Giving in India is often said to be going through a boom, with registered foreign funding increasing by 150 per cent between 2003 and 2007. But scratch the surface and it is likely that much of this spending is being wasted. This is the stark conclusion of a new report by charity consultancy and think-tank New Philanthropy Capital.

The challenge for donors interested in India is a daunting one. Despite economic progress, disadvantage remains broad and deep. To take just one statistic, malnutrition among under-5s, a condition that causes irreversible brain damage, is worse in India than in Sub-Saharan Africa.

The good news is that philanthropy has significant potential on the subcontinent. Spending from overseas donors, non-resident Indians and Indians themselves is likely to run to billions of rupees.

Is money being well spent?

But how is this money being spent? NPC has carried out a year-long investigation, working on the ground in Delhi and Rajasthan in joint venture with an India-based organization, Copal Partners. We spoke to dozens of experts and scores of NGOs. What surprised us was that money appears to flow neither to the most urgent causes nor to the most effective organizations.

There is little good data on where money is spent in India, but a wealth of anecdotal evidence suggests that many individual donors do not give strategically. Talk to NGOs on the ground and you hear complaints of palliative giving, with a strong bias for funding visible capital projects in donors’ home villages – be it temples or schools. A narrow set of issues eats up donor attention. More challenging subjects – malnutrition, child trafficking, violence against women – go neglected. The poorer states (often in central and north India) get underfunded relative to the wealthier ones in the south. Trying to get ‘high risk, high return’ options like policy work funded is very difficult indeed.

Looking at individual organizations, the situation is similarly frustrating. Very few Indian NGOs measure their results in robust ways. In the absence of high-quality independent evaluation, it is unclear how donors can be confident that their funding is being used well. It seems probable that funding decisions are often being driven by marketing budgets or random personal connections, not by the moral imperative to maximize impact.

All of this means that money is likely to be being wasted. NPC and Copal saw NGOs doing fabulous work and NGOs that were struggling. The latter appeared just as likely to get donor support as the former.

Of course none of this is unique to India. But the scale of misallocation of resources may be worse than in developed countries – if only because there is hardly any public information about India’s 1.2 million NGOs. Moreover, wasted resources matter more in India than in developed nations because its social problems are more pressing, and the capacity of the state to address them is more limited.

What can be done?

Our research offers no magic bullet to fix these challenges. But it does propose some modest steps towards better philanthropy. What India needs is a more effective funding market, where money follows success and failure is identified and learned from. A great starting point would be for donors to share their existing evaluations. Wider steps include funding what might be termed a market infrastructure. There have been some important developments in this direction with the establishment of Guidestar India and transparency initiatives like the Credibility Alliance and Give India (the former an NGO-agreed and enforced set of minimum norms on transparency and accountability; the latter a web platform to showcase organizations that meet these norms). In the medium term, donors to India need to move the debate to wider questions of effectiveness and fund the public sharing of results data.

Donors also need to support NGOs in more hands-on ways. The key problem affecting Indian NGOs that we visited on the ground was not corruption or waste or any of the other concerns donors giving overseas often have. Rather it was much more pedestrian: recruiting and retaining talent – especially professional skills, and at middle management level. NPC believes that organizations that don’t resource themselves properly cannot be effective. But too few donors fund core costs.

Indian NGOS are doing some immensely inspiring work – from anti-trafficking campaigns in the Mumbai red-light district to crèche provision for under-3s on Delhi construction sites. A more strategic approach can help these organizations make a step-change in what they are doing.

Adrian Fradd is Senior Analyst at New Philanthropy Capital. Email AFradd@philanthropycapital.org

For more information
To download Giving in India: A guide for funders and charities, go to http://www.philanthropycapital.org/research/research_reports/international/Giving_in_india.aspx