Although the COVID-19 pandemic has affected everyone, in India, the impact has been the greatest for marginalised groups in cities – such as migrant workers and low-income households – with containment zones having shifted from the more affluent parts of cities to slums and other congested areas. Nearly 40 million individuals are reported to be without work or homeless, and their plight is unlikely to end any time soon. A third group comprising ageing citizens in cities, who are bereft of any support system, also remains vulnerable.
Figure 1: shift in hotspots from affluent south Mumbai in April 2020 (left) to other parts of Mumbai in June 2020 (right) (Source: BMC Daily Dashboard).
NGOs' contribution to COVID-19 response
Faced with the herculean task of protecting public health and the economy, the government is struggling to provide adequate support to these groups. In these challenging times, non-governmental organisations (NGOs) have stepped in, distributing rations, organising trains for migrants and providing medicine to the elderly.
Amitabh Kant, CEO of NITI Aayog, acknowledged NGOs' immense contribution to India's COVID-19 response, writing as follows:
Civil society and voluntary and non-governmental organisations constitute the backbone of collective articulation of citizen interest in a democracy. As facilitators, mediators, and advocators of this interest, they have put people before everything else during this pandemic crisis.
The data supports Kant's assertions. An India Today study revealed that NGOs provided meals to nearly 3 million people during the initial weeks of the lockdown. In 13 states and union territories, NGOs provided meals to more people than the respective state governments during this time.
NGO funding in 2020 and beyond
Despite various government initiatives – including the proposed decriminalisation of the corporate social responsibility (CSR) regime via the introduction of the Companies (Amendment) Bill 2020 – Indian NGOs are facing a crisis due to the pandemic. NGOs in India typically have three major sources of funding (ie, Indian CSR and individual and international donors), but recent FSG research shows that COVID-19 will lead to a drastic reduction in funding for NGOs in 2020 and 2021. In particular, CSR funding will see a large reduction, estimated by FSG to be approximately 30% to 60%.
This will be driven by the following factors:
- Current priority given to the Prime Minister's Citizen Assistance and Relief in Emergency Situations (PM CARES) Fund and COVID-19 – approximately 50% of CSR funding for 2020 has already gone towards the PM CARES Fund or other COVID-19 relief efforts. While this is understandable, an unintended consequence has been a squeeze in funding available for NGOs.
- Reduction in existing commitments to NGOs – approximately two-thirds of CSR funders said that they may have to reduce funding under some of their formal commitments, and all of them said that they would not be able to keep their informal or verbal commitments.
- Foreign contributions expected to hit additional roadblocks and dry up – the central government's wariness towards foreign contributions continues. Not satisfied with simply cancelling registrations of over 20,000 NGOs in the recent past, the government has further tightened the screws on foreign contributions.
In the short-term, this means the loss of knowledge, skills, expertise and relationships. This will compromise NGOs' abilities to serve their target communities – the part of the population most affected by this crisis. In the longer term, the situation is unlikely to improve. Philanthropy typically recovers more slowly than other sectors after a recession, which is likely to affect NGOs' core capabilities – namely, helping to address issues such as malnutrition, water sanitation and hygiene and domestic violence. Without a functioning NGO sector, most of India's development goals will stall.
The impact will not be limited to the communities with which NGOs work – there will also be a significant loss of livelihood. The NGO sector is estimated to provide paid employment to 7.2 million people (substantially more than sectors such as automobiles or IT, which employ approximately 5 million each). Even a 30% drop in funding could result in rendering more than 2 million people jobless, adding to the ranks of the unemployed rather than helping to alleviate their circumstances.
All of this presents a grim picture of the Indian NGO sector and gives rise to the question of how can it be saved?
HNIs and NGOs – an important partnership
The challenge faced by funders is understandable, and many have constraints that they cannot overcome during the COVID-19 crisis. However, like with most crises, there are also hidden opportunities. One such opportunity is the philanthropic investments of high-net-worth individuals (HNIs), who could step in (directly or via their family offices or foundations) to help mitigate the funding crisis in the sector.
HNIs are typically classified as individual donors, but they have greater financial resources than the typical individual donor. While companies will have to navigate their own internal policies with regard to the CSR regime, HNIs and their family offices have a greater degree of flexibility. They are not restricted by regulatory policies or strict investment mandates and have greater discretion in the disbursement of funds. They are often driven by the personal passions of their founders or principals. Unfortunately, Indian family offices have traditionally focused their attention on the family's investment portfolio and matters of philanthropy have become ancillary. Globally, the trend is different. As per Campden's Global Family Office Report 2019, eight in 10 family offices believe that the world's wealthiest families will play an increasingly active role in helping to address global challenges which have historically been reserved for governments. Similarly, two-thirds (65%) believe that they have a role to play in alleviating economic inequality.
Given the present environment, it is imperative that Indian promoters reconsider their family office framework, and non-financial activities, such as philanthropic initiatives, should be given equal weight. This will help families to maintain unity, talent and momentum alongside their wealth. This evolutionary process will provide promoters with useful information about the family's needs now and in the future, which will help to build trust and inclusiveness among family members who will feel heard and represented.
Planned personal philanthropic activities are also more likely to be successful as founders will invest personal time and effort in causes about which they are passionate. As family capital is generally long-term capital which is unconstrained by aggressive shareholder concerns or quarterly pressures, it acts as patient capital which can help in the longer-term development of social projects. HNIs do not necessarily need to change the amounts that they intend to donate. Instead, they could consider front-loading their support, donating over the next 12 to 18 months what they had planned to donate over three years. Timely support during this critical period will enable NGOs to survive and both maintain their core capabilities and build new skills that have become more relevant during the COVID-19 pandemic (eg, using digital communication to reach target communities). For example, since the onset of the pandemic, the Premiji Foundation, founded by Azim Premji and backed by Wipro's technical expertise and distribution reach, has extended immediate support to 7.8 million people in 467 districts across 26 states and three union territories in the form of food, dry rations and personal hygiene items. The Reliance Foundation is also providing free meals to people in partnership with NGOs.
Notably, HNIs have also suffered due to the crisis. Their asset holdings are likely to have been eroded – this group typically has a substantial amount of investment in newer and less-tested opportunities, which may have been greatly affected by the crisis. However, given the diversification and magnitude of their financial resources, HNIs are likely to recover their net worth in the longer term. The crisis presents an opportunity to contribute when it is most needed.
Liquidity may also be a genuine concern for HNIs, especially in the event of a drop in asset prices or the drying up of dividends and cash flows. However, there is an opportunity to use debt products that leverage current low wholesale borrowing rates to generate this liquidity, which can then be paid off as asset prices recover. HNIs may also use this period to strategically reassess their business portfolio to see what is really adding value and dispose of any assets which are not. This portfolio shuffling can free up capital for where it is really needed.
The value of the NGO sector has never been more clear, yet its existence has never been more fragile. In the middle of a pandemic, it may seem foolish to think of anything else. However, as this article highlights, the damage to the NGO sector may be irreversible. Luckily, HNIs are uniquely positioned to help. Individual philanthropy can present an attractive combination of present and future. A meaningful experience with family members can be shared in the here and now while a legacy of giving is built for future generations. If HNIs can step in, they may leave a legacy that will be remembered long after the COVID-19 crisis is over.
