Andrew Forrest, Fortescue Metals chief, has pledged to donate half of his private wealth for philanthropy causes. This comes on top of Graham Tuckwell’s $50m donation to equity scholarships at the Australian National University.

Australia isn’t the first country to practice philanthropy. We all know the names of museums, galleries and think-tanks. Many less-known Australians also make generous donations. The nation’s largest banks manage millions of dollars in small to medium charitable bequests from anonymous or unknown donors. Many of these donations date back over a century.

It is worth discussing how Australia uses the generous donations of private benefactors.

As Australia becomes richer, but also less equal, the role of philanthropy has been growing in prominence. However, government funding being cut. Someone, or something, must give.

Critics see philanthropy, even though it is not unique to America, as being alien or hypocritical and self-serving. Satyajit Das, a commentator, argue that philanthropy can use to undermine social policies by reflecting the views and not a thorough analysis of the issues. He writes that such influence can be harmful in a democracy.

Good Or Bad Thing Philanthropy

The question isn’t whether philanthropy can be a good or bad thing. It could be both. It is possible to work with private donors on a scale that can really make a difference.

Philanthropy not meant to replace markets or do the job of the government. Its purpose is to manage the health and education system, provide basic care to the sick, and reduce poverty on a significant scale. These services provide by non-government organizations in Australia, which mostly fund by the government. These services are fund by the government, but only a small fraction of private wealth is available.

Philanthropy can be a way to help, as it draws on two distinct features of private giving that are often lacking in government and market operations: innovation and taking risks.

Private philanthropy can support innovation more effectively than commercial investors or government agencies. Muhammad Yunus approached Bank of Bangladesh in 1970 to expand micro-credit services for the rural poor through his Grameen Bank. The Bank of Bangladesh declined Yunus’ request for core lending. Management and the board of the bank considered that lending to poor households was inconsistent with its obligation to shareholders and depositors to ensure their investments’ security. The breach was not filled by any government agencies, government international aid donors, or other government agencies.

Yunus sought out a private donor to the Ford Foundation for a $800,000. loan guarantee as security against commercial microcredit loans. This was not a grant, but a social investment. He was willing to repay it if his plan succeeded. Ford took the risk. As we now know Muhammad Yunus paid the entire loan back after proving the viability of his microfinance model to both banks and the market.

Harvard University Professor

Steven Lawry, a Harvard University professor, notes in a case study about the Ford Foundation’s dealings regarding the Grameen Bank that most innovative ideas don’t come from donors or their boards but rather from those living and working near the problem.

Social justice donors must keep their ears open to the ground, but be humble enough to recognize that they may not have all the answers. They bring resources, open minds, and a willingness to take risks. This case involved a private foundation taking on the risk of social innovation from another person until the innovation was commercialized and proven to be viable – in an investment philanthropy style that is still innovative in some parts of the globe 40 years later.

It is not enough to take on risk. After the risk appetite is establish, it’s important to find the best innovations and test them in the field. Then, you need to work with markets and the state to increase resources. Finally, scaling up a social program until it has a systemic impact will require a different set of challenges. If done right, a strategic risk investment under one million dollars can make a positive social impact that is measured in the hundreds of thousands or even billions of dollar over time.

Afraid To Take Risks Philanthropy

Australian Philanthropy isn’t afraid to take risks. The Commission for the Future and the Myer Foundation created Asialink in 1989. This university-based entity promotes Asia literacy in Australian schools, from kindergarten to senior high school.

Asialink, in turn, established the Asia Education Foundation. This foundation leveraged millions from the federal government to support state-based Asia literacy programs. The Myer Foundation made an investment in a future that was yet to realize through Asialink.

Philanthropy cannot compensate for market failures or replace poor policy. It can, however, expand public access to public goods and improve delivery of government services through its willingness to take risks and be innovative.

It can also trigger market corrections. Australia requires more of this type of risk-taking innovation, and not less. It is also important to have a more inclusive and open discussion about how philanthropy can impact our communities, the environment, and our overall well-being. Not a question of whether philanthropy can be a good thing or not. It is about finding out how beneficial it can really be.