The field of philanthropy in Brazil is growing. As new data comes to light, there is a real possibility for development based on the experience of countries with longer histories of developing philanthropy. One of those possibilities is the rise of fiscal sponsorship.
The need for new philanthropic structures was highlighted in a recent study, Peripheries and Philanthropy: The Barriers to Accessing Resources in Brazil, conducted by the PIPA Initiative in partnership with the Nu Institute.
The report shares previously unseen data on the concentration of resources in Brazilian philanthropy and the barriers that grassroots groups working “in the periphery” face in accessing them.
A few data points stand out. For instance, most of the groups in the periphery – who are generally working in impoverished parts of the country – are led by black women, who work triple or quadruple the hours of larger organizations and have little access to digital systems. Or the fact that 31% of organizations working on the periphery survive on less than R$5,000 a year.
The report also points to several barriers that prevent funds from reaching these periphery organizations. Some are obvious, like small, overworked teams that can’t write grant proposals. However, one of the more interesting barriers is that many peripheral organizations are not formally incorporated as CSOs.
Instead of formalizing peripheric collectives and organizations, which can be very expensive and distract from an organization’s mission, one approach that I have found interesting is fiscal sponsorship. It has become increasingly popular outside Brazil.
A New Type of Partnership
Fiscal sponsorship refers to an operational model in which a formally constituted non-profit organization provides administrative, financial, and fiduciary support to other projects and collectives.
This is particularly helpful for small organizations for which the cost of formalization doesn't make sense, and collectives that, because of their nature as patchwork organizations in the field, deliberately choose not to formalize.
When formalization is discussed, we often see it as a challenge that social organizations must overcome to obtain resources. But there is an unconscious bias there. To solve this problem, we use the logic that whoever has the money is at the center of power. Everyone else has to conform to their will. This is one of the perverse logics of philanthropy that needs to change. In other words, part of the process is recognizing the lack of formalization as a stage or an option, not a flaw.
Incubation by a fiscal sponsor allows organizations to receive funds in an agile and secure manner, following legal requirements and allowing social organizations to focus on their core activities. Being under the umbrella of a fiscal sponsor can also bring greater credibility, helping to increase access to funding for historically marginalized communities that are effective agents of social change.
Fiscal sponsorship has grown increasingly in other countries, especially in the United States. According to a recent field scan, there are now more than 100 fiscal sponsors in the US that collectively sponsor more than 12,000 charitable projects and steward more than $3 billion in funding.
This model has recently reached our shores. The first fiscal sponsors have popped up in Brazil in the past few years. However, this is still very new – Brazil's model is not regulated and remains in a gray area. It remains to be seen where the sector will go.
Limitations of Fiscal Sponsorship?
I spoke with two leaders in Brazilian philanthropy about the possibilities for fiscal sponsorship in Brazil. They both expressed excitement about the possibilities but also pointed out some limitations.
One leader, who preferred to remain anonymous, said that it is natural that fiscal sponsorship is still in its infancy in Brazil, just as philanthropy is in its infancy compared to other countries in the global North.
In the United States, the high inheritance tax creates a market for philanthropic services, including fiscal sponsorship. Charitable donations are also tax-exempt, and the fiscal sponsor can guarantee this benefit if the funds are destined for a foreign country or an unregistered organization.
None of this applies in Brazil. Our system has one of the lowest inheritance taxes in the world, with a constitutional ceiling of 8%, and the tax system offers incentives, not exemptions, following government policy in areas considered priorities.
In another interview, Marcelle Decothé, co-founder of the PIPA Initiative, believes fiscal sponsorship is possible in Brazilian philanthropy. Still, she points out that the ideal would be to arrive at a system without intermediaries. "At PIPA, we have a policy that intermediaries are a temporary alternative to democratizing resources. In the current situation, they work because they do a good job of meeting the demands and expectations of the big donors so that the funds flow to the organizations. Still, our mission is that we no longer need intermediaries and that we manage to have a culture of giving and a practice of grantmaking in Brazil that manages to reach these grassroots organizations without going through the big organizations," she says.
This is an important reservation. Suppose we include the fiscal sponsor in the Brazilian philanthropic field. In that case, we must be aware that it must be a service provided to organizations and collectives, acting as a bridge between the donor and the social organization, bringing the necessary structure to the relationship.
Still, the business model of fiscal sponsorship must not be pressured by the economic and power systems.
Otherwise, it will also end up adapting to the donor's demands for access to resources, passing them on to social organizations, and completely losing its sense of purpose as a facilitator in the flow of resources, a criticism we have heard from other countries in the Global South.
Fiscal sponsorship could distract from larger conversations about the need to fundamentally change how philanthropy operates in Brazil. “We understand that it is a palliative solution for the grantmaking being done in Brazil, which is not very significant and, even when they are available, they are usually severely restricted. …we always have to aim for a long-term discussion about changing the culture of Brazilian philanthropy," warns Decothé.
