By Jane Arnott, Head of Global Alliance, Charities Aid Foundation
- In the UK, 14% of people who give money to charity and 10% of all charitable donations target overseas causes.
- As with any domestic giving strategy, donors will consider the impact that you want to achieve and this will in turn shape your long-term strategy informing what, where and how you want to fund.
- The challenge of international funding is that the range of options is so much wider than in the domestic space, and the field is further complicated by different tax incentives, philanthropic traditions and structure around civil society.
You may want to include an international focus as part of your giving strategy. According to UK Giving 2012 14% of people who give money to charity and 10% of all charitable donations target overseas causes. In 2011/12 this amounted to approximately £930 million. Major humanitarian disasters such as the Haiti earthquake and East African famine lead to spikes in international giving from UK donors, but there is also a significant body of donors supporting overseas charities on an ongoing basis. These include donations to address poverty, education, health and other development activities in developing countries. Global movements in people have also had an impact – whether through temporary travel for work, study or holiday, or permanent relocation for work or due to geopolitical pressures. In many cases, these donors may be supporting cultural and heritage institutions or as alumni of their former universities, as well as social welfare charities.
Identifying what to fund
Philanthropy is more successful when you have a clear, costed and workable strategy in place. As with any domestic giving strategy, donors will consider the impact that you want to achieve and this will in turn shape your long-term strategy informing what, where and how you want to fund. Some donors know exactly where they want to direct their funding, based on personal ties or experiences. However others may have a vision of helping developing countries, but without a clear focus.
The challenge of international funding is that the range of options is so much wider than in the domestic space, and the field is further complicated by different tax incentives, philanthropic traditions and structure around civil society. The UK has a sophisticated philanthropy market served by well established charities and intermediary organisations, tax incentives for giving and a regulated civil society. Philanthropy and civil society are growing in emerging economies such as Brazil, Russia and India, but the regulatory environment for philanthropic activity is still evolving. In many cases we use the same language of philanthropy, charity and social investment, but often with a different meaning. The spread of information in an increasingly globalised world has led to an explosion of new ideas in philanthropy. Donors are faced with ever more models for giving, including microfinance and impact investment. This is of course a positive development, with those ideas that are shown to be effective driving improvements that ultimately mean better outcomes for beneficiaries. However, it also means that donors need to be better informed and more strategic in their charitable activities.
Donors should also consider risk appetite and the type of work you want to fund in order to achieve your desired impact – do you want to support advocacy to change policy and practice, address systemic issues, support direct service delivery or build the capacity of local civil society? This will help to determine who you support and may influence your route to giving.
Language barriers, contextual variations and geographical distances means that it is essential to research both your broader strategy and individual donations before you give.
Routes for giving
Charities operating internationally are usually referred to as non-governmental organisations, or NGOs. There are a number of approaches to funding NGOs outside the UK.
- Direct funding to an NGO working in the target country: this gives donors direct control over their donation, but it can be difficult to find, assess and monitor appropriate organisations. Many countries do not have a robust regulatory framework for NGOs, leading to donor concerns about credibility and corruption. An advisor can support you to identify organisations that deliver the impact that you are looking for and run due diligence checks to give reassurance about the credibility of beneficiary NGOs. There are a number of organisations that can provide advice and support for major overseas donations, including the Charities Aid Foundation.
- Donation via a UK based NGO: the UK is a well regulated philanthropic market with tax incentives that benefit both donor and recipient and as such it is a hub for both international charities and for international charitable giving. The UK is home to many of the world’s leading international charities and foundations, and many of these operate through a network of partners which deliver work in-country. If you choose to support organisations such as Oxfam and Action Aid, your funds may directed to these ‘on the ground’ partners, with the UK based organisation monitoring and evaluating projects to ensure that the funds have been spent effectively.
- Co-funding through established international grant makers: a number of UK based foundations fund internationally and some will channel funds within their programmes or co-fund. Alternatively, your could work with a local community foundation to fund in your country of choice.
Your degree of control over how your donation is used will vary depending on the route you use. If it is important to you that you can specify the exact use of your funds, you should discuss this with the NGO or intermediary, or work with an advisor on your own programme of donations.
