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Equity, stocks and mutual funds: New-age forms of philanthropic capital! - Outside View

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Equity, stocks and mutual funds: New-age forms of philanthropic capital!
Feb 4, 2015

There are many ways in which you can donate to charitable organisations. Most donors prefer to write out a cheque, drop cash into a box or personally hand over money to NGOs with which they are familiar. Other donors are rocking that boat a little. These philanthropists establish sophisticated instruments to generate funds for their pet causes. We introduce new-age forms of philanthropy!

More popular:

Lesser known:
  • '1% equity': Tech companies are known to make millionaires of founders overnight. Several young co-founders are starting to pledge 1% of equity. The 1% will be donated to the charity of their choice when the business is sold, so it works as a future investment for founders who desire to give to charity but don't have the money. The plus point: 1% can turn into a huge amount depending on how much the company got acquired for. Australian startup Atlassian ended up donating $35 million to the Atlassian Foundation they established on being acquired. Imagine what 1% of equity of a Flipkart or Amazon would be, and what it would mean for the organisation it goes to!

  • Mutual funds: Can mutual funds be a philanthropic instrument? HDFC Mutual Fund shows us how. In 2011, it launched a close-ended debt fund called the HDFC Debt Fund for Cancer Cure (HDFCC). Investors had to invest a minimum of Rs1 lakh with a lock-in period of three years. The total principal was then invested in debt/money market instruments or government securities. Investors could then choose to donate 50% or 100% of all dividend earned to the Indian Cancer Society (ICS) to sponsor treatment and therapy for cancer patients who could not afford it. Moreover, they could claim a tax deduction under Section 80G on any dividend amount they donated.

Income sources for NGOs supporting cancer treatment
Income Statement (Rs) CPAA FY13 CanSupport FY14 Care India FY13 ICS FY12 V Care FY14
Total Income 121,886,801 40,809,955 10,218,239 52,592,548 15,272,085
Income From:          
Government Sources 0 0 0 3,203,330 0
Institutional Sources 40,762,411 16,814,588 0 4,192,796 1,823,863
Foreign Sources 0 11,101,852 0 11,889,118 0
General donations 33,058,310 7,163,248 9,380,821 10,209,913 9,217,064
Sales/Service Charges 39,117,600 0 0 12,792,033 61,500
Interest/Dividend 2,080,820 5,730,267 837,418 8,891,769 4,169,659
Other Income 6,867,659 0 0 1,413,589 0
% Spent on beneficiaries 68% 78% 63% 66% 88%
Figures presented are for latest available financial year
**Click on an NGO's name to see more details of their income and expenses.
Only HYNGO subscribers can see detailed financials and full comparisons for the NGOs.)

In 2011, HDFCC found that "Medical relief for poor patients accounts for only Rs15 lacs or so of their (ICS's) annual budget due to paucity of funds." HDFCC channeled a total of Rs 26.81 crores for treatment till December 2014. This instrument therefore gave ICS a tremendous boost in its total income.

Uncertainty in income leaves NGOs unable to provide required services for beneficiaries. Thanks to HDFCC, over 900 cancer patients across the country were given timely financial aid for their treatment. The average aid provided to a patient was Rs 4 lakhs. A second offering of the same scheme was launched in February 2014, with HDFC offering to match donations by investors this time around.


The world is changing at a rapid pace and philanthropy is evolving with it. We're sure there are more innovative instruments and donation options coming in the future.

About HelpYourNGO:

HelpYourNGO.com seeks to increase transparency in the social sector and promote philanthropy. Donors can use HelpYourNGO to make an informed decision by accessing NGO financials and comparing data across multiple parameters.

To learn more about the NGO sector please visit HelpYourNGO Knowledge Centre.

This article first appeared on the HelpYourNGO Knowledge Centre Blog. Click here to read more articles like this.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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