12 Core Approaches To Effective Philanthropy
Style or approach to philanthropy There are many different ways to be a philanthropist and the style or approach to philanthropy is a very individual one. In recent years, the study and practice of philanthropy has grown rapidly and there is now a great deal of literature, and supporting professionals, which deal with various options.
The table below provides a summarized indication of the different approaches available to philanthropists. Many philanthropists adopt one or even more of these approaches.
|Type of philanthropist||Key differentiator|
|Charitable philanthropy||Unconditional donations given to individuals, non-profit organisations and other community based organisations that usually are engaged in social welfare activities and helping the poor. Usually an upfront assessment of the project with little follow up.|
|Grant-making philanthropy||Grants, usually with conditions attached, made to non-profit organisations based on an assessment, usually by trustees or a board, of an application against set criteria. Some follow up with reports submitted.|
|Strategic philanthropy||Similar to grant-making philanthropy but with selection criteria line up against a clear strategy and theory of change. Clearly articulated expected outcomes and impact are monitored and reported on.|
|Operating philanthropy||The philanthropist sets up an entity to run charitable programs of her own. She may set up a foundation that channels money exclusively to the implementing non-profit organisation (NPO) or she will directly support a NPO to run programmes. She will make few, if any, grants to outside organizations.|
|Large scale, one off donation||A particular driving vision to establish a “bricks and mortar”, capital project legacy. Completion of the project is usually the end of the relationship. Examples including building a school or a hospital.|
|Social entrepreneurship||Applying principles and techniques of entrepreneurship to address social development issues. The social entrepreneur is directly engaged with the execution of its programmes. Intensive hands on management.|
|Social finance||Soft loans to social development organisations, which can be non-profit, or for profit. This form of capital is often considered “patient” because of the longer lead times for repayment and the lower interest rates. Social bonds are another example of social finance. Ability to repay loan and interest is often a key consideration.|
|Venture philanthropy||Applying principles and techniques of venture capitalists to address social development issues – a high engagement approach to improving the performance of social change organisations with finance and other non-financial resources, such as business management skills. Organisational reporting and monitoring undertaken.|
|Investment philanthropy||Similar to venture philanthropy whereby the philanthropist seeks to build and grow an organisation (nonprofit or for profit) over the long terms by investing in the capabilities of the organisation not just individual projects. Organisational reporting and monitoring undertaken. The investor can look for both social and financial returns.|
|Impact investing||The philanthropist makes an investment into a for-profit or nonprofit company, or an NGO, with a clear expectation of a financial return as well a social or environmental benefit or “return”.|
|Social investing||Similar to impact investing, the emphasis is on the investment the philanthropist makes, with the expectation of a return. The return is measured by an improvement in some social or environmental issue. There may also be a financial return, usually below market rate. This definition helps to differentiate the “social investor” from a “normal” investor.|
There are many new ideas, and just as many accompanying definitions, on how to approach philanthropy and these terms are still unstable and contentious. However, it is more important to understand that there are many different ways to establish a philanthropic profile and choose a style that aligns with the philanthropist’s values and interests.
In addition to the chosen approach towards philanthropy, the philanthropist may also want to target a specific objective that cuts across sectors (such as health, education, environment etc.). She may want to focus on influencing public spending if she believes that the best way to spend private money is to influence public money. Consequently, she may focus on incubating and rigorously testing new ideas, programmes or organisations for solutions that could work at scale. With careful and rigorous evidence, and the engagement of government as a key stakeholder from the outset, these privately funded ideas may be adopted by government for a much wider reach. Alternatively, the philanthropist may choose to make general-purpose grants to research and policy development, such as universities, think tanks and advocacy organisations that work to improve, critically examine and challenge government policy for improved social outcomes.
On the other hand, a philanthropist may have a strong belief in the power of collaboration and the positive role that sharing information and ideas can have in replicating best practice across a system. In this instance, a philanthropist would look to support networks and collaborative practices and organisations that are good at knowledge management and dissemination, as well as trial running the replication of programmes, through the support of social franchises for example. Other activities could include bringing together community leaders, experts, grantees, funders and creative thinkers to generate new ideas, build consensus around a shared vision, and share experiences and best practices.
This article is an excerpt from the first edition of the Toolkit for African Philanthropists published by the African Philanthropy Forum. To learn more about this toolkit, please visit here africanpf.org/publication