Philanthropy and the Indian Businessman – V. P. Nandakumar
On March 2, 2014, the Asianet News channel telecast a half-hour documentary on the CSR activities of our company carried out under the aegis of the Manappuram Foundation. It was a very well-made documentary that successfully captured the full range of activities we are involved in as part of our corporate social responsibility (CSR). In this context, I would like to share some thoughts about businessman and philanthropy.
We all know of Bill Gates as the founder of Microsoft and usually the richest man in the world. In 1994, he sold some of his Microsoft shares to create the William H. Gates Foundation. Later, in the year 2000, Gates and his wife combined three family foundations into one and created the Bill & Melinda Gates Foundation. Today, it is the largest transparently operated charitable foundation in the world and Bill and Melinda Gates are among the most generous philanthropists in the world, having given away billions of dollars in charity.
In December 2010, Bill Gates joined hands with the legendary investor Warren Buffett, to take a pledge—what they called the “Gates-Buffet Giving Pledge“—in which they promised to donate to charity at least half of their wealth over the course of time. Gates and Buffett visited India to promote the Giving Pledge and encourage wealthy Indians to give more. The chairman of Wipro, Azim Premji, became the first person in the country to sign up for the Giving Pledge. He was joined by P.N.C. Menon, founder of the Sobha group, who has promised to devote half of his fortune to philanthropic efforts.
According to a report on Indian philanthropy by the management consultancy Bain, private charity contributions as a percentage of GDP are only 0.4% in India, compared with 1.3% in the U.K. and 2.2% in the U.S. The report noted, however, that “India is recognized as a nation of givers. But we have a tradition of being quiet givers.”
Around the time that Bill Gates came to India, there was a lot of talk in the Indian media about how Indian businessmen were not as generous as their American counterparts in the matter of charity. Actually, the truth is a little more complex.
There is an important reason for this divergent trends in philanthropy among businessmen in America and in India. In India, all citizens including wealthy businessmen are allowed to leave their entire wealth to their family. Estate duty, or the tax on inheritance, was abolished in India in 1985. In the US, if you are very rich, the estate tax has a top rate of 40%. Therefore, when an Indian businessman donates a crore, it is money that otherwise would have gone to his family. In America, only 60 percent would pass on to the family with the rest going to the government as estate tax.
Businessman donating their wealth to charitable causes is one side of the story. On the other side, India has seen some very good work being done by corporate establishments as part of their CSR. Indeed, CSR has assumed extra importance ever since the government amended the Companies Act to make it mandatory for corporate entities to spend a minimum of 2 percent of their after tax profit on social welfare. The revised norms apply to companies with at least Rs 5 crore net profit or Rs 1,000 crore turnover or Rs 500 crore net worth and comes into effect from April 1, 2014. From this date, companies will have to spend 2 per cent of their three-year average annual net profit on CSR activities in each financial year, starting from FY15. It has also been clarified that CSR activities will have to be undertaken within India and will apply equally to foreign companies registered in the country.
It is a matter of pride that well before CSR became mandatory, Manappuram had become active in this sphere out of its own cherished values. We established the Manappuram Foundation in 2009 with the objective of funding and managing grassroots programmes in healthcare, education, empowerment of women, and charity. The first major initiative of the Foundation was Janaraksha Manappuram Free Health Insurance Scheme rolled out in FY 2009-10. Under this project, 20,000 BPL families—that’s about one lakh people—in seven Panchayats adjoining our Corporate Office at Valapad, Thrissur, are provided with free health insurance covering them for hospitalisation and medical expenses up to a limit of Rs.60,000 per annum.
Presently, the bulk of the Foundation’s activities is restricted to Thrissur District (Kerala) but we now plan to try and extend our CSR footprint across India. We have decided to sponsor worthy projects focused on the uplift of weaker sections of society in areas where we have a presence. For this purpose, senior executives of the company from across India have been asked to identify suitable projects with the potential to make a visible difference to the lives of the underprivileged classes. And so, one of these days, the Manappuram Foundation will also become a national presence, like its parent, Manappuram Finance Ltd. That is the dream.
Shri V.P. Nandakumar is MD & CEO of Manappuram Finance Ltd.