Cultivating Philanthropy Overseas

Community funds tackle local problems on 5 continents

From Munich to Melbourne, Kobe to Kwa Zulu-Natal, community foundations

are taking root and gaining a reputation as the most adaptable and democratic form of organized philanthropy.

As governments around the globe have cut back on providing direct social services, as foreign-aid budgets languish in the economic doldrums, and as citizens in Africa, Asia, Latin America, and the former Soviet bloc have sought new ways to mobilize resources and magnify their own impact on society, ordinary people in a growing list of countries have come to view community foundations as appropriate tools for their aspirations.

Indeed, a concept born in Cleveland in 1914, when separate charitable trusts were consolidated into a single institution, has spawned many far-flung descendants: Besides more than 600 such institutions in the United States, there are now 113 in Canada, 68 in Britain (including many in the planning stage), 30 in Germany, a score each in Mexico and Australia, and several dozen more in places as diverse as Brazil, Bulgaria, India, Japan, and Puerto Rico.

Much of the growth overseas has taken place in the past five years. The first community foundation in Germany, for example, was established in 1996; the first ones in Poland and Russia, in 1998; in Italy and South Africa, in 1999; and in Ireland, just last year.

“What was a uniquely American construct is now providing the energy for the development of philanthropy around the world,” says Barry D. Gaberman, senior vice president of the Ford Foundation, which has long sought to strengthen philanthropic institutions in the developing world.

Challenging Questions

Community foundations, though they can vary widely in both structure and operation, are generally characterized as independent institutions that receive money from a variety of donors and make charitable grants within a specific geographic area, with decisions made by people from those same communities. Assets normally are held in endowments as a permanent source of support.

As they gain footholds in various countries, community foundations face a number of questions: Should they focus more on raising money for endowment or on gaining visibility through immediate grants? Should they rely more on affluent donors or on grass-roots support? Should they welcome the involvement of government officials or keep them at arm’s length? And how should they balance service to their donors with service to the larger community?

The concerns of community foundations internationally are finding their way onto conference agendas, including the Council of Foundations’ annual conference of community foundations this week in Vancouver, British Columbia. More than 70 non-U.S. funds are expected to be represented there, in what is the first such gathering to be held outside the United States.

Democratizing Giving

A handful of private foundations, including Ford, have been actively promoting the globalization of community-based philanthropy. And that mission, in turn, is enriching the work of U.S. grant makers by exposing them to new approaches and different perspectives.

The effect, increasingly, is to democratize philanthropy, bringing it within the reach of people — and countries — of modest means.

“Philanthropy needs to begin on Main Street,” says William S. White, president of the Charles Stewart Mott Foundation, which has been at the forefront of the community-foundation effort. “Local neighborhood people know far better than people from out of town what their town needs. I believe in empowering people at the local level; that’s why I’m so behind these organizations.”

In the past two decades, Mott has spent some $75-million to help create, promote, and strengthen community foundations, of which nearly $20-million has gone to help funds outside the United States, particularly in Britain, Eastern Europe, and South Africa.

Government Aid

People in some countries have turned to community-based philanthropy after becoming discouraged with top-down patterns of grant making.

Some believe that community foundations can be an effective way to get overseas aid to the grass roots in developing countries where it’s most needed, for example. Aid officials are realizing that “instead of handing the money to a government department they can give it to an institution that will be making grants for 50 years or more,” says David Winder, director of global philanthropy and foundation building at the Synergos Institute, which is helping community foundations in Africa, Asia, and Latin America. Debt swaps, in which a government might agree to donate to a fund in exchange for having some of its foreign debt written off, are another potential revenue source, he adds. And Mr. White hopes the World Bank will recognize that community foundations would be suitable conduits for channeling some of its support to the local level.

“Part of the problem,” Mr. White says, “is that all our traditional ways of thinking about things aren’t making much of a change.”

Frustration over conventional forms of development aid was a motivating force behind the creation of the Kenya Community Development Foundation, for example, which next month will become independent after three years under the institutional wing of the Aga Khan Foundation with support from Ford.

“In Kenya, the donor dictates what happens and sets the development agenda,” says Joyce Malombe, a founding board member of the Kenyan fund who has studied community philanthropy at the World Bank and now teaches economics at Southern New Hampshire University. African countries that typically receive development money from outside their borders, whether from private foundations, government aid agencies, or the World Bank, often find that it comes with strings attached that reflect the wishes of the donors rather than the beneficiaries, she says.

The new foundation holds out the promise that Kenyans will be able to decide for themselves where to direct its resources. “If you own the process, you can have consistent, sustainable growth,” Ms. Malombe says. “You can decide what you want to do over time and do it.”

Endowments

Amassing adequate resources for a permanent endowment is not easy, however, in countries that have little experience with such forms of giving, a small pool of wealthy donors, and few or none of the tax incentives available to American donors.

“People are scared that they may never benefit from this money that is put away,” says Ms. Malombe. Raising endowment money “is very difficult to do, especially when you’re living from hand to mouth.”

In Africa, Latin America, and Eastern Europe, therefore, endowments at many funds are still quite small, if they exist at all. The institutions tend to focus instead on raising money for immediate grant making, so they can produce tangible results and acquire a track record that builds trust within their communities.

