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  • ASIA PACIFIC PHILANTHROPY CONSORTIUM

    STRENGTHENING PHILANTHROPY IN THE ASIA PACIFIC: AN AGENDA FOR ACTION

    Background Paper: Indonesia

    July 2001

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    INTRODUCTION

    This paper is based on views gathered from two national workshops in Indonesia. A wide range of issues on philanthropy in general was discussed. The first step was agreeing on the definition of philanthropy in the Indonesian context, as this term has never been academically discussed in the country. For this purpose, a definition was borrowed from the Philippines.

    Philanthropy is defined as the voluntary transfer of resources for charitable, civic and social purposes and consists of two major types: charitable grantmaking and development grantmaking.1 A further definition of charity is the support of nonprofit organizations for the purpose of running social, educational, charitable, or other activities that serve the public good with full authority in the hands of recipients in terms of managing the grant.2 A development grant, on the other hand, calls for selective assistance to a nonprofit organization that pursues an agenda that is similar or related to the one defined by the grant-making organization.3

    Furthermore, Velasco characterizes a charitable grant by a donor-grantee relationship initiated through a proposal or letter of request and forged on the basis of the donors priorities or focus or on personal behest or preferences. Development grants, on the other hand, are characterized by the proactive development of partner organizations and their capability in managing programs to meet the development needs of the target area.

    Based on these definitions, a wide range of issues surrounding the philanthropic world in Indonesia was discussed by the stakeholders who attended the two workshops. The issues presented in this report are organized into five major parts. Attention was given in one section to specific forms of charity, including in-kind contributions and volunteerism. Another section discusses the regulatory framework and societys interest in philanthropy. Last, an agenda for action is proposed to better develop the sector in this country. CONTEXT OF PHILANTHROPY IN INDONESIA Indonesian society has enjoyed a long tradition of philanthropic giving, especially motivated by religious causes, mainly Islam. Indonesia is the worlds largest Muslim country. The Muslim community constitutes almost 90 percent of the Indonesian population and the giving tradition is formally practiced through the mobilization of ZIS (Zakah, Infak and Sadaqah). 4 Based on Islamic teachings and customs, a Muslim who has reached a certain level of income5 must pay the Zakah-- amounting to as much as 2.5 percent of his or her annual net savings. Wealth for Zakah must be paid monetarily -- gold or silver in whatever form. Other forms are money, wares/merchandise, crops and livestock. Crops comprise agricultural produce that can be stored for extended periods of time. Livestock refers to camels, cattle, sheep and goats. In addition, the Muslim is encouraged to voluntarily donate other forms of almsgiving, the Infak and Sadaqah, irrespective of his or her level

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    of income. Despite the fact that the major source of social funds in the country is ZIS, various organizations have developed techniques and methods for fund mobilization. With the on-going economic crisis in this country, interest by the corporate sector in helping the poor has been increasing. As will be elaborated later on, corporate means of giving are varied, from direct involvement, establishing corporate foundations, collaborating through a consortium, or encouraging employees to actively participate in social works. SOURCES OF FUNDS Comprehensive data on social fund sources in Indonesia are not yet available. It is clear, however, that the sources vary, ranging from individual to corporate giving. A recent survey conducted by Ibrahim6 (2000), involving 25 CRSOs (civil society resource organizations) provides an illustration of the composition of fund sources, although these groups are not fully grantmaking organizations.7 It is important to note that CRSOs mobilize resources from within and outside their countries and groups and pass them on to other civil society organizations and groups via grants and financing mechanisms.

