Asia’s social sector sees a funding decline

Photo by Van Tay Media

COVID-19 has exacerbated income inequalities and social disparities across Asia, serving as a force multiplier for trends already in place.

A new social impact study released by the Centre for Asian Philanthropy and Society (CAPS) shows how to maximize philanthropic and policy responses to cope with these post-Covid challenges.

Assessing performance across four sub-indexes – Regulations, Tax and Fiscal Policy, Ecosystem, and Procurement – CAPS’ biennial flagship study, the Doing Good Index 2022, examines the social investment landscape in Asia.

It exposes the underlying structural conditions preventing the region’s social sectors from thriving, whilst highlighting enabling factors that can empower governments, companies, philanthropists, and social delivery organizations (SDOs) to tap resources and work together to meet Asia’s challenges.

Mr. Ronnie Chan, Chairman of CAPS, said, “Two-thirds of those newly forced into poverty live in South Asia, East Asia, and the Pacific, underscoring the need for philanthropic giving in these economies.

“The pandemic has forced an immediate and united response from individuals, companies, and governments, demonstrating how a collaborative ‘Asia for Asia’ philanthropic approach can guide the region’s recovery and rehabilitation.

“That said, we need to urgently do more if we are to protect and support the most vulnerable members of our society.”

Asia on track to fail all Sustainable Development Goals if immediate action isn’t taken

In order to meet the United Nations Sustainable Development Goals (SDGs) by 2030, economies in Asia will need to invest US$1.5 trillion annually. However, Asia is currently not on track to meet any of the SDGs as a region.

Private capital plays a critical role in closing this funding gap. An estimated US$701 billion per year can be unleashed if Asia – home to 26% of the global rich – were to match the United States in terms of philanthropic spend.

This is about 14 times the net foreign aid flowing to Asia and roughly 28% of the expected costs to fulfil the SDGs by 2030.

The Doing Good Index 2022 identifies four key trends across Asia:

Trust deficit among sectors impacting the power of collaboration

The lack of trust among the government, private, and social sectors remains the foremost impediment to creating a supportive and enabling environment for the flow of private social investment.

As a result, many Asian governments have put in place regulations that limit the social sector’s freedom and flexibility to operate, thus impacting donors’ motivations to engage with them.

This results in a loss of both funding as well as talent to the sector, in turn reducing its capacity to deliver on its objectives.

Ambiguous policies and government oversight driving away donors

Throughout Asia, governments have enacted ambiguous policies governing philanthropy, corporate social responsibility (CSR), and the social sector in general, which, at times, seem to work against each other.

The incoherence around the fluctuating regulations often leads to mixed messages from the government. This dilutes the incentivizing potential of their fiscal policies to encourage systemic philanthropic giving, ultimately translating into a lack of support for the social sector.

Funding to the social sector characterized by shortfalls 

Almost half (47%) of social delivery organizations (SDOs) in Asia have reported a decline in funding, with 75% of those reporting a decrease of up to 50%.

A number of factors have contributed to this shortfall including diminished foreign funding as a result of regional affluence, companies and donors redirecting their funding to other areas or opting to engage in humanitarian work themselves in the wake of the pandemic, and the zero-sum nature of COVID-19 support.

At the same time, eight of the 17 governments in Asia have enacted policies that make it more difficult for foreign funds to enter the country. Few economies have been successful in leveraging domestic and government funding to close the funding gap.

Synergies among the sectors imperative for a vibrant social sector ecosystem 

Despite unrivalled challenges and structural impediments, Asia’s social sector has demonstrated its capacity as a trusted partner for sustainable development, working with governments, companies, and philanthropists to build back better.

However, as the COVID-19 crisis abates, it will be critical to harness the strengths of all parts of society – government, private and social sectors, and individuals – and maximize collaboration to drive long-lasting change in the direction of inclusive and sustainable development.

Addressing the region’s unmet social needs will require a coordinated “all-hands-on-deck” approach that includes not only funding but also talent, knowledge and a shared commitment towards the most vulnerable in our communities.

Dr. Ruth Shapiro, Founder and Chief Executive of CAPS, commented, “The remarkable resilience of the social sector amidst the current crisis is a beacon of hope, but all the same, fundraising to the sector has never been more challenging. Foreign funding in Asia has been progressively declining in recent years, particularly in lower-middle-income economies that have relied heavily on foreign support for decades. 

“It will be critical for economies in Asia to develop a clear and consistent set of policies to unlock domestic funding that will allow for inclusive and sustainable development.”