The “New” Giving Environment

As with everything, the web has changed philanthropy. The upstarts are changing the rules, but as this Fortune article points out, traditional nonprofits like United Way are taking heed.

From the article, the innovators: Kiva allows you to loan money to entrepreneurs in developing countries, and while loans are interest free, you are able to receive email updates from the entrepreneur, when your money comes back you are able to reinvest in another project; DonorsChoose.org where teachers ask for materials in order to teach students, you are allowed to choose a project to support, allowing students to learn, and in the end they send you thank-you notes (if you have ever received a thank-you from children, you know how good that can feel); global giving connects you with grassroots charity projects around the globe; and Progreso Financiero allows you to help Hispanic immigrants build businesses.

Some of the benefits of the new approaches: lower operating costs than the standard “bricks and mortar” nonprofit; speed in providing services (loan requests on Kiva can be granted within hours); better information that allows givers to see exactly where their money goes and who it helps; allows anyone and everyone to get involved, the college kid living off ramen noodles and the investment banker downtown can contribute just the same; and customized giving allows donors to give to projects related to interests they hold near-and-dear to their hearts.

So far Kiva has attracted nearly 250,000 lenders and disbursed $22 million across 40 countries. Lenders may withdraw loans upon repayment, but 90% recirculate the funds, so the kitty keeps growing. Kiva expects to have doled out $100 million by 2010 and $1 billion within a decade, $25 at a time. “To get everyone a piece of the action, we had to set a limit on the size of the loans,” says 32-year-old president Premal Shah, who came to Kiva from his product manager position at PayPal in March 2006. “When’s the last time someone put a cap on your philanthropy?”

Capping philanthropy? The business plan is obviously working.

The key to all of it: involvement. Givers enjoy seeing and hearing about what their money has done for specific people (whether it’s one or thirty). Being involved throughout the process adds a compelling human factor: a donor can see the goodness his or her money has provided daily.

My thinking is this: hospital foundations are stagnant. While many are trying hard, hospital foundations have not traditionally been hubs for innovation (golf tournaments are a dime a dozen). It seems every nonprofit organization (locally and nationally) is looking for support. There is big competition for donations. As people become more aware of information like 30-40% of care provided in the health care system is waste, health care consumes 20% of GDP, perverse reimbursement incentives, issues arising from not providing enough free care, etc., luring donations is only going to get harder. True or not, good or bad, perception is reality.

Hospital foundations are going to have to find new ways to reach donors. One way to do this is to set up a system (similar to the above) that allows donors to see what projects in a health system need funding. Whether it is the purchase of a new MRI machine, the construction of a healing garden, or important cancer research, donors can choose the project that best fits their interests and donate accordingly.

Turbulent times require innovation everywhere, even in the hospital foundation. What is there to lose in at least trying the idea?

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