New Open Road Philanthropic Project Takes On Nonprofit Project Derailments

Standard

January 13, 2017; New York Times

A new philanthropic project called the Open Road Alliance has been established to help grantees that hit snags in promised projects. It is intended both to help the grantees complete projects and educate funders about the need to be supportive when such snags appear.

The Haitian nonprofit organization SOIL provides toilets to the poor residents of Port-au-Prince. These toilets don’t just offer residents a measure of dignity and safety; they also lead to the production of fertilizer, fueling employment opportunities and environmental restoration. Working since 2006, the organization, with a budget of $1.3 million, has empowered some of the poorest communities in the world to restore their environment by transforming hazardous pollutants into precious resources.

Providing services in Haiti is fraught with challenges and risks. SOIL is increasing the probability of success by employing staff who speak the local language; putting local suppliers, including local residents, to use in decision-making; creating projects with an earned income stream; and valuing diverse educational experiences. Even with all of these measures, the project was on the edge of failure less than two years ago when the private company running the local landfill lost their contract. Afterward, the area became full of smoke as trash was burned to maintain access. Employees were only able to reach the site once every two weeks, and there was no contingency landfill in the area.

SOIL’s predicament is not unusual. According to two separate reports by the Clinton Global Initiative and the Open Road Alliance, about one in five projects face challenges that could “slow or derail” successful outcomes. The large number of projects facing adversity is due in part to the failure of nonprofits to discuss likely risks with donors and donors’ inability to identify potential complications. According to the Open Road Alliance’s report, 76 percent of donors don’t ask potential grantees about the risks they face, and 87 percent of nonprofits leaders state that grant applications do not ask about potential hurdles.

The Open Road Alliance is a funding initiative providing one-time grants and loans covering “contingency funding that nonprofits frequently encounter” across sectors worldwide. Its report is based on its survey of four hundred grantors and grantees. The findings were centered on a random sample of two hundred organizations designed to determine the frequency, donor response, current policies and procedures, and consequences of unfunded requests on the relationship between funder and recipient.

Surprisingly, the report found major differences between grantor and grantee perceptions:

  • Grantees believe that asking for additional funds negatively affects the likelihood of being awarded future grants, while the vast majority of Funders claim such requests have no effect on future decision-making.
  • Funders incorrectly believe that if they deny a request for contingency funds, Grantees will find an alternate source of funds.
  • Grantees report that when requests for contingency funds are denied, projects are much more likely to be delayed and somewhat more likely to be reduced in scope than Funders believe; Grantees report 16 percent of such projects are terminated, while Funders estimate 10 percent.
  • Funders believe that Grantees are more comfortable talking about these issues with them than Grantees report.

Due to these findings, Open Road Alliance teamed up with the Rockefeller Foundation and Arabella Advisors to assemble two dozen organizations, including the Bill and Melinda Gates Foundation, Goldman Sachs, and the law firm Patterson Belknap Webb & Tyler, to develop a toolkit to identify and assess project risks. The new resource is available to the community and is constructed to encourage donors to use it in whole or in part to better assess project success.

The kit is part of an increased need to apply business fundamentals to grant making and to encourage grant makers to strategically take on more risky projects. To be more strategic, grantors need more information. The kit includes seven items to help facilitate conversations between donors and potential grantees. Equally important, the developers acknowledge the power differential between grantor and grantee.

“Part of the reason we focused on donors is they have the money,” said Dr. Michaels, a clinical psychologist who is married to David Bonderman, a founder of the private equity firm TPG.

“There’s a power differential,” she added. “It’s hard for a nonprofit to come to a funder and say, ‘How are you going to insure us if something gets screwed up?’”

While funders are fond of touting the need for innovation, taking risks and being open about the inevitable complications that surface is still somewhat foreign to many nonprofit/funder conversations. The answer, according to Open Road Alliance, is less about being a helicopter funder and more about simply being available to face reality with resources. This culture change could not come soon enough for SOIL. As the landfill access challenges continued, the organization went back unsuccessfully to its project donor to ask for additional support. The donor suggested Open Road Alliance, who granted SOIL $100,000 for a new composting site.—Gayle Nelson

Original post: https://nonprofitquarterly.org/2017/01/25/new-open-road-philanthropic-project-takes-nonprofit-project-derailments/

Is a Microloan Any Different from a Payday Loan?

Standard

 

Microloans

January 12, 2016; Hyperallergic

More and more philanthropy is funded by crowdfunding, and more and more sites are in competition for donors’ attention. Most highlight the heartfelt stories and hide the underlying costs and the meager return on investment. Yet once the costs are evaluated, the variations are staggering.

