- Wealth PMS (50L+)
Oxfam’s CEO, Nisha Agrawal, connected with me and over a few emails put in her view of the expense ratio, in response to my article on Oxfam’s cost of just fund raising being 70%.
The emails are lengthy so I’ll just summarize.
If we remove the capital investments and the costs of new product
development, the recurrent cost of fundraising (salaries of fundraisers,
rents of fundraising offices, electricity, water and phone bills etc) comes
to around 50%. This is still high (though not as high as 70%) and the
reason has largely to do with the huge efforts it takes to generate funds
in India, as explained below.
We raise funds from individuals through either face-to-face interactions or
through tele-calling (calling them over the phone). For a single, average
donation of Rs 2850, a typical fundraiser has to meet about 100 people. In
a given day, they can meet on average, at most about 60 people, of which
only about 10 are interested in having a discussion on the issue. This is
a very labor intensive exercise. Similarly, the people in our tele-calling
team make about 107 calls to get one donation, which averages around Rs.
1600. It is a time consuming and tough process to reach for the support of
the individual donor.
My thoughts: These are good answers, but it’s not doing anything to solve the problem. But the problem isn’t Oxfam’s alone, it’s also the mindset.
Most of us *need* to donate, and want to. But because of such data, we don’t. That’s also just as wrong – not donating when you can is a horrible horrible thing. We are incredibly lucky, we internet-using, upper middle class crowd, for having been born at the right time, in the right place, to the right parents. Some people don’t have that luck. We took some of that luck away because there’s only so much luck avaiable, and we got a disproportionately high amount. At the very least, we could give a little. (Or heck, help someone set up a business – better than donation!)
If we can decide that we’ll donate 2% of our income, the 20 lakh per year earner would need to donate Rs. 40,000. That’s 3,000 per month. And since most NGOs give you tax exemptions, you pay with pre-tax money (Rs. 100 is like donating Rs. 70). It’s something to think about.
On a different note: I have proposed to Oxfam that they might consider using the financial distributor route, and offer them a commission of even 10% if needed.
Disclosure: I’ve given to Cry earlier but stopped that and last year was donations directly done to causes I liked. With that high an fund raising cost, it might be better to donate directly to a charity that you find and do actual work (or simply take the Oxfam annual report, find out where they’re giving and give them direct).
Note: Freakonomics tells us why ranking charities by Admin Expenses is a bad idea. They say that the average admin+fundraising cost of "good" charities, those that are ranked highly on the quality of work they do, is higher than those that are not-so-good. The difference, in terms of fund raising costs to total expenses, is 14.7% for not-so-good charities versus 17.4% for good ones – and in terms of fund raising costs, 7.3% versus 5.4%. These numbers are different from my context (of finding out the effectiveness of fund raising from individuals for a charity like Oxfam), but at their levels of difference it hardly matters (2-3%). Even they admit that large expense ratios are not good.