Some U.S. charities need to attract private investors and turn a profit instead of relying on donations to tackle the country's woes, experts say.
Charities should operate more like businesses by becoming social enterprises to shore up revenue after the worst U.S. recession in decades sparked a fall in giving, they told a panel at New York University's Heyman Center for Philanthropy.
Giving USA found that total giving fell 3.6 percent last year to $303 billion, while a study by The Chronicle of Philanthropy showed this week that donations to the country's 400 biggest charities shrank 11 percent to $68.6 billion.
"Without private-sector capital, social problems cannot be adequately addressed, there simply isn't enough philanthropy to achieve meaningful moving of the dial," said Marc Lane, who founded Lane Wealth Group and promotes socially responsible investing.
Becoming a for-profit charity does not necessarily mean losing the tax and regulatory benefits of being a nonprofit, he told the panel Wednesday.
"There are a number of platforms and vehicles in the toolbox today that would allow for-profit businesses to be established with social missions," Lane said.
One of America's biggest arts centers, the New Jersey Performing Arts Center (NJPAC) in Newark, recently announced the creation of the NJPAC Development Corporation to develop land around the center and establish another source of income.
U.S. BUSINESS A MODEL?
The constant pressure of fundraising can also cause some nonprofits to lose sight of their real work, said Jane Slusser, chief service officer at Catchafire, which charges a fee to match professionals who want to volunteer with charities.
Slusser told the panel that many charities simply want volunteers to raise money, instead of putting their skills and creativity to better use on the charity's core mission.
"We try and make sure their bottom line is tied to doing good and actually staying in business," Slusser said of the charities they match with volunteers. "That's why we're a for-profit because we realize ... we can continue to do good and keep ourselves afloat and actually scale the business."
But Naomi Levine, executive director of the Heyman Center for Philanthropy, said there was still a place for traditional fundraising and that she does not believe charities need to operate like businesses.
"American business has not exactly been the kind of model I would place on a pedestal and say 'let's follow,"' she said.
Michael Norton, a social entrepreneur and founder of the Centre for Innovation and in Voluntary Action in London, spoke about a nurse in South Africa who wanted to make it easier for people to get medicine.
He said she decided to distribute drugs in the evenings and weekends for a small fee, earning extra income in the process.
"If she can make this work then she has invented a whole new mechanism for distributing medicines in South Africa, which are not being distributed properly at the moment," Norton said. "It's not philanthropy, its not charity, it's a business." (Editing by Mark Egan and Xavier Briand)
© 2013 Thomson/Reuters. All rights reserved.