If you have a low appetite for risk, your best option may be to work through a trusted intermediary. Discuss with them the level of service that they can provide. They will be able to inform you about the giving environment in country and any particular risks involved. They will be able to help you select NGOs based on your giving strategy and give you confidence that you are supporting a bona fide organisation.
If you choose to find charities yourself, there are some factors to consider in addition to those you would use when funding a charity operating in the UK. These include:
- The country context: what is the political, economic and social context? How are NGOs and their activities viewed in the country, and what are the implications of this? How volatile is the environment and how might the country and local context change, and what effect would this have on your donation?
- Establishing the credibility of the organisation: as systems for charity registration and publically available financial accounts do not exist in many countries, you may need to find a way to establish the trustworthiness and credibility of any NGOs you plan to fund. Endorsement of the organisation and the people involved by a trusted third party, for instance by another funder, can be helpful to establish trust. You should also look at any documentary evidence that they can provide, for example accounts and evaluation reports. An advisor can support you with this.
Monitoring international grants
As with all large donations, you will want to monitor how your funds have been spent, and what impact they have achieved. A structured approach to monitoring and evaluation and impact measurement will reassure you that your funds are being spent effectively – or flag any issues of concern. It will also generate learning to inform and shape your future giving.
Any monitoring arrangements should be agreed with the beneficiary NGO in advance of the grant to ensure that the organisation can provide the required monitoring information in a cost effective and timely way. This could include some fairly simple measures – such as progress milestones, to more elaborate impact measurement arrangements for large grants. Your level of measurement and reporting should be proportionate to the size of your grant and the capacity of the organisation. Professional advisors can help you to design a monitoring and/or impact measurement framework and to collect and analyse the data.
Tax efficient international giving
The UK tax environment for giving is one of the most favourable to donors and charities in the world. However, giving direct to charities based outside the UK does not carry tax benefits for individuals or companies unless an intermediary, such as a private foundation or a specialist organisation such as Charities Aid Foundation (CAF), is used. Fundamental to all international giving facilitated by CAF is whether the organisation would qualify as a charity under the laws of the country where the funds are held. This means that for gifts from the UK, the beneficiary’s governing documents, accounts and activities are assessed under UK law. CAF supports UK based donors to make over £30m worth of tax effective overseas donations each year.
If you are paying tax in the UK and elsewhere, seek advice on international tax efficient giving as international tax rules can invalidate UK tax breaks. However, for dual UK and US taxpayers, the CAF American Donor Fund can help you to make the most of tax reliefs from both countries and make gifts to charities across the world.
Another resource is Transnational Giving Europe (TGE), which enables tax payers in participating countries to make tax-effective cross-border donations. If you want to make a tax-effective donation to a UK charity from one of the member countries, then this is a solution. CAF is the UK partner, and other members are currently working in Belgium, Bulgaria, France, Germany, Hungary, Ireland, Italy, Luxembourg, Netherlands, Poland, Romania, Slovakia, Slovenia, Spain and Switzerland.
Giving in Europe: A guide to cross-border giving within EU member states,
CAF Global Alliance offices: for information about CAF offices in America, Australia, Brazil, Bulgaria, India, Russia, South East Asia and Southern Africa.
About the author
CAF (Charities Aid Foundation) is a global organisation that promotes charitable giving through advisory and transactional support to individual and corporate donors. CAF facilitates in the region of £400m of donations each year. CAF also provides financial services and social finance to not-for-profit organisations.
Jane Arnott is Head of Global Alliance at the Charities Aid Foundation.
Jane has spent the last 20 years working to strengthen the civil society sector and has significant experience of grant making, policy and organisational development, direct service provision and infrastructure support.
Jane joined Charities Aid Foundation (CAF) in the UK in 2010 as Senior Advisory Manager for charities and grant making and later served as Interim Head of Advisory and Consulting. In 2012 Jane became Head of the CAF Global Alliance. Her role involves working with CAF’s offices and partners in America, Australia, Brazil, Bulgaria, India, Russia, South East Asia and Southern Africa to develop CAF as a global leader in philanthropy services and thought leadership and to provide strategic development support to each office.