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Study: Drop in private capital hurt nonprofits around the world

Written on May 19, 2023

The $841 billion that flowed across borders from 47 countries during 2020 was certainly welcomed by recipients. But, focusing on local philanthropic systems, structures that stimulate local philanthropy in response to global challenges and developing international data tracking and transparency practices would boost the donations’ impact, according to a new study. 

According to Global Philanthropy Tracker 2023, a research study from the Indiana University Lilly Family School of Philanthropy, funding sources that year — the first impacted by the coronavirus epidemic – included:  

  • $590 billion in remittances (cash and goods sent by individuals to their home country) 

  • $180 billion in official development assistance (government aid given with the intention of promoting and targeting the economic development and welfare of developing countries) 

  • $70 billion in philanthropic outflows (financial contributions sent by funders to beneficiaries in different countries) 

  • $400 million in private capital investment (purchase of capital assets expected to generate income and/or appreciate over time) 

The $841 billion represents a 2% decline from the $859 billion tracked in 2018. Nearly all of the decline can be attributed to private capital investment as a funding source coming to a near-halt in 2020. In 2018, that source accounted for $112 billion in funding. While two other sources showed slight declines (official development assistance declined by 1%, from $181 billion in 2018 and philanthropic outflows slipped 0.5%, from $71 billion in 2018), remittances made up nearly all of the shortfall, growing by 19% from $496 billion. 

The changes in the funding mix are understandable, given the disruptions of the coronavirus pandemic. “Global investments and trade were severely constrained during this period of shutdown,” Lilly Family School of Philanthropy Associate Dean for Research and International Programs Una Osili said in a statement. “In contrast, private remittances proved to be very resilient during the crisis. Similarly, private philanthropy, which is usually targeted in terms of need, also proved to be quite resilient.” 

The functions of philanthropy are becoming increasingly critical, alongside sources and destinations of funds. The report outlines three suggestions for making contributions more effective in generating sustainable development. 

The report’s authors call for enhancing local philanthropic ecosystems via regional collaborations. Local grassroots organizations often provide first responder functions in times of crisis. Through regional collaborations, philanthropic organizations can provide knowledge sharing, local capacity building and advocacy work. Collaboration-focused organizations can also facilitate connections and communications between international donors and recipients. 

The report’s authors recommended establishing mechanisms for mobilizing local philanthropy in response to global challenges, developing international standards for data tracking and promoting data transparency.