October 15, 2012 7:09 pm

Diaspora giving: Young generation keen to make a change

Back in 2006, Give to Colombia (G2C), a US-based non-profit group that creates, promotes and facilitates alliances between international donors and grassroots organisations in Colombia, hosted a forum in Miami targeted at the US diaspora. Sitting in the audience was a wealthy businessman with a mission to improve the conditions at one of his textile factories that was subcontracted to Levi Strauss.

The result was a partnership between G2C and the Levi Strauss Foundation and the launch of a programme to increase financial literacy among apparel workers. The joint venture provides financial training, matched with savings accounts and microenterprise programmes for workers in the clothes industry in Medellin, Colombia’s second city.

This is just one example of the role that diaspora giving – tax deductible donations and remittances – can play in improving the lives of people living in Latin America. With an increasingly large percentage of the US population either Hispanic or Latino, diaspora giving makes up much of the region’s philanthropic funding.

“Traditionally, philanthropy focused on giving to the church, or supporting families that you knew and supported directly,” says Marcela Lopez-Macedonio, executive director of The Resource Foundation, a US non-profit group.

“But as the younger generation – folk who have lived and worked in the US and/or are familiar with non-profits and how philanthropy works – comes of age, they want to support causes in Latin America because they feel they can make a difference.”

This generation has also been exposed to social media, another factor that may be behind an increase in giving.

“There is a growing interest in participating in what is going on back home,” says Bernardo Guillamon, manager of the office of outreach and partnerships at the Inter-American Development Bank (IDB).

Bernardo Guillamon: more opportunities to give

Bernardo Guillamon: more opportunities to give

“Everybody is more connected through social networks and social media and there are more opportunities for people to know what is going on in their home countries.”

There are two factors that play into donors’ comfort levels. The first is the emergence of organisations that connect diaspora donors in the US with organisations at home and act as an intermediary between philanthropic funds and local non-governmental organisations. Part of the appeal is their formalised structure.

According to a 2007 report by The Philanthropic Initiative and The Global Equity Initiative, these organisations have “been established as formal, independent organisations with non-profit status under US tax laws; e.g. most are classified as ‘501 (c) (3)’ organisations under the federal tax code. As such, these intermediaries: (a) assume responsibility for the ultimate distribution of funds, and (b) can provide the donor with the means to establish the deductibility of a contribution”.

The report notes that “US tax law encourages giving through US charities; individuals cannot receive a tax deduction for gifts made directly to overseas organisations”.

Angela Maria Tafur, executive director and co-founder of G2C, says that having 501(c) (3) status gives an organisation “credibility and transparency”. But while the tax deduction is important too, it is not the biggest motivation.

“The motivation is that you want to give back to your country of origin and believe it has a future and feel you have an important role to play in the development of that country.”

The second factor is the level of accountability. “It is fundamental and donors expect it,” says Ms Tafur. “Donors today want to see the impact of their giving, so our reports are very detailed.”

Ms Lopez-Macedonio agrees. “Due diligence procedures are a key part of what we do. We do it on an annual basis, on all grantees, even if we are familiar with an organisation. We want to make sure that programmes are being implemented correctly, organisations are transparent and that donors feel comfortable.”

One of the local groups The Resource Foundation has supported for many years is Fundación Origen in Chile.

In 1991, it founded an agro-industrial high school to provide at-risk students with theoretical and practical training in order to improve their job opportunities.

“What began with individual donor support from the Chilean diaspora community then led to grants from institutions, including both corporate and private foundations,” according to a recent case study by the foundation.

“We see diaspora philanthropy not simply in terms of monetary contributions but also as comprising experience, expertise, time, efforts and outreach,” says Ms Lopez-Macedonio

The scale of diaspora giving across Latin American is hard to measure. However, the IDB does track remittances.

Natasha Bajuk, specialist at the IDB’s Multilateral Investment Fund, says remittances from the US account for about three-quarters of what Latin America receives in total remittances. In 2011, the total was $61bn.

Lauren Foster is a content director at CFA Institute

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

SHARE THIS QUOTE