads. It can be far swifter, too. Within days of Haiti’s devastating earthquake, Digicel and Invenco had emergency communications gear on the ground.


Companies also may get to earn good-corporate-citizen stripes. Often as not, donations are made to local nongovernment organizations or coordinated through groups that take new approaches to philanthropy, such as the Clinton Global Initiative. CGI, founded by former President Clinton, harnesses corporate expertise and do-goodism directly. Pfizer used CGI’s network to provide malaria treatments in Africa. Established charities such as Care International and Lifeline Energy pledged through CGI to distribute solar and windup power lights and radios to Rwandans enabling them to boost productivity.

Similarly, the Acumen Fund’s Patient Capital lets entrepreneurs invest in funds that make loans or provide equity to start-up businesses in developing countries. India’s Ekta Foundation Trust channels corporate donations to promote the handicrafts industry and generate employment for people living in rural and urban slums.

At the same time, building goodwill and brand awareness in markets where consumers could have $5 trillion in buying power a decade from now is a tantalizing prospect for businesses. Many big-name brands that instantly resonate with American consumers -- Procter & Gamble, Timberland, John Deere, Del Monte, for example -- are largely unknown in developing world villages. But donations go a long way to help companies demonstrate their corporate social responsibility—a trend that’s swaying many to set aside some profits to assist the needy.

Consumers may have just a few bucks to spare, but their insistence on giving to projects that provide more of a hand than a handout, and who want to track progress online, is fostering different breeds of philanthropy. Heifer International lets people purchase cows for donation. Jumo, started by a Facebook cofounder, aims to send consumer donations to health care and education projects selected by donors.


Keep an eye on MiWorld, a communications and commerce portal that lets corporations and nonprofits partner on social innovation development projects. It’s tapping into four powerful forces: consumers’ insistence on targeted giving; demand for instant feedback; love of personal stories; and social media. With a click, donors can support health clinics in Asia, promote sustainable farming in Central America or advance water projects in Africa. Web links enable them to watch videos of projects in process or chat with kids in Guatemala, Kenya, Pakistan and elsewhere while the kids sit in classrooms funded by their donations.

MiWorld also enables companies to donate or sell at wholesale goods and services to projects, but firms have an extra opportunity to build goodwill with consumers in the U.S., Europe and elsewhere who donate. Feature stories written by residents of villages where projects are underway, will contain paid links to donor companies’ sites.

If this is a new approach to philanthropy, so is the organization. It’s neither a nonprofit nor a profit-making company, but is a hybrid not-for-our-profit model that will direct after-tax profits to developing world projects, such as building schools, hospitals and clinics, and microfinance start-up businesses.