As philanthropy grows, so do limits on cross-border giving: Report

A global rise in legislative restrictions on cross-border philanthropic donations — a trend that Russia helped spawn — corresponds with an international decline in democracy and a shift toward authoritarianism, findings from a new Indiana University report suggest.

More countries are passing such laws as their governments try to block foreign donors from funding human rights groups and other nonprofits, the report found.

“The Global Philanthropy Environment Index 2022,” released Thursday by IU’s Lilly Family School of Philanthropy, showed that philanthropic giving grew worldwide between 2018 and 2020. Still, cross-border giving decreased, even as some countries became more prosperous and residents presumably had more disposable income that could be donated to charities.

One-third of the 91 countries and economies included in the study reported a “restrictive environment for cross-border philanthropic flows,” according to the report, which measured the “regulatory, political, economic, and socio-cultural incentives and barriers to philanthropy in economies at every level of income and growth.”

Dozens of them have implemented regulations to limit cross-border donations, despite a growing awareness of the importance of globally focused philanthropy during the COVID-19 pandemic, according to the IU research team.

The findings were a surprise to the researchers, since one of the hypotheses they started with was that cross-border giving would rise as economic conditions improved, said Una Osili, the report’s lead author.

“But when we started to look at the data, we found that was not the case,” said Osili, a professor of economics and associate dean for research and international programs at the Lilly Family School of Philanthropy. “In fact, we found that in some parts of the world where there was prosperity that was accompanied by a political regime, that provided much more constraints around the growth of philanthropy and especially cross-border giving.”

Osili said Russia was among the first to pass these kinds of “foreign agent” laws to limit such funders about a decade ago. Under Russian law, nonprofits receiving funding from outside the country are classified as foreign agents. Human Rights Watch has said the law has been used to “demonize independent groups that accept foreign funding and carry out public advocacy.”

“And then we saw this idea spread where there was so much scrutiny around foreign donations,” Osili said. “And for many organizations, that means even when they’re able to attract those foreign funders, they may not be able to accept those donations.”

Russia, which is currently attacking the nation of Ukraine under the direction of its longtime leader Vladimir Putin, may be one of the best examples of what Freedom House recently referred to as the “global expansion of authoritarian rule.” The IU research team noted the ongoing Russian invasion and said that it would study the impact of the event in a future global philanthropy index report.

However, an interesting twist of this conflict is that it has given rise to a surge in cryptocurrency donations, which allow for quicker cross-border giving that bypasses financial institutions.

“We’re definitely seeing crypto take more visibility and prominence in this crisis because of the ease of transfer,” Osili said.

Despite this example, the report included additional sobering findings about the difficulties that donors and charitable organizations face around the world. Philanthropy was found to be “shrinking” in one-third of 79 countries and economies that the IU researchers had been tracking since 2014. This was due to political instability, “state harassment and negative campaigns (especially against human rights and watchdog organizations),” and limitations on foreign funding.

Additionally, Canada was identified as the only country in the G-7 group of nations to score poorly in regard to its cross-border donations to other countries and “ease of operating a philanthropic organization.”

“The rules required of charitable organizations engaged in cross-border philanthropy in Canada are onerous and require significant resources in order to meet all requirements, which creates a barrier to giving,” a press release for the report said, adding that despite this, Canada had a “highly favorable” environment for tax incentives for charitable donations and receiving charities.

The report also found that regions with a slight decline in the ease of operating a philanthropic organization included Canada and the United States, Latin America, the Middle East and northern Africa, Oceania, and southern Europe. Among the reasons given for that decline were reports of restrictive governance rules and burdensome administrative guidance. Philanthropy in Latin American and Caribbean countries also has been especially affected by the pandemic, political instability, and high inflation, the findings showed.

The IU report rated countries and economies on a five-point scale across six factors that “comprehensively measure philanthropy”: the ease of operating a philanthropic organization, tax incentives on giving, cross-border philanthropic flows, political environment, economic environment, and sociocultural environment for philanthropy.

Osili said she wants the report to help policymakers and decision-makers better understand how philanthropy can shape responses to global challenges by highlighting where philanthropy is thriving and where it isn’t, as well as the reasons why.

It also provides a helpful road map for philanthropists, some of whom might not be aware of the potential limitations to their giving in certain regions of the world, she said.

Amir Pasic, dean of the IU school of philanthropy, also discussed how he would like to see the information used.

“The Global Philanthropy Environment Index and the Global Philanthropy Tracker [another index from the IU philanthropy school] provide the tools global leaders need to understand how and where the philanthropic environment is changing and evolving and – most importantly – to provide context as philanthropy works to solve pressing challenges. Whatever the challenge at hand, philanthropy operates in a context that we ignore at our peril,” he said in a statement.