Thoughts on What the Future Holds for the Non-Profit World

As most of you know, I've been doing a lot of reading over the past few months about microfinancing and the world of non-profits in general. I've learned quite a lot, and it's been a humbling experience to jump into a universe about which I know so little.

One of the themes I've come across repeatedly in my readings is what seems to be a relatively high level of mistrust regarding charitable donations. A week ago I read an article on the anniversary of the tsunami that said over a third of the donations had gone to operating costs for the various organizations. Similarly, I've heard about the same type of behavior (and worse) regarding money donated after 9/11. One can only imagine what we'll be hearing on the one year anniversary of Hurricane Katrina.

Of course, this type of conduct is confined to a small minority of organizations, but it happens enough that it seems to have become a considerable deterrent to people donating money. How many times have you heard somebody say "Yeah, I'd like to donate some money, but who knows how much of that will actually make it to the people in need?"

One of the things I find so exciting about Kiva is the prospect of countering this type of attitude by addressing the problem directly. For the first time, a global technology exists that can reassure people that yes, all of your money is really going directly to a person who needs it. Thanks to regular photos/blogging/email updates, there will be no doubt as to the difference a Kiva donation will have made. I suspect that this will be a very effective way to show people that 30% overhead is not a byproduct of philanthropy, but merely ineffective operating on the part of an outdated model.

My vision is that in the 21st century the days of handing money to a monolithic organization only to watch it disappear behind a curtain will be over. Why shouldn't people keep tabs on their social investments as well as their stocks, bonds, and other assets? There's no reason that people shouldn't expect a return on any investment - be it a financially beneficial or social one. The return might not take on a monetary form, but it is still a return just the same.

In addition to making profit-maximizing investments in companies based on potential financial gain, the 21st century "social capitalist" will also choose to make social-objective driven investments (aka donations) based on potential social gain. For example, while a traditional investment takes into account things like P/E ratios and Morningstar ratings, a socially motivated investment will consider factors such as administrative costs vs. actual services delivered and ratings by independent non-profit evaluators such as Charity Navigator.

Fifteen years ago it would have been impossible to imagine the amount of control individuals now wield over their portfolios. In 1990 who would have thought that Grandmas would be daytrading in their muumuus over a computer without ever having to call a stockbroker or sign a pile of forms?

The same level of control is coming to the non-profit world. People will soon be able to monitor their social investments with as little effort as they now monitor their other assets. The days of enormous organizations siphoning money off the goodwill of regular people are numbered, and I certainly won't miss them when they're gone.

For a more in-depth look at the future of the non-profit world by one of the industry leaders, take a look at this paper by Muhammad Yunus.

Posted by flow Frazao on January 4, 2006 at 01:18 AM in Kiva/VEF, Microfinancing, Web/Tech | Permalink