The meaning of Stephanie Rothenberg’s new project at the ZKM Center for Art & Media in Karlsruhe, Germany, “The Garden of Virtual Kinship,” is hidden at first glance. Visitors are captivated by the plants growing and flourishing in individual glass planters. Each seedling waits its turn to be watered, but one can’t help noticing the large amount of water leaking out and missing the thirsty plants. As your eyes follow the leak to the large tank underneath, one realizes just how much water the plants could be getting—if only the leak were repaired.

The project, part of the exhibition GLOBAL: infosphere, examines crowdfunding and microlending costs and return on investment. Each plant represents a campaign in a certain region of the world listed on the crowdfunding site Kiva. As a donor makes a donation, a plant is watered, yet more water leaks into the tank below. The leaking water represents the money that fails to reach the borrower due to high interest and fees charged by the site.

Combined with a second project, “Planthropy,” on view at Manchester’s The Lowry, displaying how social media affects philanthropy, Rothernberg explores, “the intersection between social media, finance, and philanthropy,” Rothenberg toldHyperallergic. “Both pieces are questioning what it means to donate through the click of a button.”

Why are the costs of microfinancing so high? Some of it is the nature of the industry itself and the need for scale. Many microfinance sites research and authenticate the site projects. These activities are cost intensive, particularly in developing rural areas. Costs are also incurred to market and connect the sites to social media, thereby creating a platform donors are drawn to. Other considerations include the method of computing the interest. Overall, these costs add up to a palatable percentage on a $10,000 loan, but for a $550 or $1000 loan, these same costs take up a much higher percentage.

Many donors are drawn to the stories and fail to examine the costs of investing and the meager returns. The microfinance sites highlight the opportunity to use the funds more than once as the initial loans are repaid, but once fees are tacked on, the amount that can be reloaned is minimal. Further, donors are often unaware of the lackluster rate of return because many sites hide the costs and charges. Some studies even suggest that the high interest rates and fees have similar effects on borrowers as payday loans do in the United States.

Rothenberg appeals to donors to research these sites before investing and ask the hard questions: Does the return justify the donation? What is the loan’s cost to the borrower? What is the method of calculating interest payments? (She’d also like them to share their findings on social media.)

But microloan sites charging high interest rates and fees are not the only models. Another option is to support institutions that create tools to help people in developing countries save. Often, group savings can fuel similar opportunities without the high fees and interest rates. Further, since little money is actually rechanneled, donors might consider donating instead of lending. Websites like GivingGrid only charge credit card fees and ask donors to make a second donation to the site to cover its fees and mission. Another site, Benevolent, is a nonprofit raising donations from foundations and individuals to cover its costs. Benevolent partners with other nonprofits to validate the client’s need, and since the donation is channeled through the nonprofit, donors can deduct their donation from their taxes.

As donors research and invest in sites with lower costs and fees, competition will work to decrease fees and increase return on investments.

Original cite: https://nonprofitquarterly.org/2016/01/29/is-a-microloan-any-different-from-a-payday-loan/

Fees and Inequality in the Kenyan School System

Standard

Kenya-School

October 2, 2015; Quartz

Throughout the world, education is considered at least part of the lifeline to new opportunities, particularly for children living in poverty. In 2003, Kenya declared primary school education to be free and compulsory. In the decade that followed, foreign aid poured in, the number of schools increased, and today most children are enrolled. At the same time, school fees have multiplied, even for families living in the slums of Nairobi. Since most of the schools serving children in the capital’s poorest areas are unregistered, the quality of education they provide is difficult to measure. As a result, many wonder whether Western donations are well spent.

Kenya is located on the eastern coast of Africa. It is a country of 44 million people and boasts the biggest economy in east Africa. Twelve years ago, the government focused a significant portion of its resources on educating its children, and as a result nearly nine out of ten Kenyans under the age of 11 are now enrolled in school.

While the number of children in school is increasing, so have the school fees that families pay. Not surprisingly, wealthy children are sent to private schools with correspondingly high fees. At the same time, even less well off Kenyans question the quality of the public schools and opt instead for low-fee private primary schools. Between 2010 and 2014, the number of children in public schools dropped by over six percent. Even those families that do send their children to public schools are subject to some fees, including uniform and testing fees.

Kenyan families have reason to believe public schools are failing. According to a 2013 World Bank report, public school teachers were absent almost half of the time, leading to children receiving on average slightly more than two hours of instruction. A second study discovered that only one-third of teachers at these schools scored a minimum of 80 percent on exams of curriculum it was their job to teach.

