Published on: August 30, 2013
A Landscape Study on Donations in Singapore
NUS’ study found that individual giving is much more resilient than corporate giving.
By ASSOCIATE PROFESSOR LAM SWEE SUM & GABRIEL HENRY JACOB
With favourable policies and increasing interest in the local philanthropic scene, donations to Singapore charities have increased significantly over the past decade. Total donations to charities with Institution of a Public Character (IPC) status grew at an average rate of 11 percent per annum, from S$381 million in 2001 to S$776 million in 2010. To better understand this phenomenon, we conducted a landscape study on donations in Singapore.
Donations to IPCs are made by corporate and individual donors. Our study showed that although corporations are the major donors of IPCs, the relative contribution of individual giving is increasing. In 2001, 22 percent of donations to IPCs were made by individuals. In 2010, individual donations increased to 35 percent. From 2001 to 2010, individual donations grew at an annual rate of 17 percent per annum, a higher rate than that of corporate donations, which grew at nine percent.
Our study also gives us a better insight into individual donors in Singapore. First, we found that individual giving tends to be more resilient than corporate giving. The Global Financial Crisis (GFC) in 2008 caused both individual and corporate giving to dip substantially. But, post-GFC, individual giving recovered faster than corporate giving. From 2008 to 2010, individual giving registered an annual growth rate of three percent while corporate giving declined by three percent per annum. This suggests that while corporate giving is muted by the global uncertainty, individual donors are more than willing to pick up the slack.
Second, we found individual donations to be closely associated with economic growth. Interestingly, as individual giving increases, its channel of giving also changes. We analysed the total funds raised by Community Chest by Singapore’s GDP. This ratio declined over the past five years. Our analysis suggests that individual donors are becoming more sensitive to the charitable causes they support and prefer to give directly to charities.
Third, our study showed that per capita individual giving is increasing. While one may argue that total individual donations have increased due to the growth in population, our analysis points to another factor. Analysing total individual giving by the corresponding year population, we find that per capita individual giving is on an uptrend (see chart below). We infer that Singapore donors are becoming more generous and are giving more. It seems that even the non-residents are supporting local charities.
Source: Chart constructed based on data from Commissioner of Charities and Department of Statistics Singapore.
We credit the growth of individual donations to the favourable tax policy in Singapore. Studies have shown that tax policies are effective in promoting individual giving. Tax shields reduce the tax price of giving and motivate donors to give more. In Singapore, donors will receive a 250 percent tax deduction for donations to IPCs. This benefit is very attractive to donors, especially the high net-worth individuals. Universities in Singapore are some of the major beneficiaries. Besides receiving tax shield, donations to universities attract matching grants from the Singapore Government, which further decreases the price of giving. However, we note that the reach of this tax benefit is limited as only 21 percent of the population in Singapore pays income tax.
The landscape study points to the growing importance and contribution of individual giving in Singapore’s philanthropic scene. This is a timely reminder for local charities to scale up their engagements with individual donors. We foresee such endeavours to be rewarding in the near future.
Dr Lam Swee Sum is an associate professor of finance and director of the Asia Centre for Social Entrepreneurship and Philanthropy (ACSEP) at the National University of Singapore (NUS) Business School. Gabriel Henry Jacob is a graduate student at the Lee Kuan Yew School of Public Policy and a research associate with ACSEP at the NUS Business School.