Governance Today article: Bringing clarity to charity in India

India is now an important global economic power. This is partly due to external factors like the slowdown in China but also due to internal factors like India being set to enter an era of more inclusive growth. Significant progress is likely to be visible in the coming decades in terms of growth percolating to more people in society. While this progress can be attributed to changing growth dynamics in states and a greater emphasis on the untapped potential of rural India, the CSR rules in the Companies Act 2013 will play a role too.

Historically, there has been broad industry participation in corporate responsibility, and societal values are ingrained into core  business structures of many of the largest businesses in India.

But the Companies Act 2013 has made far-reaching changes, including with companies now having a mandatory financial obligation to contribute to remediating India’s social problems. For the first time, the Board need to be represented on a CSR committee, putting social responsibility firming in decision-makers’ agendas.

For the largest companies, there may be an awareness of their social obligations already, and structures in place which enable this in a highimpact manner.

But the real  potential will come from the next tier down, that are impacted by the law, but do not have the best practice thinking and implementation in place to ensure the monies are spent in the most effective manner.

Here are plenty of industry organisations and  consultants that can help, particular in the health and education sectors where the greatest NGO capacity exists. However, there is no pan-India “clearing  house,” where donors can express their preferences, and charitable causes which have been through a due diligence process can easily be presented as investable
options.

There are some of course that exist on a smaller scale, such as Give India and in the US, Charity Navigator. But there are barriers to entry for creating such a portal in India, not least because charities do not have their audited accounts published online by a sector regulator, like they do for example in Britain.

There are other reasons too. Soliciting donations for some areas (such as religious causes) is generally good business in India, but the charitable accountability is by and large missing. Charities and trusts often do not have professional teams in place to manage funds and operations, and often operate in grey areas in terms of accountability.

One start-up is looking to change this. Charity Navigator has a database of more than 8,000 of the largest US charities, but this focuses very much on audited financial data, which may not be easily available in India. So Charity Clarity, a British tech start-up, is looking to empower donors with information not just on financial health, but also several other factors.

One of these is sentiment analysis, which uses natural language processing, text analysis and computational linguistics to identify and extract information about the charities on the internet. In other words, feedback about the charity on Facebook, favourable mentions by larger organisations and greater engagement with stakeholders can help the charity be better rated.

Combined with information about its trustees, quality of its accounts and a wider financial health-check, this can provide any donor helpful advice on what can be spent where in a manner to maximise social impact. One  such Indian charity actually won anaward for its high impact work.

Whether it’s this charity tech start-up or another, the sector in India is moving into the right direction–companies will invest more into CSR (particularly social infrastructure such as education and health), and they will expect the recipients to be effective, transparent and accountable. This can only be a good thing in building a more inclusive growth story for India.

This article was first published on the Governance Today website.