While it is a fact that several charitable organizations, the world over, are doing good work in helping developing communities, societies and economies, it is also a fact that there are charitable organizations that are either wasting resources or subverting the very causes that they claim to espouse or, worse, doing both. This is mostly because the idea of charity, arising as it does out of a present-day variation of the feudal concept of ‘noblesse oblige‘ (which in turn arises from a benevolent variation on the theme of self-interest) carries within itself the seeds of its own failure. Presented below are examples of some of the risks that are intrinsic to charity initiatives:

1. Power: Charity tilts the balance of power in favor of the donor. It provides the donor with political leverage over the recipient, and therefore gives the donor the opportunity to determine the scope, pace and extent of the recipient’s development and also the opportunity to influence other incidental factors that impact the recipient’s growth and future prosperity. This could lend itself to abuse in situations where such power falls into the wrong hands. In many cases, charity has prevented recipients from evolving solutions that might have been better than the ones the donor is willing to fund or provide for. In such cases, charity serves as a strategy to suppress potential competition.

2. Dignity and Dependency: Charity tends to deprive recipients of their dignity and self-esteem, especially in situations where it does not provide them with opportunities to independently improve their own socio-economic conditions. Charity also undermines the basis for catalyzing entrepreneurship, drive and innovation in recipient communities and instead replaces it with a ready justification for complacency. Recipients grow dependent on aid and are not equipped to deal with a future that does not bring in as much aid as they require.

3. Dumping:  Charity easily becomes the vehicle for handing-down legacy products and technologies that are ready to be retired from their lifecycle or, worse, are being withdrawn from donor-side markets due to known defects or harmful effects. Obsolete products are usually more expensive to maintain, and defective / harmful products are clearly undesirable. In some cases, recipient communities could be used as testing grounds for new products (especially in the life sciences sector) whose impact is not clearly known. This is another potential area of abuse.

4. Wastage: Since charitable initiatives do not have a profit motive, there is no incentive to control wastage of resources (including money). Such organizations are open to the risk of becoming fertile grounds that breed inefficiency and/or corruption (if not one, then the other; worst case, both). In order to avoid this, controls need to be enforced through external audits and tighter internal checks and balances, both of which add to costs and thereby drain scarce resources.

A more effective approach to socio-economic development would be to shift the paradigm, from a traditional not-for-profit donor/recipient model built on patronage, to a ‘social enterprise’ model that is based on the same economic principles and financial disciplines of mainstream for-profit businesses, and which builds on a spirit of partnership. The fundamental difference between these two models is characterized by the fundamental difference between the spirit of patronage arising from self-interest and the spirit of partnership towards a common goal.

While the partnership-based social enterprise approach also brings its own risks (such as the potential to levy usury interest on loans), adequate competition in the social enterprise domain would go a long way in checking such exploitative tendencies and monopolistic opportunism. Suitable regulatory mechanisms (including the requirement for better corporate governance, and for standards in performance reporting) would also help in ensuring that social entrepreneurship initiatives retain integrity in their efforts to promote growth and development. This may not be a perfect solution, since every approach brings its own risks, but it would certainly be more sustainable than one based purely on the charity of patron communities.

There’s an old proverb that goes “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” To that, social enterprise can only add “Help him set-up a fishing business and you put him on the path to prosperity in his own lifetime as well as for his future generations.”