Working in Fund Mode: How Mistrust of State and Society Hinders Development of Charity in Russia


How Did the Life Line Charity Foundation Appear

Oleg Sysuev: I started working in the charity sector for two reasons. The first one relates to my past, since I was responsible for the social sphere of the country (note:he was the Deputy Prime Minister for Social Policy in two cabinets of the Russian government). At that time it was in ruins. The second reason was actually the request of my friend and Alfa-Bank shareholder Mikhail Fridman who asked me to start developing charity work in our corporation. He visited a children's hospital, and his friend, the head of this hospital, said: “Look, these children that are running around… if I don’t find money for medicines today, then, most likely, tomorrow these children will no longer be with us.” This made a great impression on Mikhail, so he decided to invest in charity projects himself, and to encourage his partners, Alfa-Group shareholders, to do the same. 18 years ago, this was the birth of the Life Line Charity Foundation, which helps seriously ill children.

We understood that the unity of the Russian society is a myth, that the level of solidarity in society is very low. We understood what the society thinks about private capital, rich people, and private property. Nobody will thank you if you spend a lot of money on charity. People would rather say: “We need to take everything from them and share between the people.” Therefore, we decided to create the Life Line project, which allowed us to support charitable foundations with small streams of financial flows. The idea was not to take money from people, but to provide them with the opportunity to participate in charity.


The Main Obstacle is the Dominance of the State

Oleg Sysuev: The main obstacle to charity in Russia is the dominance of the state. It does not really want to coexist with charitable projects. It wants to take them over in any possible way.

Another problem arises from formal government mandates in the healthcare sector. Treatment of almost all diseases, including serious childhood ones, is formally funded by the budget. And when we (knowing that there is deficit of money and that even if it is available on paper, it is not necessary available in reality – and while you wait for it, the child may die) bring money to the state officials, they say: “Please, don't give it to us, we will be punished for this.” Local officials are afraid to accept donations.

Ruben Enikolopov: Charity is, to some extent, a substitute for the state. The only difference is that when you are engaged in charity work, you can control what the money is spent on, and when the state is solving the same problems, there is no such opportunity.

Meanwhile, in Russia, independent charity is perceived quite badly, especially when it is not related to funding a project under the state’s pressure or at its request. In the US, people take pride in supporting foundations, which often bear the names of wealthy people. In Russia, rich people very often hide the fact that they support some fund.

Oleg Sysuev: The following story illustrates how the state treats social responsibility: the head of a federal district received a letter with a request to help an orphanage and provide it with computers. The official re-addressed this letter to Peter Aven with the notation: "To Be Done."


Wealth, Culture and Charity

Ruben Enikolopov: In order to do charity work, you need to be able to afford it. Of course, people who are not very wealthy are also involved in charity, but research shows that the amount of money allocated to charity is very clearly related to income. In rich countries, people and corporations can afford to do more charity work than in poorer countries.

Culture also impacts the scale of charity. In Anglo-Saxon countries, private charity accounts for more than 2% of GDP, in other states it does not exceed 1%, and in Russia it is below 0.5%.


Spontaneous, Quick and not Always Effective

Oleg Sysuev: To choose which charitable foundation to support, you need to do some research of its work, whether this fund has a website, how often it publishes reports, etc. We have troubles with this in our society: people do not do it.

This is a mental problem common to the society as a whole, to the state, and its leaders. We want everything here and now. We do not want to deal with long- or even medium-term horizons, we are reactive all the time. We take quick decisions to send troops somewhere or to give money to a beggar on a sidewalk.

Ruben Enikolopov: There are two huge problems. The first is a very short planning time-frame. Therefore, most of the donations are impulsive and spontaneous: people see a donation box in a supermarket and throw money there. Rarely do people think carefully about which goals they consider most important, which areas of charity they will support.

The second problem is lack of trust. On the one hand, people do not trust funds and therefore prefer to give money to a beggar in the street. On the other hand, the government does not trust the society and wants to control everything.

However, important are not only trust and confidence that the money will not be stolen and that it will reach the final addressee. Intended use does not yet mean effective. Therefore, in the world's largest funds, people conduct experiments, checking which types of support are most effective. For example, in some schools they invest in teachers, in others – in textbooks and, depending on the result, choose what they would spend the money on.


Threat by Law

Ruben Enikolopov: At the New Economic School, we cannot take money from our own alumni if they have left the country and are working, say, in London. It creates the risk of being recognized as a foreign agent. God forbid, if our graduate helps us we would be in trouble! For the same reason, we cannot win grants for international projects. This is, of course, a huge problem.

We are also thinking about the effects that the amendments on educational activities would have on us. We have not yet been told what consequences this law may have, but it certainly does not make our life easier.


What Are the Benefits of Endowments

Ruben Enikolopov: Everything related to higher education requires long-term investments. And endowments are the most stable and reliable source of such funding. You give a sum, it is invested in securities, deposits, etc., and an organization exists using profit from these investments. For the world's leading universities, up to a third of all funding comes from endowments that secure their steady development over decades or even centuries. For example, in the case of Harvard, student tuition fees provide about 20% of the budget, while the main funding comes from charity.


Digitization as a Growth Point

Oleg Sysuev: Alfa-Bank is one of the leaders in the field of digitization and automation. 17 years ago, together with the CAF Charity Foundation and the Life Line Foundation, we introduced the ‘Give As You Earn’ program into our banking business (note: a special software allows Alfa-Bank employees to donate part of their salaries for the treatment of seriously ill children).

Another example of digitization is a program that allows a person to choose an animal to take home from a shelter or to donate money to a shelter. A survey showed that many people prefer to support stray animals.

Ruben Enikolopov: Digital technologies solve two problems. The first is the reduction of transaction costs: it is very easy to donate money to specific needs through a mobile app. The second is the increased transparency thanks to the digital footprint: a person now knows which particular dog he or she is supporting. This can partially solve the lack of trust problem that we talked about earlier.


What Will Happen to Charity

Ruben Enikolopov: Both problems – lack of trust and a short planning horizon – are being slowly resolved. It could happen faster if there had been a slightly different situation in the country. Trust is growing thanks to the leading foundations. And the extension of the planning horizon is facilitated by the systematic work of foundations and projects that give long-term returns. Charity will shift from impulsive and spontaneous support for an ill child to support for the healthcare system, education, science or culture. After all, if a vaccine is created with your money, it will save many times more lives of both children and adults than if you give money to a particular child.

Oleg Sysuev: My view is optimistic, but, as the British say, hope is not a strategy. I hope that the main task – reducing the influence of the state and emancipating the society – will be solved.

Ruben Enikolopov: Society must become more mature. It should not expect that the big brother, the state, will help. It should understand that people need to take charge of their destiny and proactively develop the surrounding environment so that it becomes comfortable. People need to stop hoping that someone will solve their problems for them.