Businesses Help Bridge the Charity Gap

Charitable giving has fallen for the first time in a generation. Not only is government not able to take up the slack but they, like consumers, will be looking to cut expenditure. This is against a background of escalating need. The voluntary sector faces a major challenge to bridge this yawning gap.

Pray though, do not reach for your revolver yet.

There has been, for sure, waste in delivery — indeed one could argue that the $1 trillion that has been given to sub-Saharan Africa since the 1970s (where most of the billion of the world’s poorest live) has actually made things worse. Not only have these developing countries failed to develop, they have actually been going BACKWARDS with most having a gross national product less than 40 years before.

Waste is not confined to poor countries. The UK now spends more on Social Security than it raises in income tax. So there is room for improvement.

Enter Microloans and Social Enterprise

Research from Manchester University has shown that Microloans invested in new small business have had a very positive effect on the country’s development.

Thomas Northcut | Photodisc | Getty Images

Microloans in the UK similarly are hugely cost effective because they save both the cost of administering many benefits and the hard cost of those benefits.

Fredericks Foundation estimates that for every 100 people who are granted loans to start businesses, it saves $3 million for a cost of under $250,000.

Perhaps more compelling is the fact that capital can be used indefinitely as the interest (15 percent) covers default.

Social enterprises where business sustainably supports good causes are also an area which need to be developed in this climate.

For example Divine Chocolate not only gives a fair price to the Ghanaian cocoa farmers but also has given them a significant percentage of the company.

However, while there is enormous scope for social enterprises they cannot support every need.

So charities must do 3 things:

  1. They must convince a justifiably skeptical public that their money will be well spent.
  2. They have to explore new avenues of fundraising.
  3. They must convince the public to be engaged. This does not mean investment bankers should paint new schools but it does mean them giving their time and advice, imparting their experience and attitudes. Just look what Bill Gates has been able to achieve - yes his money is important but his time, prestige and ability to get things done are invaluable.
    We the charitable sector need to openly publish our results failures as well as successes. The most difficult area is raising new funds. I have come across a couple of interesting ideas.

Business and Philanthropy Joining Forces

The first is Give as you Live.

This concept exploits the commission that company Web sites pay to introducers.

It may be 2 percent or up to 8 percent of the revenue.

This idea is not new.

What is new is that you do not have to go to a different site and you only have to nominate a charity once and money is automatically sent to the charity of your choice with every product you buy off the Web. The beta is running and 1,000 companies from British Airways to Tesco are partaking.

Secondly, a company named Eurovestech gives 1 percent of its equity each year to good causes. What do the shareholders say about being diluted? They are relaxed as the performance in share price comfortably offsets this tiny dilution. If the top 100 companies partook, this would raise over $3 billion for good causes.

Finally, I am convinced the only way to alleviate poverty is work. Employers are currently concerned about taking on extra fixed costs, they want flexibility. About 20 percent of the potential workforce are unable to work traditional eight-hour shifts according to the Rountree Foundation. What they would like is to work ultra flexibly with time slots as short as one hour with just a couple of hours notice.

What is needed is an ultra flexible marketplace capable of dealing with this. It looks like a British company named Slivers of Time has cracked this complex problem with both of Britain’s largest public sector and private sector employers — the NHS and Tesco — completing trials.

This market initiative has the potential to transform the prospects for the unemployed and to help employers deal with inconsistent demand. It could even help the West! So it’s time to put that revolver firmly back in the holster and for each of us to apply ourselves to do what we can.

See more of what Barry-Walsh and other philanthropy experts are saying in our special series Executive Vision.

Paul Barry-Walsh left IBM in 1986, after nine years to form Safetynet, which became one of the UK's leading providers of Business Continuity Services. Paul went on to found Netstore in 1996. He founded The Fredericks Foundation in 2001 which has gone on to become a leading microfinance organization in the UK, funding two disadvantaged individuals per week. In March 2009 he was awarded the CNBC /FT European Philanthropist of the year.