The Star Malaysia

Innovate philanthro­py

- NAZIR RAZAK & RUTH SHAPIRO

WE are experienci­ng a crisis like none other in modern history: a global pandemic that has stalled economic activity all over the world. The Internatio­nal Monetary Fund reported in June that the global economy will shrink by 4.9% this year – a decline worse than the Great Depression in the 1930s.

In the Malaysian context, our response to Covid-19 has been relatively successful due to accessible healthcare, robust response of the government and cooperativ­e behaviour of the populace. How-ever, the impact of the pandemic is still dire and more severe on the economical­ly vulnerable.

Ironically, as companies and individual­s see incomes deteriorat­e, they instinctiv­ely or necessaril­y cut back on philanthro­py – just when more is needed most.

There is an urgent need to mitigate the reality of financial cutbacks with innovation and new approaches to philanthro­py. How can this be done?

One approach is through cross-sector collaborat­ion. There is room for the government and the private sector to be more involved.

Procuremen­t is an underexplo­red area. According to the Centre for Asian Philanthro­py and Society’s Doing Good Index 2020, only 11% of social delivery organisati­ons (SDOs) surveyed in Malaysia receive government contracts. This is low compared with the Asia average of 26%, with Singapore outperform­ing the average at 31%.

Channellin­g more revenue to SDOs means that they can do more for those they support. (SDOs are organisati­ons engaged in delivering a product or service that addresses a societal need.)

The private sector can also help SDOs and charitable organisati­ons in non-financial ways. For instance, they can contribute through knowledge transfer initiative­s, as social organisati­ons need help with accounting, financial planning, IT expertise, impact measuremen­t, and marketing.

With more companies integratin­g corporate social responsibi­lity principles and activities as part of the business through Environ-mental, Social and Corporate Governance strategies, this can be a two-way collaborat­ion where the social sector can also advise businesses on poli

cies and practices that advance social developmen­t.

In Malaysia, one constraint on the amount of donations is the donation cap. Though donations from individual­s and companies enjoy a tax deduction, it is capped at 7% and 10% of their income respective­ly. This is extremely low compared with Singapore’s 250% tax waiver for both companies and individual­s, the highest in the world, with no ceiling in place. In the West, tax relief can range from 20% to 50% of a donor’s gross income.

And the process of qualifying for relief in Malaysia is burdensome too. For an organisati­on in this sector to attain tax-exempt status, it needs to have been in business for at least two years before it can apply, meaning organisati­on leaders would often have to shoulder the costs personally or find donors to support tax payments.

The lack of government support for charity needs to be studied from all angles. There is a lack of trust stemming from the chequered history of the governance of charitable foundation­s. Many have been abused and too often politician­s have used foundation­s as a front for their political activities.

In the business of social investment, trust is a key commodity. According to the Doing Good Index, only 48% of respondent­s trust social enterprise­s or nonprofits in Malaysia. Only 57% of SDOs have a board of trustees compared with an average of 87% across Asia. This creates doubt about the organisati­on’s transparen­cy and accountabi­lity as there are no checks and balances.

We need to calibrate a new balance where organisati­ons that are well governed can have more incentives, enabling them to raise and channel more funds for doing good.

The fact that there are lots of bad eggs should not mean that we hold back the good ones. As a founder of the CIMB Foundation, I saw firsthand how powerful and effective a well-run private organisati­on can be in helping those in need.

The returns on monies channelled through highly committed private vehicles go much further than government schemes or, indeed, cash handouts.

To end, as much as Covid-19 has brought much pain to the world, it can also bring out the best in mankind. Apart from just urging those who can to give more in these times instead of less, we should also encourage policy changes and innovative collaborat­ions so that more help is available at this difficult time.

Note: Datuk Seri Nazir Razak is the founding partner and chairman of Ikhlas Capital and a member of the advisory board of the Centre for Asian Philanthro­py and Society (CAPS). Dr Ruth Shapiro is the co-founder and CEO of CAPS.

 ??  ?? Photo: Filepic/ The Star
Photo: Filepic/ The Star

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