Wednesday, March 14, 2007

The New Face of Giving

The face of giving is changing and it is exciting to watch. Never have so many people been so involved in giving, and never have those people so actively managed their donations. While massive organizations like the Gates Foundation get most of the publicity, changes are happening at all levels. Donors are more involved and more goal oriented then ever before, and this is forcing charity organizations to become more transparent and more effective.

One of the biggest things we’ve learned over the last few decades is that smaller projects are often much more effective then larger ones. Take for example microcredit. Last year Bangladeshi economist Muhammad Yunus and the Grameen Bank he created won the Nobel Peace Prize. It was well deserved. What the Yunus realized is that for many people poverty is simply a matter of cash flow. If you have no money, you can’t buy seeds, you can’t buy tools, and you can’t buy raw materials to make things to sell. It turns out that by lending poor people a tiny amount of money we can often give them the boost that they need to get out of poverty.

In many countries the poor are literally held in a form of slavery for lack of a few dollars. Because they have no money the only way they can get seeds or raw materials is to borrow them against a share of what they produce. In the end there is never enough left over to allow them to get break the cycle. Often the debts are passed on across generations. Children are born into debts of their parents. Grameen Bank gives loans as small as a few dollars that allow the poor a first step out of poverty. Amazingly, it does so profitably. It turns out that for the vast majority of people this first step up is all they need to start generating an income from which they can repay the loan and improve their lives.

The same principle applies to many charity projects. Often a small amount of money applied in the right spot can have a much bigger impact then a large amount of money spent more broadly. Not only is the money spent more effectively, but donors are also able to fund very specific projects that they are interested in. For instance, while I support much of the work of GreenPeace, I won’t give money to them because they are opposed to nuclear power which I happen to support. I need finer grained control over my giving.

Now this is changing. GlobalGiving and other organizations are providing marketplaces where smaller, more focused ideas can get funding. Donors are now able to find projects by area of interest and geographical location. For instance, through GlobalGiving you can pay for a year of education for a student in Indonesia, or buy renewable energy for Peruvian villages.

Donors have more options available then ever before, and this is enabling a new wave of tightly focused, highly effective charities. Never have we been able to do so much good, so easily.

Next week Lara and I are visiting two agricultural projects in southern Mexico. Stay tuned…

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