Summary: Endowments for Global Health Interventions

Report by Tanae Rao & Alexa Kaminski

Nonprofits that tackle global and child health issues need consistent funding to maintain their programs and ensure that their clients receive a full course of benefits. In 2022, several of Taimaka’s research partners completed a report to investigate whether endowment-based financing is a promising model for global health nonprofits.

The final report is available here and an interactive quantitative model of the cost-effectiveness of endowment based financing is here. This post provides a brief summary of the findings.

Morning at one of Taimaka’s Nutrition Clinics in Northeastern Nigeria

Why we wrote this report:

As an organization committed to cost-effectiveness and spending every dollar to do as much good as possible, we’re wanted to explore innovative, evidence-based financing mechanisms to help maximize our impact. By providing an exploratory overview of the benefits, drawbacks, and logistics of financing an endowment to fund a program, this report shines a light on potential options for Taimaka to pursue in the coming years.

Equally importantly, we hope that it provides a practical and well-evidenced overview of endowment-based financing options for other nonprofits in global health pursuing cost-effectiveness and sustainable impact.

Key findings of the report:

We find that endowment funding is a promising model for global health charities that provide cost effective interventions addressing long-term community needs. Specifically, endowment funding can strengthen a charity’s impact through three mechanisms:

1. The endowment provides steady funding for the charity’s operations.
2. The endowment eliminates the monetary and time costs of continuous fundraising, and this savings might exceed the initial cost of setting up the endowment in the long-run.
3. Eliminating the need for continuous fundraising enhances the charity’s ability to prioritize its social impact in cases where social impact and optics are in conflict.
4. Some concerns with the endowment model include 1) impractical spending restrictions, 2) market volatility, and 3) a lack of accountability to donors. There are promising solutions to these problems:
5. Communicating the risks of overly restrictive terms to potential donors, and using appropriate legal structures, such as quasi (unrestricted) endowments, can help endowed charities retain their ability to adapt to changing circumstances and evidence.
6. Tried and tested smoothing rules, such as those used by the Yale and Stanford endowments, can mitigate the effects of financial market volatility on the funds released from the endowment.
7. In addition to basic good governance practices, giving donors the option to ‘park’ their money (while retaining the right to withdraw) can ensure that a charity’s staff remain accountable to endowment donors.

Finally, donating to an endowment can come at the expense of deploying funds today, but it ensures long-term stability without causing a net harm if the charity is sufficiently more cost effective than how donors would have otherwise spent the funds. The definition of ‘sufficiently more cost effective’ depends on a number of factors, which can be explored through an interactive quantitative model published alongside this report.