The evolution of charitable giving in Saudi Arabia

17 October 2008

A new generation of wealthy Saudis are changing philanthropy in the kingdom by eschewing simple donations in favour of spending more strategically to achieve their goals.

When the UN World Food Programme (WFP) issued a global appeal for $755m in May 2008, to help the world’s poor with the dramatic global rises in the costs of food and fuel, Saudi Arabia, traditionally the second-largest donor to the WFP worldwide, contributed the generous sum of $500m.

Boosted by the current oil boom, the nature of charitable giving in the kingdom is evolving. A new breed of philanthropists is emerging, building on Saudi Arabia’s religious traditions of zakat (obligatory charity) and sadaqa (alms giving).

“There is a generational shift,” says Salvatore Laspada, chief executive officer (CEO) of the UK-based Institute of Philanthropy.

“In many Saudi family businesses, it is the second and third generations, the children and grandchildren of the great patriarchs, who are now not only assuming leadership, but also [control] of their charitable and corporate giving programmes.

“The opportunity this new generation has is to reinterpret the religious traditions in ways that perhaps create greater social impact beyond charity.”

Strategic funding

The new generation are challenging traditional ideas of charity as being a one-off gift and seeking to find forms that will have a long-term impact, that are capable of transforming people’s lives.

“They are catering less to meeting immediate needs, but rather asking more fundamental questions and trying to understand the root causes of some of their social problems,”
says Laspada.

Susan Raymond, executive vice-president of US-based philanthropic services consultant Changing Our World, says the way people are giving to charity is changing across the region.

“There has always been philanthropy in the Middle East, through the religious arrangements of zakat, sadaqa and waqf [religiously endowed foundations],” says Raymond.

“But at the level of high net worth individuals, you now have the emergence of institutionalised, individually controlled philanthropy.”

Donors now want greater control over their donations and, in some cases, are offering grants that carry obligations on recipients, as opposed to traditional gifts. This allows them to provide strategic funding and assess its success.

“There is proactive monitoring, with donors acting more like investors than traditional donors,” says Dina Sherif, associate director at the Gerhart Center for Philanthropy & Civic Engagement at the American University of Cairo. The key question for them is, how do we make our riyals go further?”

While this type of institutional philanthropy is still in its infancy, it is growing in the kingdom. “Now you have structured institutions created by high net worth individuals that control the use of that money,” says Raymond.

“But it is moving slowly because it is a new business model. All of these mechanisms around the flow of funds are new, especially in the region. And they take time to put in place.”

These institutions can take the form of corporate social responsibility programmes such as those created by Mohammed Abdul Latif Jameel, president of Jeddah-based Abdul Latif Jameel Group.

His social enterprise programmes include the Jameel Poverty Action Lab and the Mohammed Yunus Challenge.

Providing jobs

Laspada says the programmes have created more than 12,000 jobs for the unemployed by providing finance to micro-projects.

“Companies such as these are leading the way, taking them some way from simply providing meals for the poor’” says Laspada.

The community foundation is another form of emerging institutionalised philanthropy. These take donations from individuals, control how funds are spent and report back to donors.

“These have been the fastest-growing mechanisms in the US and are now proliferating in the Middle East,” says Raymond.

“It [a community foundation] allows people who may not be high net worth individuals to engage in philanthropic activities.”

There are obstacles to philanthropic efforts, regardless of form, not least the aggressive investigation of Muslim charities by the US authorities since September 2001.

This has certainly had an effect on the market, leading to a tangible, if not yet quantifiable, reduction in giving.

“Many of the accusations [made by US investigators] are simply scurrilous, and there has been a chilling effect due to the fear of ending up on some list,” says Laspada.

The Gerhart Centre for Philanthropy & Civic Engagement, based at the American University of Cairo, is planning a quantitative study of Arab philanthropy in the coming years, but to date little research has been undertaken.

Despite this, conclusions can be drawn from the anecdotal evidence available, says Laspada. “We can use our own philanthropy workshops as evidence,” he says. “We do see the numbers of participants increasing.”

The institute recently had its first workshop participants from the Middle East: one from Saudi Arabia and one from Lebanon.

“This reflects donors in the Middle East looking out and connecting with overseas donors,” says Laspada. “The philanthropy of these families is globalising in the same way that their companies have.”

In the broader region, the number of philanthropic meetings and conferences is on the rise, providing more opportunities for charities to share their experiences of best practice.

Notwithstanding its position as a prominent government donor, Saudi Arabia has not taken the lead in the region in this respect.

Dubai’s Al-Maktoum family organised a large philanthropy conference in January, and appears to be positioning itself as the leader in the field.

There has even been talk of establishing a philanthropy city in Dubai, says Laspada, although it remains unclear how much progress has been made on the scheme.

Growing sector

Nonetheless, the number of Saudi non-government organisations (NGOs) involved in charity is growing, despite there being no legal framework for charities and private foun-dations.

According to the Social Affairs Ministry, there are now 434 charitable societies licensed in the kingdom, in addition to 45 private charitable institutions.

Almost 30 per cent of the organisations deal with social and health issues specific to women. The legal framework for charities and private foundations is the biggest hurdle.

“There is not a strong culture of NGOs or civil engagement in Saudi Arabia, so the legal framework for establishing a philanthropic base is not yet present,” says Sherif.

“Saudi Arabia and the region will have to address this, as there is a need for public-private partnership, but moves in this direction have been limited.”

In the West, there has been hesitation on the part of governments to hand over social development programmes to independent philanthropists.

“This is what we went through in the US before we moved towards public-private partnerships,” says Raymond.

“There was a lot of nervousness of private funds redirecting what had previously been government-directed policies.

“Private philanthropy may not necessarily buy into the same solutions, and may actually take community non-profit efforts in a different direction to government policy. It is not the intent, but the reality of the grant making.”

As the Middle East’s not-for-profit sector evolves, the region’s philanphropic foun-dations may also find their goals clashing with state aid programmes, as seen in the West.

But, according to Garnham, there has been less suspicion between policymakers and wealth owners than expected in the kingdom.

With a clearly defined and deeply embedded obligation to give, the barriers between policymakers and wealth owners is less stark than in the US.

This is not surprising, given the historical context of charity and hospitality in Arabic culture.

“The obligation is there, and engrained in religion,” says Raymond.

Indeed, philanthropists are being encouraged by Riyadh. “The charitable societies play their role in serving their local societies, and their role is not restricted to offering aid to the needy, but it has gone beyond this to supporting the efforts of the ministry,” Social Affairs Minister Abdul Mohsen al-Akkas said at a press conference in March.

“The ministry supports these charitable societies in order to secure that they offer distinguished services to these groups.”

However, it is clear that there is a need for debate on the role of private philanthropy in public policy and social development, to enable greater co-operation between governments and wealth owners.

In many ways, Saudi Arabia is still negotiating its philanthropic position. It has yet
to reinvent traditional modes of giving to meet modern needs and demands. One way the focus can shift is towards importing key features from the West.

Many commentators in the kingdom say it is important to wed Western elements with the Islamic traditions that have a long history in this society, such as waqf.

But regardless of how it evolves, the revitalisation of Saudi Arabia’s tradition of philanthropy, particularly religious philanthropy, is under way.

Key fact

479 - Number of charities in Saudi Arabia

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