Call it the Covid-19 effect. Philanthropic or social sector funding has taken a huge blow with several non-profits even facing an existential crisis, with all funding activities currently revolving around fighting the pandemic.
The sector stares at a huge fall, with CSR funding expected to drop by an estimated 30-60% over the next two years, as ultra-high-net-worth individuals and leading corporates set aside their spends for Covid-19 response.
Going forward, economic distress faced by companies will be the double whammy for the sector. Officials working in the non-profits space told TOI that the social sector is expected to face a drying up of CSR spends over the next two years, with a bulk of it being channelized to meet the Covid crisis, including for various initiatives like the PM-Cares Fund.
The drying up of funds for social sector funding, together with the downward pressure on corporate profitability over the years, is expected to significantly reduce CSR funding across sectors, experts say.
“Most companies have contributed substantially to the Covid-19 response, either to the PM-Cares Fund or chief ministers’ funds (across states) as well as to their own CSR Covid-19 interventions. This contribution of resources, paired with the downward pressure on corporate profitability over the coming years, is anticipated to significantly reduce CSR funding that supports India’s Sustainable Development Goals across sectors,” says Pritha Venkatachalam, partner of The Bridgespan Group, a philanthropy advisory.
“Even if the quantum of CSR funds is inevitably lower, CSR donors could reorient their giving in three ways — proactively supporting the vulnerable and most marginalized groups; rebuilding resilience of communities through for example, sustainable livelihoods and stronger primary health systems, and collaborating smartly to leverage scarce resources for greater impact,” Venkatachalam adds.
Many domestic and foreign philanthropists who have announced large-sized Covid response initiatives are unlikely to make new/bold bets this year. Several others are repurposing their current commitments to support the pandemic response, impacting other social challenges, including non-Covid public health initiatives. A few are adopting a wait-and-watch approach to ensure funding headroom for a post-emergency phase; while some non-profits — with the support of primarily their existing funders — have rallied or repurposed their programs to work on health and/or socio-economic needs of the pandemic, a Bridgespan study across 40 organizations, shared exclusively with TOI, says.
Deval Sanghavi, co-founder, Dasra, a strategic philanthropy foundation, says, “NGOs which have a higher dependency on CSR funds have seen a 20-40% drop in budgets, regardless of the sector they focus on. Their financial situation only gets worse next year with even greater deficits, leading some to even shutdown. In other countries, governments have supported non-profit organizations with salary and rental payments for a three-to-six month period.”
Covid funding will move from current focus on food, health and hygiene to rural education and livelihood, according to Vineet Nayar, philanthropist and former chief of HCL Technologies.
“Non-Covid project funding will reduce by 30-50%, thus we will see flight to quality, leading to consolidation around fewer high-impact projects. Secondly, many inflight projects will come to a sudden halt, leaving end beneficiaries worse off than before, and lastly we will see a significant number of people in the social sector lose their jobs,” he adds.
The study highlights philanthropic investment could be in supporting critical healthcare and socioeconomic needs, and vulnerable populations like migrant workers.
Philanthropic funding has grown at a Compound Annual Growth Rate (CAGR) of over 17% during 2011-19, with an increasing share from domestic corporations and individual/family philanthropies, according to Bain India Philanthropy Report 2019.