The year 2020 brought tough challenges due to the outbreak of the Covid-19 pandemic. Developing countries, including Pakistan, have already been struggling to cope with economic strain, socio-political instability and inadequate health and education facilities have been hit hard by the unexpected outbreak.
Besides a vigorous policy response by Pakistan’s government to off-set the negative impact of this pandemic, innovative solution and intensified support — for primary sectors like education, health and small and medium enterprises — is necessary. The government has taken various initiatives and announced relief packages for the poor; however, the severity and scale of the pandemic demands that the private sector and non-profit organisation (NPOs) should be on board to work together to respond to the daunting challenges posed by the pandemic.
This is high time that individual philanthropists, welfare organisations and diaspora communities should come forward to help people in the provision of necessities and online education, especially where needed most. In view of the economic crunch and tight-funding availability faced by many public and private/nonprofit organisations, specific financing and fund generating programmes are needed to support organisations working at a community level.
Some organisations involved in philanthropic work such as the Pakistan Centre for Philanthropy (PCP), The Citizen’s Foundation, Punjab Education Foundation, and others have stepped forward to jointly support underserved people. However, the second wave of coronavirus has proved that temporary or short-term support programmes are not sufficient to mitigate the adversity of this pandemic.
A study by the Pakistan Centre for Philanthropy estimates that the Pakistani diaspora in the UK donates £1.25 billion a year
It is imperative to explore and adopt innovative measures to generate additional resources to tackle the issue. Considering the need for an innovative and long-term financing approach, the Pakistan Center for philanthropy — as a member of the innovative financing sub-committees on social sectors formulated by the Planning Commission of Pakistan — has put forward various suggestions and recommendations to meet the challenges of the current scenario. In this context, different models of innovative financing such as diaspora bonds, mobilising dormant deposits in commercial banks, micro-financing, debt swaps for financing education, crowdfunding, etc should become part of public policy.
Each model of innovative financing has its own process, applicability and merits. For example, a diaspora bond is a debt instrument issued by a country or potentially, a sub-sovereign entity or a private corporation, to raise funds from its overseas diaspora community. Dormant deposits in commercial banks are the accounts that have had no financial activity for a long time, except for the posting of interest that can be activated and used for supporting programmes of education and health.
Further, debt swaps are a type of debt relief, often as part of official development assistance funding. Instead of paying back the debt to donor countries, debtor countries commit to using the borrowed funds for their social development, such as education and health care. Lastly, public sector crowdfunding is raising small amounts of money from a large number of people through virtual platforms.
These potential models of innovative financing can be taken into consideration by the government not only for attaining Sustainable Development Goals but also for combating the critical challenges of Covid-19, especially in the education and health sectors which have inadequate provision and facilities in the public sector. The PCP study on diaspora philanthropy estimates that the Pakistani diaspora in the UK donates £1.25 billion a year. The finding reveals the potential of introducing and experimenting with the use of a diaspora bond for social development purposes. This diaspora philanthropic giving can also be further increased by adopting a more transparent mechanism of utilising funds and winning diaspora trust.
Given the fact that individual philanthropy in Pakistan is a potentially huge funding stream, efforts should be made to institutionalise giving to support civil society organisations, especially in areas of health and education. Many low-cost schools and dispensaries are being run by the private sector and most of them are financed by non-bank microfinance institutions which are regulated by the State Bank of Pakistan (SBP).
Considering this mechanism as an innovative financing scheme, the ongoing economic challenge of mobilising funds for small local organisations in the wake of Covid-19 can be dealt with if the SBP increases the outreach of large-scale microfinance banks to rural areas, especially for the provision of low-cost private health and education services (regular or virtual) in underserved areas. Dormant deposits in commercial banks can also be further explored for the monetary support of various social development sectors.
Another suggestion in the Planning Commission’s report of the subcommittee on social sectors to ameliorate the existing public financial management (PFM) framework — is enabling co-financing of development schemes by public and private partnerships (PPP) which warrants attention from relevant high-level authorities.
Though the PPP framework has been occasionally used, it needs to be utilised more effectively to encounter the severe impact of the ongoing pandemic. As per the current PFM framework, private funds cannot be directly combined with public funds for financing development interventions, so for the effective use of available and potential funds, a progressive feasible policy is crucial.
Pakistan has a vibrant civil society that has been playing an important role in supplementing the government’s efforts to resolve social issues, fight terrorism and defend human rights. CSOs’ significant contributions in service delivery at the grassroots level have impacted people in the community in many ways. However, the irony is that despite striving hard for the betterment of society, these CSOs have always been seen with suspicion, not only by the government but even the public image shows a lack of trust.
Individual philanthropy as a source of funding for various social causes is traditional in nature as revealed by a study conducted by the PCP which reveals that about 67 per cent of monetary donations, are largely given to beggars, sick and needy people, and only a small share is given to organisations. It is important to note that along with certain traditional ways of giving, new strategic giving practices need to be adopted to utilise philanthropic funds more efficiently and effectively.
The government should consider the importance of innovative financing models and the role of CSOs to establish a robust institutional mechanism for effective fundraising and transparent utilisation to accelerate the development process in the country. In critical times of the pandemic, the NPO sector — with limited funds and strict regulatory policies — is struggling hard to sustain its activities in the field, and the business sector and donors are also facing a financial crunch. Therefore, any initiative taken in collaboration with the government will surely gain people’s confidence and trust in CSOs and NPOs. In this regard, an innovative response is required to confront the challenges and proceed as a united nation to sail through these difficult times.
The writer is the Senior Program Officer-Research Unit at the Pakistan Centre for Philanthropy
Published in Dawn, The Business and Finance Weekly, , March 1st, 2021