Says Elan Garonzik, a Mott senior program officer who has been heavily involved in supporting community foundations: “It might take 10 or 15 years or longer to build up a decent endowment in a developing country, but ultimately those organizations will be there with their own money. Self-determination and self-reliance — those words have a lot different meaning when you have your own money and aren’t always out there with your hand out.”

British Contract

Britain’s community foundations have had considerable success in building endowments: Its 30 or so most active foundations have about $150-million in combined assets. Much of their support has come from corporations, which in some cases are doing their local grant making through community foundations rather than directly.

Just this year, British community foundations also received their first major contract from the national government: About $100-million from the Children’s Fund to run a special small-grants program aimed at helping children in rural areas, inner cities, and other areas where they may be missed by more conventional social-service programs. Seventeen funds were selected to make the first round of grants under the program.

“It’s either a great breakthrough or a frightening development for community foundations, because we don’t yet have coverage of the entire country,” says George Hepburn, director of the Community Foundation Serving Tyne & Wear and Northumberland, in Newcastle upon Tyne. Complete coverage is not expected until the end of this decade. “There’s a debate, too, over whether community foundations should be taking this kind of funding anyway. If we become contractors for the government, it changes the kind of institutions we are.”

National Reach

Community funds modulate their relations with government according to their circumstances. Organizers of the fund in Kenya opted for a nationwide institution for practical reasons — primarily so it could be powerful enough to stand up to any attempted interference by the government.

“If we started small, we would marginalize ourselves already,” Ms. Malombe says.

In addition, so few Kenyans were familiar with the concept that it would have been difficult to organize more than one institution initially. “It made sense to develop expertise in one place, with the intention of decentralizing eventually,” she says, as more people become familiar with the concept.

The Charities Aid Foundation in Russia, on the other hand, advises the community foundations it has helped to organize to include government officials on their governing boards. Because businesses still look to government for guidance on social policy, “it is important both politically and practically to involve local authorities in community foundations as members of boards or grant committees,” says Olga Alexeeva, the organization’s codirector, while ensuring that the foundations do not fall under government control or become dependent on government support. Of the 15 community foundations now operating in Russia, she says, just two have small endowments.

The funds also serve as a neutral forum where nonprofit leaders, business executives, government officials, religious figures, and scholars can meet to discuss community needs — no mean accomplishment in countries where suspicion and distrust have often kept people apart.

Grass-Roots Fund Raising

Some funds are experimenting with grass-roots fund raising. In an attempt to build the Community Foundation for the Western Region, in Zimbabwe, from the ground up, for example, organizers collected a dollar each from 7,000 people, thereby ensuring a sense of ownership across a broad base of supporters.

“Those individuals from a wide range of communities now see it as their foundation,” Mr. Winder says. “That’s an interesting example that could resonate in some of the smaller communities of North America.”

In Germany, by contrast, the Bertelsmann Foundation, an operating foundation created by the German publishing company Bertelsmann AG, thinks community foundations can occupy a very different niche in that country’s philanthropic landscape.

“For the intergenerational transfer of wealth in Germany, we believe that the community foundation is a very attractive instrument for moderately wealthy donors,” for whom it might not be cost-effective to set up a small private foundation, says Peter Walkenhorst, Bertelsmann’s director of philanthropy and foundations. The goal, he says, is to increase the overall sum donated to charity by providing a convenient method of giving for people who otherwise might not have been asked for donations.

Bertelsmann set up Germany’s first community foundation in 1996 in its hometown of Gütersloh as a model for others to follow, and has encouraged the creation of others elsewhere. The country now has 30 foundations, with others in the planning stage.

Bertelsmann is among the very few European grant makers that are working alongside several American institutions to promote community funds. Among their efforts is the Transatlantic Community Foundation Network, run by Bertelsmann with support from Mott to encourage sharing of expertise among more than 30 leaders of European and North American funds. Another program, the Transatlantic Community Foundation Fellowship, run jointly by the King Baudouin Foundation, of Belgium, and the German Marshall Fund of the United States, sends five American and five European senior staff members a year across the ocean for a three-week stint working at another community foundation. And the International Fellows program of the Center for the Study of Philanthropy, at the City University of New York, which brings nonprofit leaders and researchers from abroad who are under age 36 for an intensive three-month course of study in the United States, is now focusing on community foundations.

Focusing on Needs

Emmett D. Carson, president of the Minneapolis Foundation, says that as a participant in the Transatlantic Community Foundation Network and other exchanges he has been continually inspired by his colleagues from less-developed countries.

“When you recognize how much they’re able to do with so little in communities that don’t have access to wealth or to vehicles to increase that wealth, you’re overwhelmed with how little we do with so many resources and opportunities,” he says.

More than that, however, Mr. Carson says the newcomers from abroad are driven by a passion that many U.S. community foundations seem to have lost.

“Those community foundations have the true spirit of what we used to be here,” he says. “They’re not measuring their success by the size of their assets or trying to become a financial powerhouse. They’re focused on doing the community’s work: public accountability, consensus building, those fuzzy things that are the glue and fabric of a community — and that some U.S. community foundations no longer want to do or to be.”

In the United States, he says, “some feel that our institutions are essentially charitable banks, where donors can come for advice and information, while we carry out their wishes faithfully and efficiently. But another view is that we serve a larger purpose, collecting unrestricted assets in a community and directing them to those issues that would most improve our quality of life. That idea of promoting civil society, of bringing people together, is what’s so attractive to people in South Africa, Brazil, or Slovakia. It’s not about being a financial center for people of wealth.”