Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit scholar, student, or professional to highlight current research reports or studies and discuss how they can inform and improve day-to-day nonprofit practice.

Each year, through the publication of Giving USA, we learn about the generosity of Americans. In 2010, we gave nearly $300 billion in support of a wide variety of charitable causes—3.8 percent increase over the prior year. Almost all of this was given to causes within the United States. However, the 5 percent given to international causes reflected a 15.3 percent increase over the prior year, and was the largest percentage of growth among recipient areas. This level of increased global philanthropy is worth a further look. The Hudson Institute’s Center for Global Prosperity recently published its Annual Index of Global Philanthropy and Remittances for 2010 and reported “financial flows to the developing world from the United States increased notably in 2010 to $326.4 billion from $226.2 billion in 2009,”1 largely due to the improved economy. This support consists of four sources: U.S. government aid, capital investment, philanthropy and remittances. Accompanying the Annual Index is an Executive Summary. Both papers serve as resources for this blog post, which touches on only a few aspects of this global generosity. Data such as that presented in this annual study is important to track as we learn of the impact of investments such as these.

The table below highlights the billions of dollars that flowed to developing countries from the United States and the specific percentages sources noted above.

Table 1

U.S. OFFICIAL DEVELOPMENT ASSISTANCE (U.S. ODA)
Total U.S. Official Development Assistance in 2010 was $30.4 billion, a 4.2 percent increase from 2009. The U.S. remains the highest net donor of aid in absolute dollar amounts, providing more than twice the amount of the next highest donor, the United Kingdom.3 This study reports that a change is occurring; the long-held perception that the reduction in global poverty is primarily driven by government aid (from the U.S. as well as other countries) no longer holds true.4 A broader look at the sources of funds moving from the U.S. to developing countries includes examination of capital investment, philanthropy and remittances as well as government aid.

CAPITAL INVESTMENT (U.S. Private Capital Flows)
As the above chart illustrates, nearly half of the financial engagement between the U.S. and developing countries is capital investment. In fact, this stream of support more than doubled in 2010 over 2009, increasing $92 billion, from $69.2 billion to $161.2 billion. Most of these private capital flows were in the form of portfolio investments and foreign direct investments. Included in the tabulation of capital investments are Program Related Investments (PRIs) by foundations to support their philanthropic activities.5

PHILANTHROPY (U.S. Private Philanthropy)
The increase in philanthropy to developing countries from the United States counters the impact of the lingering recession. In fact, various philanthropic sources generated $1.5 billion more dollars in 2010 than in 2009. “This tracks with data from Giving USA, which reported an increase of 3.8% in overall U.S. giving and a 15.3% increase in giving to international causes, which suggests that Americans are being particularly generous to overseas causes in a time of economic hardship for many countries.”6 I surmise from the report that this generosity was in response to basic human needs existing in developing countries and not as much by the natural disasters of prior years (Japan being an exception).

REMITTANCES (U.S. Private Remittances)
The second largest source of funds moving from the U.S. to developing countries is from monies provided by families, individuals, and hometown associations. These remittances increased $5.3 billion in 2010 over funds sent in 2009. The report indicates that these sources will increase as the economy recovers and “are now more than three times larger than official U.S. aid, making up nearly 30% of total U.S. financial flows to the developing world.” 7 Mexico is the largest recipient of remittances from the U.S., receiving $22.2 billion 2010,which was 99% of all remittances received in that country. Close behind are China ($12.2 billion), India ($12.0 billion) and the Philippines ($10.1 billion). The need to help families ‘back home’ experience some kind of economic stability is very real.

CHANGE
The report quotes Secretary of State Hillary Clinton who recently noted, "Official development assistance from governments and multilateral organizations is no longer the primary driver of economic growth." 8 "This year’s Index highlights the many ways that the traditional equation of international development funding sources is now including higher levels of capital investment, philanthropy and remittances … seen as more sustainable funding to assist developing countries."

IMPACT
The study reports a very significant finding: "…recent data suggest that long-lasting structural changes in economic engagement with the developing world are making inroads against poverty in ways that surprised even the experts." 9 Contrary to the World Bank’s predictions, poverty in developing countries did not increase as a result of the global recession.

To summarize the results of this expanded generosity, I quote the Executive Summary:

"What is clear from these numbers is that developed countries provide far more to the developing world through private actors than through government aid. Private sector interactions—whether it be investment, remittances, and philanthropy or just remittances and private philanthropy—far exceed ODA. This reflects the diverse, new world of international development where foundations, corporations, charities, nonprofits, churches, universities, families and individuals can and are contributing to international relief and development in the developing world."10

The Index is an excellent read once one gets through the data. It includes a number of stories that relate how these monies are used to improve poverty throughout the world. They are inspiring and worth sharing, highlighting the value of personal action in helping to positively impact living conditions in developing countries.

Patricia Lewis' role as Sr. Professional-in-Residence at the Lodestar Center is to help bridge academia and practice. She has a long career as a nonprofit executive and as a "pracademic," having previously served as President and CEO of the Association of Fundraising Professionals, Executive Director of Camp Fire Boys and Girls in Seattle-King County, Development Director of the Childrens' Home Society of Washington State, and as the Nonprofit Professional-in-Residence at George Mason University. She has written and lectured throughout the world about various leadership and management topics for the nonprofit sector.
 

Sources:

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