Collaborative Philanthropy: Even Billionaires Need Help Changing the World

Philanthropy at its best is an inventive and collaborative enterprise. Yet, more often than not, foundations and individual benefactors have chosen to go it alone.

No longer.

A new breed of philanthropist has emerged, willing to partner across sectors, disciplines, and geographic boundaries to achieve their goals. They often reject the simplistic divides that can sometimes hamstring innovation, and they have early successes to show this approach can pay off.

Many of these philanthropists are beneficiaries of the information revolution and the technology-driven economic integration that accompanied it. They want to see globalization’s benefits more evenly shared — and its dangers mitigated. While most of these newer philanthropists are based in North America and Europe, they are now joined by counterparts who live and have made their wealth in fast-growing economies like Nigeria and Brazil, where growth is robust but far from inclusive.

Whether from Palo Alto, London, Mumbai, Lagos or Sao Paulo, these philanthropists are inventive, ambitious, and knowledge-hungry. They’re willing to take on complex problems – like poverty, climate change, or infectious disease. They seek new partners and create new models for addressing them.

They see these problems as the results of faulty or out-of-date systems that need to be replaced by new systems built from the ground up to serve their communities in a new way. And they know that no individual, entity, or sector can do that alone.

While some of the more inventive models were pioneered by wealth creators without staffed foundations, now even the world’s largest philanthropies and wealthiest benefactors are following suit with innovative collaborations. For even these philanthropic heavy-hitters, their ambitions outstrip their resources.

So, when philanthropist Aliko Dangote took up the challenge of eradicating polio in his native Nigeria, he did so in partnership with the Bill and Melinda Gates Foundation, UNICEF, the World Health Organization and the Nigerian Ministry of Health.

The Gates Foundation had long promoted the notion that leveraging others would bring better, faster and more lasting results. When the foundation began its search for cures for the world’s most devastating diseases, it did more than team up with governmental agencies. The foundation also invested in pharmaceutical manufacturers that agreed to conduct R&D into the diseases of the poor. The foundation provided the capital to compensate for a market failure, absorbing risk for the companies. And the companies have the core capacity for R&D, marketing and distribution, so the foundation isn’t wasting resources reinventing these functions. To further mitigate risk, the Gates Foundation guarantees the purchase of the resulting vaccines or medicines in sufficient quantity to justify its production.

In Nigeria, this has been an ideal partnership.

What is so telling about this collaboration between Dangote and Gates is that two mega-donors – who would be most justified in thinking they can go it alone – are leading the charge to partner and produce better results together.

Despite their extraordinary wealth – they too know they cannot, need not, and should not fly solo. In their view, doing so would not only be inefficient, but would likely squander an opportunity to save lives. And that is an unacceptable price to pay.

They are joined by others who have pursued market-leveraging innovations to assure that solutions can be scaled and sustained.

One approach is the deliberate creation of an “inclusive business” where social benefit is intrinsic to the company’s value chain. James Mwangi, CEO of Kenya’s Equity Bank, has pioneered this strategy there. Equity provides financial services to the poor at affordable rates and with flexible payment schedules. Another entrant in this field is Eco-cash, a new product of the Zimbabwean mobile network Econet, founded by Strive Masiyiwa. It allows for simple cash transfers via mobile phone and has opened a world of commerce and trade for citizens who are far from the reaches of conventional banking. Masiyiwa and his wife Tsitsi are significant and strategic philanthropists.

Another example is so-called “impact investing,” or investing in companies that produce both a social and a financial return, often at below-market rates. It is creating a new investment class of small and growing enterprises, which provide goods, services and income generating opportunities for the poor. A leader in the field is the New York based FB Heron Foundation, which has the bold goal of investing its entire endowment in enterprises that advance its mission of job creation. The uptake for this brand of philanthropy has been rapid in Brazil, India, and elsewhere.

Or take for instance the pay-for-performance contract. In entering into a pay-for-performance contract, a city or other government entity contracts with a nonprofit to deliver a service. Working capital is provided by private investors. Under this model, the city would repay those investors, with profit, only after the service has been delivered, the promised impact has been achieved, and corresponding savings have been realized. The investors are betting that the nonprofit can deliver a positive outcome. Michael Bloomberg experimented with this innovation when he was New York’s mayor. The city contracted with a nonprofit to launch a program aimed at reducing recidivism among former inmates, Goldman Sachs provided the capital, and Bloomberg Philanthropies agreed to take first loss, absorbing the risk. The city government will only repay investors if and when the program succeeds. And it will do so with the funds saved by reducing the number of prisoners returning to city jails.

Taken together these innovative projects form the beginnings of an “impact economy” for which the infrastructure is being built by the Rockefeller, Skoll, and Lemelson Foundations, along with Citibank, JP Morgan and the Lagos-based Tony Elumelu Foundation.

Using these and other collaborative instruments, philanthropists are harnessing the resources, know-how, and capacity of others who share their goals. These philanthropists often find willing partners from far outside their sector. As a result, this new breed of impact investing represents a set of values and a sense of purpose that spans sectors. And it has given rise to a community of savvy, determined, and caring people who know how to get things done – together. In so doing they may offer the best attributes of each sector:

  • The transparency and accountability of democratic governments
  • The efficiency and scale of private sector companies
  • The agility and responsiveness of NGOs
  • The risk appetite of philanthropy

Of course, there remains a great deal foundations choose to do on their own, and a great deal of effective change they can achieve. However, for the most persistent problems, this new breed of innovative partnerships could deliver the kind of success that has been elusive to traditional philanthropy. If this trend continues, we may be at the beginning of an era where lasting and positive change in these very difficult areas can finally come into view.

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Edition: July/August 2014