August 04, 2014 01:00 By MICHAEL BENZ THE NATION 4,512 Viewed
As wealth shifts towards emerging markets, a new generation of philanthropists are entering the world stage. They want to give back, not just by handing a cheque to charity, but by playing an active role in shaping the future of their communities.
Successful entrepreneurs have always been giving back to society, but as their wealth grows, business owners across emerging markets are seeking to make a bigger social and economic impact on communities – reinvesting private proceeds from their business and helping to raise awareness of key issues at a global level.
Our own research confirms that wealthy entrepreneurs prioritise philanthropy, and an active form at that. In a report commissioned from Campden Wealth Research, we surveyed 60 high-net-worth business owners across Asia, Africa and the Middle East, and almost all of them said they currently contribute to charitable causes or plan to become involved in the future.
More specifically, these entrepreneurs are focused on local initiatives and look for an active involvement.
“I’m excited less by financial donation and more with how we can give back to communities,” one of them told us.
Education in particular is seen by wealthy business owners as the top issue that they want to devote their resources and time to – ahead of healthcare, poverty and food security. Almost all the emerging market entrepreneurs that we asked rated education as “important” or “very important”.
Many emerging market philanthropists want to help improve education provision, whether by funding the building of new schools, helping to train teachers or offering scholarships. Some are keen to provide children and young people with opportunities they themselves did not have access to.
Prominent examples of philanthropists making a real difference in education include Dang Yanbao, the president of China’s Ningxia Baofeng Energy Group, who pledged US$186 million in 2013 to help 10,000 disadvantaged young people in the Ningxia region complete university.
Or India’s Ashish Dhawan, a former Goldman Sachs banker and founder of private equity firm ChrysCapital, who set up the Central Square Foundation to help improve education in India.
Our research also suggests emerging markets are catching up fast with countries such as the US when it comes to philanthropy. The surge in high-net-worth individuals located in Asia, Africa and the Middle East has led to a significant increase in the number of private foundations and organisations set up to help donors structure their charitable efforts, such as Singapore’s Centre for Asian Philanthropy, which was founded in 2008.
For private banks operating in these regions, the growing trend towards active philanthropy is a significant factor that is likely to affect client relationships in the future. However, our research indicates it is also a largely unexplored opportunity.
Almost none of the wealthy business owners we surveyed in Asia, Africa and the Middle East are currently involved in philanthropic activity through their private bank, with a quarter claiming that no such services are offered by their banking partner.
Banks can and should fill this gap. They have a real opportunity to help grow philanthropy across emerging markets, by providing the right advice and helping clients set up charitable foundation structures and identify the best opportunities for charitable work.
This is particularly relevant in regions such as parts of Africa and emerging Asia where a formal culture of philanthropy is still relatively underdeveloped and there are a limited number of structures through which to donate.
The role of banks might involve educating business owners on the risks and best practices of philanthropy, bringing them together with like-minded peers or even offering financing, especially for capital-intensive projects such as the building of schools or hospitals. It should not be purely limited to advice, but could take the form of partnerships with clients.
At Standard Chartered, we recently collaborated with a long-standing client family and a leading non-government organisation to set up the sustainable Seeing is Believing project that aims to deliver 30,000 sight-restoring operations over the next five years. The client approached us realising that we shared a common interest in providing access to healthcare in communities with high need.
In many cases, for the individual the line between business and philanthropy will be blurred. One of the entrepreneurs we spoke to suggested that banks could have a role in connecting the new business owners they finance with established entrepreneurs, giving the latter the opportunity to act as mentors for the younger generation.
This is a poignant reminder that private banks need to think holistically about serving these entrepreneurs – just like their business and personal wealth is often closely linked, their business ambitions may overlap with their social missions.
Across the world, philanthropy is seen by many high-net-worth individuals as a natural extension of their wealth, but in emerging markets private banks have a particular opportunity to make a difference by offering their clients impactful and measurable ways of giving back.
As the economies in Asia, Africa and the Middle East continue to grow, philanthropy is set to become an increasing priority. All private banks that wish to connect more closely with their clients should take heed, working out how best to support them in this endeavour.
Michael Benz is Global Head, Private Banking Clients, Standard Chartered Private Bank
For more articles like this, visit our blog, ourviews.sc.com