International Charities Say Donations Could Drop by 15% a Year During Downturn

By Caroline Preston
The Chronicle of Philanthropy
December 15, 2008

Charities that provide aid overseas could lose as much as $1-billion in donations per year as a result of the economic collapse, according to the head of a coalition that represents international organizations.

Speaking last week at an informal gathering of international-charity officials, Samuel A. Worthington, president of InterAction, said that private donations to international-aid groups, which now total just shy of $6-billion annually, could drop from 5 to 15 percent annually during the downturn.

"And those billions of dollars would translate into significant hardship," he said, while cautioning that it is too early to determine how most groups will fare in 2008 because many raise the majority of their money in December.

Mr. Worthington and others said the length of the economic crisis would have a significant impact on just how dire the financial situations of international groups become.

Delayed Impact

Many international groups are relatively secure for the moment because they rely on multi-year foundation grants and government support, in addition to other forms of aid. Some charities are hopeful that newer ways of donating, such as gift cards, could buoy year-end fund raising.

But if the crisis persists beyond the next 16 months, said Charlie MacCormack, president of Save the Children, in Westport, Conn., that could spell disaster for many international charities. "If jobs are still going away, and equity is still going away, and people say I don't have a lifeline myself any longer, then it will be tough," he said.

Nonprofit officials said they were also concerned that donors would shift their support to local causes during the recession.

"They're hearing from the Salvation Army, they're hearing from local food banks, and they're seeing more people on the streets," said Kenneth H. Bacon, president of Refugees International, a policy group in Washington. "So they may decide not to give to an international advocacy organization for refugees but instead to their local food bank."

Jo Luck, president of Heifer International, which works both overseas and in the United States, said she would not be surprised if some donors redirected their gifts to the group's domestic projects, although she said she had yet to see any evidence of that happening.

That said, the charity leaders expressed optimism that the long-term outlook for international-development fund raising was bright, as more Americans are showing an interest in the plight of people outside of the United States.

"People are much more aware of how interconnected we are and how our well-being depends on that of others," said Mr. MacCormack. "The long-term trends are positive for our cause."

Disaster Factor

Another factor that could improve the fund-raising outlook for international groups, albeit an undesirable one, was the potential for another large-scale natural disaster. While aid groups typically record 3 to 4 percent growth annually, they can see donations jump by 30 percent in years of a major disaster such as the Asian tsunamis, said Mr. MacCormack.

He said charities would still see many new donors give to their organizations in the event of a large-scale natural disaster, even during the recession.

"People consider that such a priority that they will give, even if their own lives are really tough," he said.

Mr. Worthington also said that international giving may not drop as much as he fears because right now, gifts abroad make up such a small percentage of total philanthropy. Today, just 3 percent of giving in the United States supports work overseas, he said.

"We're looking at a very small piece of total giving," said Mr. Worthington. "That might offset some of the decreases."

President-elect Barack Obama's appeal abroad, and his focus on international causes, might also help aid groups attract new donors, said Julius E. Coles, president of Africare.

And even as the economy threatens to scuttle Mr. Obama's campaign pledge to double U.S. foreign aid to $50-billion, international-charity leaders said they were thrilled with what they perceived as the next administration's commitment to improving how the United States provides aid abroad.

The charity officials said they were hopeful that Mr. Obama and members of his administration would support a reorganization of U.S. foreign assistance into a single agency, perhaps led by a Cabinet-level secretary of development.

Congress, too, is supportive of streamlining U.S. foreign aid, and the House of Representatives has signaled that it will introduce legislation to that end. (See an earlier Chronicle article about the push to streamline U.S. foreign aid.)

Nonprofit officials also said they were pleased with the selection of Sen . Hillary Clinton as secretary of state, and with individuals whose names have been leaked as possible candidates to lead USAID.

"Whether it's Helene Gayle [president of CARE], Gayle Smith [a fellow with the Center for American Progress], or Aaron Williams [a former USAID official], these are people who've had careers in international development," said Mr. Coles. "We're not talking about bringing someone in from the outside who has no idea what international development is all about."

Meanwhile, Elizabeth J. Latham, executive director of the United States Committee for the United Nations Development Programme, a Washington charity, said she was encouraged that Mr. Obama's administration would improve U.S. relations with the United Nations.

Mr. Worthington said that, given the economic gloom, charities needed to make the case that reorganizing foreign assistance could save U.S. taxpayers money.

While he said that the prospects for improving U.S. foreign aid were brighter than perhaps any time since the Kennedy administration, there was also a "tension associated with the financial crisis of what is doable."