The generous pledge by Saudi Arabia’s HRH Prince al-Waleed bin Talal to donate his entire fortune to philanthropy will have come as no surprise to the Arab world. Large donations are frequent in the Middle East, especially in the Gulf Cooperation Council (GCC) region, where wealthy individuals frequently choose to donate to philanthropy projects.
Philanthropy in the GCC has always been, and will continue to be, entrenched in its culture and religion. Year-on-year data gathered on donations of one million dollars or more illustrates the scale and nature of philanthropy in the region, including the emerging desire to create positive and lasting social impact. In the UAE, for example, the wealthiest philanthropists donate on average $10.2m per person over the course of their lifetime, according to Philanthropy Report 2015, published by Wealth-X and Arton Capital in 2015.
However, a big part of the story remains untold as many major donations remain anonymous. In addition, estimating the scale of philanthropy and the charitable sector in the GCC remains challenging. Most philanthropy is private, and is frequently informal and often anonymous. As a result, data collected for this report is likely to highlight only a part of the true picture of million-dollar giving.
Philanthropy in transition
A new paradigm in the region
Foundations in the Middle East and North Africa, not dissimilar to their global counterparts, are moving slowly but surely away from traditional philanthropic models. Short term, multi-sector grant-making is being replaced by more strategic operations that are focused, long-term and go beyond grants.
The region’s traditional heritage of generosity, closely intertwined with cultural and religious norms, still prevails. Arabs regularly and consistently give at the level of the individual with regional leaders calling for ever more donations to support fellow citizens and worthy causes.
As the 2016 Arab Giving Survey notes, the “region’s generous spirit” is still focused on smaller grants to individuals. It mainly targets friends, family and colleagues, or charities focused on traditional issues such as poverty.” While there is growing appetite for information about where the money goes and the social impact it creates, there is little direct connection with the end beneficiaries or understanding of the real outcomes.
However, this rather conservative picture obscures the activities of a small but growing community of more strategic givers championing new models such as social enterprise and new financial tools such as impact investing and impact bonds. It’s a community that is also actively promoting the idea that business principles can be applied to the philanthropic sector to creating significantly greater social value.
Addressing shared challenges
A collaborative and cohesive approach
Emirates Foundation's annual philanthropy summit held in Abu Dhabi on 8 and 9 November 2016 highlighted the shift towards a more strategic perspective on philanthropy in the region.
The forum assessed how data science can transform the way regional foundations focus their work, evaluate their output and direct their investments to the most obvious ‘gaps’ in the market. Participants shared ways in which commercial organisations are using data to improve efficiency, operations and innovation and how this could apply to philanthropy. Emirates Foundation itself has undergone a radical transition from traditional grant-making to becoming an operational foundation, using the model of venture philanthropy to create scalable and sustainable social enterprises.
Indeed, the concept of social enterprise is rapidly gaining traction across the Arab world with young entrepreneurs pioneering new models of social innovation. Despite the region’s diversity, it faces common challenges – notably around securing good jobs for its large population of young people and delivering much-needed educational reform. Arab countries all stand to benefit from the rise of social entrepreneurs bringing new creative solutions.
Moreover, the sector is increasingly cohesive with organisations such as the Arab Foundations Forum (AFF) uniting philanthropic entities from across the region. This allows them to share lessons learned, exchange ideas around best practices and provide opportunities for direct collaboration. This not only creates a real drive towards further professionalisation of the sector, but also opportunities for operational partnerships. The AFF is currently working with its global counterpart, the OECD’s global network of foundations, NetFWD, to create partnerships around youth employment with a view to fast-tracking the UN's Sustainable Development Goal #8 'Decent work and economic growth'.
This consolidation will stand the region’s philanthropists in good stead to be able to support broader developmental goals and ensure that the growing pool of philanthropic capital is spent wisely and effectively.
Integrating sustainable principles
There is a whole new appetite for social purpose in the region. It’s driven by the rapid uptake of social media, the greater level of connectivity that comes with this, and the region’s unique demographic - half of the Arab population is under the age of 30. In addition to the emergence of new social enterprises, corporates are equally looking to move away from short-term, charitable initiatives with limited sustainable or scalable social impact to look at more integrated approaches.
Corporate Social Responsibility used to sit under the umbrella of marketing and communications – a ‘bolt-on’ rather than a ‘built-in’ mechanism. Today, however, progressive regional companies are looking beyond this and seeking to integrate sustainable and ethical principles into their overall core operations rather than simply their communications messages. High profile examples include DP World, Majid Al Futtaim and Damman. They recognise that business cannot succeed if society fails. They look at how their entire business can create value beyond just financial returns, and acknowledge that ethical behaviour can unlock innovation and attract top talent.