Additionally, research completed by Concern Worldwide found that the schools located in the slums of Nairobi were suffering a cumulative shortage of 250 teachers. (Schools located outside of the slums are only short around seven teachers.) The shortage has led to more than eighty percent of classrooms in the slums exceeding the government-stipulated ratio of 1 teacher per 45 children; three of these schools have a ratio of over one hundred children per teacher.

The growth in private primary schools began in the 1980s as the population ballooned by almost four percent, one of the largest rises in such rates in the world. At that time, the Kenyan government encouraged education entrepreneurs to build schools to help keep up with demand. Outside funds increased as the schools and their leaders attracted the attention and support of foreign donors. From 2001 to 2009, the number of private schools doubled.

The Africa Population and Health Research Center, a leading research institute located in Nairobi, found more than 60 percent of Kenyan children, or 300,000, attend the low-fee schools. Families earning less than $1 US a day, barely able to put food on the table, still pay between $1500 and $3000 US to send their children to these low-fee schools. Those lucky enough to continue schooling at the secondary level attend schools with more modest fees, starting at $1200 in the poorer communities.

Sadly, while fees are rising, the quality may not be. Most of the low-fee private primary schools are not registered with the Department of Education, leaving the educational entrepreneurs running them with the opportunity to pocket the fees and foreign donations. Unregistered schools don’t get the same scrutiny as registered schools, and therefore the quality of education is unclear. Adding to the injustice, unregistered schools are not eligible for the public grants provided to registered schools, including those attended by the wealthy.

The winners are the children living outside of the city, attending registered schools and paying less in tuition. Enrollment at these schools has tripled from four percent in 2005 to twelve percent currently. Competition for children is fierce, and only stellar teachers are employed. According to research from the Brookings Institution, fees for these schools are two-thirds of what schools in the “free” public system charge.

http://nonprofitquarterly.org/2015/10/06/fees-and-inequality-in-the-kenyan-school-system/

Sadly, the injustice continues at the secondary level. The quota admissions process at these schools sets aside one of every four places for public feeder schools. Therefore, the children attending the low-fee schools in the nation’s capital compete with wealthy children attending high-performing private schools for the limited number of spots.

Fixing this dysfunction begins with the Kenya Ministry of Education, Science, and Technology. First, all schools need to be scrutinized and regulated. Second, governmenteducation grants must follow children, and if the schools they attend do not deserve the funds, the grants should be given directly to the families to subsidize fees and other educational expenses.

Climate Change Activists File Innovative Class Action Suit against Dutch Government

Standard

Knowing the long-term effects climate change will have on the Netherlands and the world, the nonprofit Urgenda concluded it could not wait for its government to act. In November 2012, it filed a groundbreaking class action suit. In it, their attorneys used current human rights and tort law to claim the Dutch government is placing human life in danger by failing to reduce carbon emissions. If they are successful, some experts believe it will begin a major shift in environmentalists’ efforts to reduce carbon emissions.

Although many associate the Netherlands with windmills and bicycles, citizens rely heavily on coal-powered utility plants for most of their electricity. Additionally, the Dutch government’s goal of reducing emissions is far less ambitious than its European neighbors. At the same time, the country will be critically affected by the effects of climate change, since it is located three meters below sea level.

To force their government to act, an innovative class action lawsuit was filed by the Dutch nonprofit Urgenda on behalf of slightly less than 900 citizens and against the government of the Netherlands. The suit contends the Dutch government is not doing enough to reduce greenhouse gas emissions that cause climate change. On April 14th, the suit was heard by a district court in The Hague. If the court rules in the class’s favor, it will force the Dutch government to execute policies that will reduce emission by a minimum of 25 percent below 1990 levels by the year 2020.

The suit hinges on whether the rising of the Earth’s global temperature by 2 °C will cause conditions dangerous to human life. The Intergovernmental Panel on Climate Change (IPCC) created this benchmark for developing nations. The Panel is a scientific body created by the United Nations Environment Programme (UNEP) and the World Meteorological Organization (WMO) in 1988. Its mission is to provide “the world with a clear scientific view on the current state of knowledge in climate change and its potential environmental and socioeconomic impacts.” The organization evaluates scientific, technical and socioeconomic information to develop a comprehensive understanding of the effects of climate change on the planet.

The class was originated by the Dutch nonprofit Urgenda. Urgenda, abbreviated from “urgent agenda,” is a leader in developing new methods of fighting climate change. Before filing the suit, the organization, led by its founder Marjam Minnesma, created a campaign to introduce solar panels to a large number of individual consumers. When the campaign was completed, the organization negotiated a deal with Chinese manufacturers for 50,000 panels.