    The survey revealed that 65 percent of CSRO revenues come from international sources and 35 percent from domestic sources. Detailed information on the domestic sources is stated in Table 1 below. Domestic revenues are mainly derived from earned income activities (33 percent), and interest on endowment funds (17 percent). A smaller portion comes from individual giving (14 percent), government contracts (five percent) and donations from NGOs (three percent). Table 1. Composition of Domestic Revenue Sources of CRSOs

    (N=25) Sources Composition

    (percent) Endowment Income Other Earned Income/Fees National and Local Government Individual Donations NGOs Corporations Others

    17 33 5 14 3 17 11

    Source: Ibrahim (2000) A. Individual Giving The role of individual giving in financing the third sector in Indonesia, as reflected by Ibrahims survey, is relatively small, less than 15 percent. However, if other religious groups were included in the survey, the figure would be higher. Arguably, the incidence of giving to religion is more than 90 percent for all individual giving in Indonesia.8 A case study of several religious-based organizations revealed that they were not only able

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    to operate with 100 percent domestic funding, but were also able to raise more than 90 percent of their funds from the public. The annual figure of funds collected by some of these organizations may reach between Rp. 200 Rp. 1, 000 million (US$ 20-100 thousand). Notably, despite the fact that the portion of individual giving is still relatively small for philanthropy in general, its contribution for charitable purposes is very high. This figure is comparable with that of such developed countries as the United States, which reaches 79.6 percent,9 and Canada, which reaches 88 percent.10 In other words, it seems that in Indonesia the problem is more on the fund mobilization and the narrow interpretation of its possible uses beyond purely religious-based11. B. The Role of Religious Organizations

    In connection with individual giving, the government of Indonesia has been mobilizing resources through official arrangements since the 1960s. The government encourages and controls a quasi-state institution for ZIS mobilization, called "Badan Amil Zakat/Bazis" (Zakah Collector Board). The Bazis has a hierarchical structure from the national level at the top to the village level at the bottom. In 1996, the number of Bazis was 277 institutions at the district level, 3,160 at the sub-district level, and 38,117 at the village level. The total amount of funds mobilized by the Bazis has been increasing considerably, as shown in Table 2. The figures reflect a major part of individual giving in Indonesia, reaching US$ 23.6 million in 1996.

    Table 2. Collected ZIS in Indonesia Year

    Donation (Rp.)

    1991 2,273,487,378 1992 10,896,196,828 1993 46,181,411,117 1994 52,345,500,969 1995 60,314,655,826 1996 235,968,314,342

    Source: Bazis DKI

    In addition to the official Bazis, there are many more community-based ZIS collectors known as Lazis (Lembaga Amil Zakat or Zakat Collector Institutions). The abilities of these organizations vary. Some are weak while others are as strong as those run by institutions that are comparable to the government. As will be shown in a later section of this report, three Lazis in East Java, West Java and Jakarta are now competing with the Bazis to collect funds in their respective working areas.

    Similarly, in other religious communities such as Hindu, Buddhist, Protestant, and Catholic, individual giving is organized by the respective religious institutions. However, the ability to mobilize is much smaller and is limited to incidental events in their own communities.12

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    C. Institutional Giving

    The role and interest of the private sector in philanthropy in Indonesia are not yet well developed for several reasons. One is the relationship between the private sector and NGOs, which has been, in many ways, tense, if not adversarial. Another is that the business and NGO sectors view each other with suspicion.13 The regulatory environment has not been enabling, especially during the Soeharto era. There is little incentive, such as tax write-offs, for corporations to be engaged in socially oriented activities. The existence of semi-official foundations, or Yayasan, many of which were headed by the President himself, has drained some of the resources that the private sector may have otherwise contributed to social giving.14

    With the reform era, the opportunity for business involvement in philanthropy is increasing. Interest has been expressed regarding various forms of social engagement, although systematic information on these activities is not yet available. An illustrative picture of corporate giving can be seen in Table 3 below.

    Table 3. Corporate Giving in January-February 2001

    No

    Corporation

    Period

    Donation

    *

    Beneficiaries

    Use

    1 TPI January 2001

    150 Direct Beneficiaries Food distribution

    2 Hard Rock Hotel Bali

    January 2001

    120 Direct Beneficiaries Education and Scholarship

    3 Dunkin Donat January 2001

    244 Yayasan Dompet Dhuafa

    Education

    4 Freeport January 2001

    570 Yayasan Aminef Scholarship

    5 Singapore Airline

    February 2001

    100 Dept. of Education Scholars