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Americans Find New Ways To Give

"Philanthropreneurs" use investments to share commitment, involvement in causes

Innovations in philanthropy have made it possible for more American individuals and businesses to give money to those less fortunate worldwide and to have a say in how their donations are spent.

This is a good thing, says Alan Abramson, a nonprofit-sector specialist at the Aspen Institute in Washington, because American giving topped $260 billion in 2005, with more individuals, including those not so well off, giving small amounts of money, using the Internet, to causes in which they believe.

"Traditionally Americans would write a check to an organization or a foundation," Abramson told USINFO, "but in the new wave of philanthropy, at the same time people write their checks or donate online, they have become more involved in the activities of nonprofits."

Sometimes this means providing guidance or expertise to a nonprofit or seeking a seat on an organization's board of directors. Today's "venture philanthropy," Abramson said, is based on the model of venture capitalists, who are active partners when they invest in a company.

Venture Philanthropy

Andrew Carnegie first coined the phrase venture philanthropy in 1911, when he created his foundation because he wanted to have a lasting or strategic impact with his funds. Although venture philanthropy is often associated with donors who give on a large scale, individuals of modest means also "want to be engaged," Abramson said. Today, venture philanthropy tends to be aligned with the goals of venture capitalists who are engaged in their investments.

"The basic human impulse, beyond giving money away to a person who needs it, is wanting to make a change in the world," according to Sara Engelhardt, president of the Foundation Center in New York, which celebrated its 50th anniversary in 2006.

Venture philanthropy, or strategic giving, allows individuals and communities of individuals to effect social change, Engelhardt told USINFO.

Corporations also recognize the value of venture philanthropy, Engelhardt said, because some companies are increasing matching funds, allowing employees to direct corporate giving more fully. Some companies, she added, pay employees' salaries while they take time off to participate in humanitarian or relief efforts. According to the Giving USA Foundation, corporate donations reached an unprecedented $14 billion in 2005.

Philanthropreneurs

Americans genuinely are grateful that the world has been good to them, Engelhardt said, and they want to give back to the world. Overwhelmingly, individual giving is the largest source of donations in the United States, accounting for 77 percent of all giving in 2005. Yet for some highly successful entrepreneurs in the United States today, giving back to the world means making a financial investment in it.

Such American business people have signed on to a model of philanthropy - known as for-profit philanthropy, or philanthropreneurship - that seeks a double bottom line: maximum financial return and maximum social return.

American "philanthropreneurs" do not seek tax credits or tax breaks for their investments, according to Abramson. "It is all about taking a chance," he said, "but taking a chance in places where banks would normally not go."

Most philanthropreneurship involves investing in microloans, or small loans, in poor, rural places around the world. Economist and Fulbright scholar Muhammad Yunus was awarded the Nobel Peace Prize in 2006 for his pioneering efforts in offering through his Grameen Bank small loans at low interest rates without collateral to 7 million poor Bangladeshis.

Philanthropreneurs believe that it is appropriate and important for the market to operate with a double bottom line, according to Mark Rosenman, public service professor at the Union Institute and University in Cincinnati, because they are making an investment in underserved people in neglected places.

For example, Pierre M. Omidyar, founder and chief executive officer of eBay, the online auction house, is pouring capital and money into microloans around the world, and Google, the online search engine based in California, is partnering with the Acumen Fund, whose portfolio includes for-profit irrigation, health and low-cost mortgage projects in India, Kenya and Pakistan.

The commercialization of philanthropy attracts not just philanthropic dollars but ultimately investment dollars because the projects are profitable. America's new philanthropreneurs follow the same model they use in business by becoming engaged in their investments. With the loans, the investors offer community workshops, training and group meetings with local business owners.

"There is peer pressure to succeed and peer pressure to repay the loans," Abramson said.

Because microfinance has had a particularly empowering impact on the economic lives of women around the world, experts say, many microloans are given to women because women have a track record of entrepreneurial success and entire families and communities are seeing the benefits in schools, health clinics and workplaces.

For more information, see Volunteerism and the eJournal, Giving: U.S. Philanthropy.

Source: U.S. Department of State