Many of the members of the class have changed their lifestyle to limit their individual carbon emissions. They ride bicycles on a daily basis and heat their houses using solar panels. Unfortunately, they know their individual actions alone will do little to change the direction of climate change. They are hoping this suit will develop into a large movement to change carbon emission.

To build the movement, Urgenda spent critical resources translating research and court documents into English and posting them online. A similar class action suit with over 8,000 members is pending in Belgium. Additionally, lawyers in Australia, Canada, and the United States are investigating opportunities in their own countries.

A decision in the suit filed by Urgenda is expected by the end of June.

Original cite: https://nonprofitquarterly.org/policysocial-context/26117-climate-change-activists-file-innovative-class-action-suit-against-dutch-government.html

Gates Foundation Invests in Corporation to Fight Disease

Standard

The Bill & Melinda Gates Foundation is investing $52 million in CureVac, to fund a new factory in Germany. The factory will make drug products using mRNA. This represents the foundation’s largest ever investment in a corporation. It is also a symbol of what the world learned since the Ebola outbreak, diseases in poor countries affects health across the world.

The Gates Foundation’s majority equity investment will be used to build a $76 million factory developing products using mRNA, a messenger chemical that provides information from the gene into cell parts making proteins. It is believed that mRNA can be used as a platform for rapidly producing low-cost drugs and vaccines. These products are “thermostable,” meaning they do not need cold-chain storage, a major hurdle in supplying vaccines in developing countries.

Additionally, the two organizations are forging a larger partnership as part of the foundation’s focus on vaccines that fight global diseases that disproportionally affect people in the poorest countries. The Gates Foundation’s mission is “guided by the belief that every life has equal value….[The] Foundation works to help all people lead healthy, productive lives. In developing countries, the emphasis on vaccines leads to better health thereby increasing individuals’ ability to lift themselves out of extreme poverty.” This initial project is part of a larger plan to invest billions to develop vaccines for viral, bacterial, and parasitic infectious diseases including rotavirus and HIV.

This investment is part of the trend of foundations turning to corporations rather than nonprofits or other foundations to solve the world’s inequities. These partnerships are part of socially responsible investing, or SRI. SRI includes impact investing, shareholder advocacy, and community investing, and is designed to encourage corporations to act in a socially respectable manner in addition to making a profit.

Because the majority of medical research is driven by the desire to make a profit, corporations and the world’s scientists are focused on drugs and vaccines that will make the largest monetary return on investment. These are rarely realized in medicine that’s focused on outbreaks in the world’s poorest countries. World NGOs have described this as “the 10/90 gap”; ten percent of global health research is focused on ninety percent of the world’s diseases. Ignoring these diseases leads to epidemics like the recent Ebola outbreak.

While there are clearly questions embedded in such tight relationships between nonprofit and for-profit organizations, these types of partnerships are gaining support with conservatives as well as liberals. Prime Minister Stephen Harper of Canada recently met with Bill Gates to discuss their shared goal of improving the lives of women and child around the world. Canada is funding twenty research teams of African and Canadian scientists to expand immunizations in order to eradicate polio and eliminate tetanus.

The CureVac factory is expected to produce additional products funded by the foundation. The corporation will hold the licenses created by the partnership and sell the products at an affordable price in poor countries.

Original cite: https://nonprofitquarterly.org/philanthropy/25738-gates-foundation-invests-in-corporation-to-fight-disease.html

Gates and World Bank Back Tech Aided Access for the Underbanked

Standard

Imagine living without a connection to a bank or financial institution. Your check from your employer must be cashed at a check-cashing store, where they charge 5 percent of the check amount. You cannot shop online, do not have access to credit, and are likely terrified of being robbed. If you need to send money to a child living in another state or family member living in your country of origin, you are charged 5-8 percent to send funds to them, and they then pay another 5-8 percent to cash the money order. Luckily, new technology is on the horizon to help millions gain monetary protections and increase credit opportunities, leading to small business expansion and more hope for those trying to climb out of poverty.

The number of people living in the United States and in the developed world without access to the convenience and safety measures banks provide is staggering. In the U.S., an estimated 9.6 million adults live without a bank account. Internationally, an estimated 2.5 billion adults, including 59 percent of people in the developing countries, live in a cash-only society without access to credit or other opportunities to grow their small businesses. Access is particularly limited for women in these countries: 63 percent, compared to 54 percent of men, do not possess an account. The numbers increases to more than 75 percent for adults living in extreme poverty.

