The Plight of Charities

It’s been a rough year for charities and my guess is that over the next year, some very worthy organizations will be forced to close up shop. There are many factors working against charities at present:

• The Christchurch Earthquake has sucked up a huge amount of money from the big charitable trusts, leaving little behind for charities who have in the past relied on those trusts for funding.
• Government funding for many programmes delivered by charities has been cut back.
• While revenue is dropping, operating costs are going up.
• With the economic downturn, more people require assistance from charities and fewer are able to make donations.
• We are becoming an increasingly cashless society, leading to reduced revenue from street appeals.

Charities are being forced to think outside the square when it comes to funding. At the leading edge are organizations moving towards ‘Social Enterprise’, which is a blend of enterprise, capitalism and philanthropy. They fund their charitable objectives with profit made by selling products and services. In some cases, these organizations are able to raise funds from investors on which they pay a modest return. Social impact bonds, which are being trialled in several countries, raise money from investors to fund delivery of preventative social services. If the social outcomes are achieved, the government pays back the money to the investors and adds a success payment. There is no reason why social enterprise needs to be driven by charities. From the other end of the spectrum, large companies are seeing benefits in applying some of their profits for philanthropic purposes under the banner of ‘Corporate Social Responsibility’. What a different world we would live in if this combination of enterprise and philanthropy became the norm for all businesses, charities and government.