Growth of philanthropy in Saudi Arabia a cause for optimism

Growth of philanthropy in Saudi Arabia a cause for optimism

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There has never been a more exciting time for philanthropy in Saudi Arabia.
The country has, for centuries, been a shining example of individual and collective giving, such is the power of charity and compassion at the heart of Islamic faith. With the holy month of Ramadan, with its emphasis on charitable giving, about to start, it is timely to reflect on the many reasons to be optimistic about the growth of strategic philanthropy in the Kingdom.
As a UK-based philanthropic adviser to global family offices and donors, I have had the pleasure of working closely with Islamic philanthropists and foundations in the Middle East and the UK. I have been inspired to learn about the principles of zakat, sadaqah and waqf and their proud track record of influencing charitable giving.
The scale and structure of giving in Islamic cultures is impressive. Strong traditional values and religious faith provide solid foundations for meaningful and long-term giving. Recent reports estimate that philanthropy in the Gulf Cooperation Council is worth about $210 billion annually, with other estimates going further, putting the annual philanthropic capital of only 100 of the largest family businesses in the GCC at a minimum of $7 billion.
Many, like me, hope that the shift in global economic power to emerging markets, combined with the fact that trillions of dollars will be passed from one generation to another over the next decade, will create favorable conditions for an increase in charitable activity among a new cohort of philanthropists in fast-growing markets like Saudi Arabia.
With private philanthropy maturing in the country, and the region more generally, there are signs that philanthropists are adopting global trends and taking a longer-term and more strategic view with their giving — for example, by choosing to tackle the root cause of a problem as much as crisis funding. Philanthropists are increasingly joining forces with other donors to tackle big social issues, for example in health, education or sustainability. There is a genuine desire to work on solutions with their peers, or with other public or private institutions, in the knowledge that the scale of the challenges far outweigh the ability of any single donor to tackle them alone.
Many Middle Eastern families also see the benefit of using international hubs, not least the UK, as a base for their philanthropic activity. The UK in particular is an attractive jurisdiction in which to manage philanthropic capital due to its transparency and regulation, geopolitical neutrality and established rules on giving to domestic and international charities.

Strong traditional values and religious faith provide solid foundations for meaningful and long-term giving.

John Canady

The level of engagement from the emerging generation of young leaders should also be a cause for enthusiasm. There is little doubt this stems from the importance that Muslims attach to charity from a young age. Opportunities for young people to thrive with their philanthropic giving are greater than ever before, especially for second and third-generation family members who can experiment within the safe structure of strategic grant-giving.
Social media-savvy and globally connected through education or experience, the next generation’s horizons are limitless. To that end, many are adopting global trends to new forms of impact investing or social enterprise or using new structures to administer charitable grants that did not exist a few years ago.
Take donor-advised funds, for example, which are becoming a popular philanthropic vehicle due to their administrative convenience and tax benefits. The structure of donor-advised funds management allows donated money to grow tax-free, creating more value over time and allowing donors to make a greater impact on the charity or community they wish to support — a straightforward form of impact investing.
Donor-advised fund administrators have seen a dramatic increase in both assets under management and the scale of grants given in recent years, including donations from several Middle Eastern philanthropists, as they can be used for Shariah-compliant investments for their philanthropic capital. Donor-advised funds are increasingly used by families to complement existing philanthropic structures and are seen as an integral part of the wealth structuring conversation by client advisers. Such advisers are quickly learning the many benefits of donor-advised funds, such as their ease to set up, the flexibility in the assets donors can contribute to, the reduction of regulatory and reporting responsibilities (which are assigned to the fund provider) and the ability to easily create a clear succession plan for the next generation.
A combination of historic traditions of giving, the availability of new giving vehicles or jurisdictions that allow future generations of philanthropists to thrive, and a willingness to think long-term about charitable giving provides a positive and exciting context for the future of philanthropy in Saudi Arabia. Ahead of Ramadan, that is something we can all draw great hope from.

• John Canady is the CEO of National Philanthropic Trust UK.

Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News' point-of-view