Talk of deploying business-based principles - focus, accountability, measuring output, cost effectiveness and scalability - is now commonplace. Recognition that impact is paramount is now mainstream thinking. Delivering a positive impact on the lives of communities that is systemic and durable is overtaking the earlier focus on branding or ‘the feel good factor’.
Investing social capital
'Digital natives' and social entrepreneurs
Philanthropy is moving consistently away from the ‘cheque-writing’ model of the past. A new discourse is emerging about how the region’s social challenges can be resolved through more strategic ways of investing social capital.
This phenomenon is not only a response to the rapid political and social changes in the region since 2011 but also due to growing pressure from regional governments and businesses to drive more effective governance. The Pearl Initiative established out of the business community in the UAE is a clear example of this. It unites business with civil society to assess how sustainable development can be progressed in the region through better governance.
The regional interest in social impact investing is growing rapidly. Many young Arabs with a background in the financial sector are now mobilising their own funds and initiatives to invest in social ventures. The regional presence of global organisations in this space is growing. Acumen and Ashoka are now active across the region. Individual entities such as Flat6 Labs, Sheraa, WAMDA, Endeavour and many others are building an enterprise ecosystem that welcomes social enterprises as well as traditional businesses.
Young ‘digital native’ Arabs are calling for greater accountability within the sector and becoming vocal advocates of social purpose. Young social entrepreneurs – a small but growing group – are connecting philanthropy with mainstream investor communities.
One example is Faisal Al Hammadi, a young Emirati, who firmly believes in blending traditional capitalism with solutions that address the long-term needs of the planet. His social enterprise SLICES addresses health issues in the UAE such as obesity and diabetes while championing an entrepreneurial approach. “It gives you more control over operations and more flexibility,” he argues. “Generating an income base also means that unlike many non-governmental organisations you can focus on the issue in hand rather than invest a lot of resources in fundraising.”
All of these factors - particularly the way in which the younger generation readily accepts the marriage between traditional business and social giving – bode well for the region. This trend is serving to catalyse a real tipping point for the Arab world whereby regional philanthropy not only steps into the gaps left by reduced government funding, but also inspires proactive engagement in high impact social ventures that can significantly change the future prospects of the region.
The tradition of giving
The history of philanthropy in the Middle East (GCC) is deeply intertwined with the history of Islam, the official religion of the region. Indeed the practice is as old as Islam itself, dating back to the 600s.
In GCC countries, religion serves as the primary motivation for giving. A recent survey found that some 63% of Middle Eastern respondents are motivated to give to charity by their religion. An associated motivation comes from the ‘ummah’, the concept of the larger community of Muslims. Even as Muslim non-governmental organisations (NGOs) have become more formal and professional, they retain the general motivation to do good for fellow Muslim nations.
Various forms of charity and philanthropy are central to the Islamic faith. One of the five pillars of Islam is ‘zakat’, or mandated giving for those who are able. The practice involves Muslims giving a percentage of their surplus earnings to those in need, and is directed at specific types of recipients – generally causes or populations within the ummah.
In addition, ‘sadaqah’ involves voluntarily giving above and beyond the mandatory percentage (zakat) and often to a broader range of recipients . A further common practice in the Arab culture is ‘waqf’, which entails endowing land or property for philanthropic purposes.
It is estimated that every year $200bn-$1tn are given as zakat or sadaqah across the Muslim world, with GCC philanthropy comprising a significant percentage of these figures.
GCC governments generally have state ministries or departments for zakat. These ministries assess and collect zakat from their own citizens and the funds go directly to charitable activities. Similar departments and ministries exist in varying forms in each of the six GCC countries.
Philanthropy in the Western sense of institutionalised grant-making is a relatively new concept in GCC countries, dating from the oil boom in the 1970s. The subsequent surplus wealth expanded the capacity of GCC countries to give charitably. As a result, giving has become more institutionalised and has allowed the region’s countries to contribute to causes around the world.
GCC monarchies are also heavily involved in philanthropy in the region, with their input often impacting the causes that are most supported, such as education and working with children. When a donation is announced by the government, it has often been initiated by a member of the ruling family of that country.
Corporate giving is similarly prominent in the region. Depending on the particular country, zakat may be collected not only from citizens of the GCC countries but also corporations owned by those citizens. Businesses within the community are expected to have a strong philanthropic orientation within their strategies. In recent years, corporate social responsibility has been increasingly emphasised by GCC companies.
While philanthropy is widely encouraged in the GCC by their cultural and religious background – with the infrastructure for charities and foundations growing – many philanthropists in the region have chosen to base their foundations in countries where there is an established system of registration.
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