The target capital is "the safety net"


The target capital, or endowment, is a "safety cushion" that allows non-profit organizations (NPOs) to maintain operations even during difficult periods such as a pandemic.

Now, during pandemics when there are no donations, most often charitable foundations close because they have no significant savings and are on the verge of shutdown.

Unfortunately, we have seen the same thing before: in 2020 we can witness what we experienced in 1998 and 2008.

In the future, such a predetermination can be avoided. At least with the key programs for Russian philanthropy. And the solution is not only direct state aid (which is definitely needed), but also the  " safety cushion ". This refers to the endowment institute, which is still taking its first steps in Russian philanthropy.

Today, when financial flows decrease, the idea of forming one's own target capital seems fantastic to most charitable foundations, but when the economy, and the volume of aid to the nonprofit sector with it, starts to recover, a part of the proceeds should be spent on ensuring financial stability of NPOs.

Endowments are also unusually "long" money for our market, which contributes to the country's investment climate. However, domestic endowment funds are still far from being a significant factor for Russian financial market.

Now the federal authorities are planning to support socially oriented NPOs influenced by the coronavirus. These are urgent measures, which are absolutely necessary. But why shouldn't the government take part in creating an " safety cushion " for such NPOs in the future?

In a word, both the donators and the NPO management should think already now, when the crisis is far from over, about how to use effectively the next stable period and prepare for new trials.

Source: RBC. Vladimir Yakunin " Rainy Day Funds: How Endowments Help Charities"