In the United States, the end of the recession and the onset of new technology have created new avenues for the poor to access banks and financial institutions. According to the Federal Reserve, 25 million Americans built a relationship with a bank or other financial institution for the first time in 2013. Of those, more than a third opened an account because their new employer required direct deposit.

Unfortunately, for far too many, this new relationship is limited. The same report identified one in five, or over 67 million, underbanked Americans; this number remained constant from the previous year. The report defines the underbanked as those using a check cashing or other “alternative” service at least once in the last year.

For many, the relationship with their bank is limited due to a growth in bank fees and prior negative bank history due to the recession. A 2013 Bankrate.com survey found bank fees rose for the fifteenth year in a row. This limited relationship constrains the poor’s ability to exit poverty. According to The Cost of Cash in the United States, a Tufts University report, the unbanked and underbanked throw away more of their money on fees and spend more time waiting in line to receive their funds than those with full access to financial services.

Internationally, people remain unbanked because of lack of documentation, arduous regulations, and ineffective and obsolete financial infrastructure. They are unable to prove their assets, identity, or reputation, crippling potential business opportunities and leaving developing countries with little opportunity to grow. Fortunately, digital technology is changing access to money nationally and internationally, but in different ways.

In the U.S. and other developed countries, digital technology is creating a stronger connection between people and their money. New mobile applications allow people to deposit checks without visiting a teller. Text alerts provide notice of potential insufficient funds or low balance penalties before fees are accrued. Although these features are available to all account holders, low-income individuals tend to use them more. In the long run, they can turn the underbanked into full access consumers, but they do little to connect the unbanked.

Internally, technology is developing innovative financial systems that lead to new relationships with banks for millions of people. The epicenter for this growth is in Africa, where a partnership between the World Bank and the Gates Foundation is encouraging the creation of a digital payment system. One of the companies leading the way is M-Pesa. M-Pesa transmits funds via SMS or digital messaging. It was launched in 2007, and currently two-thirds of the Kenya adult population uses it, transferring funds with minimal fees of one to three percent. It is also available in the Democratic Republic of Congo (DRC), Egypt, Fiji, India, Lesotho, Mozambique, Romania, South Africa, and Tanzania.

The system is on the verge of tremendous additional growth, with last week’s partnership between M-Pesa and MoneyGram. The new system will connect funds between people in ninety countries using their mobile devices. Continued expansion of these services will open up $9.6 trillion in assets, according to controversial Peruvian economist Hernando De Soto.

We would love to hear from readers on this and similar projects.

Original cite: 

Louvre Using Crowdfunding to Purchase 18th-Century Table

Standard

Around the world, nonprofits continue to experience a drop in government funding. European nonprofits are not immune to this trend. In France, museums are struggling to raise essential funds after two years of consecutive cuts in government support. In its place, two the country’s most famous museums, the Louvre and Musée d’Orsay, are turning to crowdfunding to expand their collections.

Earlier this week, the Louvre started a new crowdfunding campaign to partially fund the purchase of the Table de Teschen. The eighteenth-century jeweled “Table of Peace” was a gift to a French diplomat at the end of the Bavarian War. The total price of the piece is 12.5 million Euros, and the museum is looking to individual donors to fund the last million Euros, or $1.67 million.

This effort follows the Louvre’s previous successful campaigns. In all, the museum has raised over 4 billion Euros since 2010 from 20,000 donors. Their activities are part of a movement toward online crowdfunding efforts. The TABB Group, a financial markets research and advisory firm, projects that the crowdfunding market will reach $17 billion by the end of 2015.

Current nonprofit crowdfunding has roots in the telethons of the late 1950s. Both are methods of raising funds by pooling a large number of small donations from unconnected donors pledged in a short period of time. Similar efforts continue on public radio and television stations across the country. These campaigns often highlight special incentives to entice donors to participate. The Louvre offers donors of over 200 Euros the opportunity to visit the exhibit on a day when the museum is closed to the public, but what they really offer is a psychic partial ownership of the museum’s beauty.

The Louvre limits its crowdfunding expenses by hosting its efforts directly on its website. Many smaller nonprofits find it necessary to host their project on one of the many crowdfunding websites. These websites allow nonprofits the opportunity to reach more new donors. The sheer number of crowdfunding sites is emblematic of the growth in crowdfunding. Successful projects include theater productions, renewable energy, and academic research.

As the Louvre continues its crowdfunding efforts, it is also exploring more conventional methods of raising revenue. It announced it will soon welcome visitors seven days a week in the hopes of bridging its funding gap.

Article original cite: https://nonprofitquarterly.org/policysocial-context/24958-louvre-using-crowdfunding-to-purchase-18th-century-table.html