There are several different types of philanthropy, ways of giving, and various types of financing commonly used in funding development.
Individual giving refers to people from a variety of economic and social backgrounds giving of their funds, knowledge and time towards a common good. Individual donors account for more than three-quarters of charitable donations every year and most non-profit organisations rely on individual donors for ongoing, regular support.
Much individual giving is done through viral fundraising. In recent years this has been evident through the rise in popularity of Crowdfunding, a financing method that involves funding a project with modest contributions from a larger group of people, rather than seeking large sums from a small group of investors. These funding campaigns are typically conducted online through specific crowdfunding sites, usually working in conjunction with the various social network platforms. The basic premise is to convince enough people to contribute to reach a target figure. Crowdfunding is successful as it allows the individual an effective way to support a cause – no matter how big or small the contribution.
Donors pool philanthropic funds to gain collective impact through their giving and thus increase the total impact on the project. This type of collaboration allows for the sharing of ideas, the joint planning of responses to issues of mutual concern, engagement with other donors that focus on related issues and the building of networks and alliances.
Organisations may have a programme or service that works but need investment from various donors to make the programme a reality. Donors thus have the opportunity to form strategic alliances which allow them to leverage their philanthropic giving while adding greater benefit to the project or programme.
Community philanthropy is an approach to development, based on the belief that community members often have the best understanding of what is needed to improve and aid their community. It is the process of gaining the support of community members, leveraging community resources and determining the local use of external resources in order to address challenges or improve the quality of life within that community. Trust is built through community collaboration and participation, as well as by providing some level of shared power in the decision-making process. It has been found that community members are more likely to commit to a project on a long-term basis if they have a level of ownership in the project.
Social justice philanthropy
Social justice philanthropy is an approach that emphasises social justice principles in funding allocations. Funders enable support to those most marginalised through social and economic exclusion and assist civil society in speaking on behalf of those usually left out of official decision-making processes. Social Justice philanthropy includes the provision of resources necessary for structural changes that assist in minimising social and economic inequalities. It is also often known as social movement philanthropy, social change philanthropy and community-based philanthropy.
Foundations and High Net Worth Giving
There are many high net worth individuals involved in philanthropy. According to the The Global Philanthropy Report, there are 15 million millionaires and close to 2,000 billionaires globally. Many of them have launched some form of philanthropic structure to enable them to make a financial investment, thereby improving society in one way or another.
Many high net worth philanthropists start a foundation — a non-governmental, non-profit organisation which makes donations, known as grants, to NPOs, either to fund a specific programme or to contribute to general operating expenses. A foundation can also be called an endowment or a charitable trust.
Through Impact investing, the investor’s aim is to make a profit while having a positive environmental or social impact on the world at the same time. The focus is usually on funding things like sustainable agriculture, clean technology development ,affordable healthcare or housing and improved education or employment opportunities. Microfinance projects are also popular in many emerging economies. Impact investing is often is done through debt, private equity or fixed-income securities. There is usually no time frame, with investors supporting the project for as long as it takes.
Venture philanthropy is slightly different to Impact Investing as it focuses purely on social impact while usually (but not always) making a profit. The primary goal is the improvement of systems and sectors as opposed to promoting and funding individual organizations and projects. Its emphasis is on capital building rather than funding operational expenses. Because of this, there is a strong emphasis on performance measurement. The focus is usually on medium-term projects with the engagement period being an average of five to seven years. Most venture philanthropy investments are done through a private equity firm or foundation.