Donor-Advised Funds (DAFs) More Popular in APAC Than in Other Regions

Donor-Advised Funds (DAFs) More Popular in APAC Than in Other Regions

October 10, 2023

Centre for Asian Philanthropy and Society’s (CAPS) first study comparing the landscape of Donor-Advised Funds (DAFs) in seven APAC economies reveals that, unlike in other regions, APAC donors view tax benefits as a bonus rather than the main driver for setting up DAFs.

Centre for Asian Philanthropy and Society (CAPS), a uniquely Asia, independent, action-oriented research and advisory organization, released its latest research report today, titled “Donor-Advised Funds in the Asia-Pacific”. The first comparative study of donor-advised funds (DAFs) in Asia-Pacific (APAC) unveils the mixed landscapes of DAFs in seven economies including Mainland China, Australia, Hong Kong, India, Japan, Korea, and Singapore. The results indicate donors are not primarily motivated by tax incentives to set up DAFS in APAC. Donors are more attracted by the services provided by sponsors to facilitate their philanthropic giving to set up DAFs. Regulatory frameworks and market dynamics also shape DAFs organically.

Tax incentives are less important for donors in the APAC

The report indicates that interest in DAFs is increasing in the region; however, motivations for setting up DAF differ. While tax incentives are the main driver for setting up DAFs in the US, donors in Asia-Pacific tend to view tax benefits as a bonus rather than the main driver. Besides Australia and Singapore, charitable donations in the region have lower tax benefits than in the US. Awareness of available tax incentives is also lower in several economies in the region.

Donors are attracted by sponsors’ professional philanthropic services

DAFs donors are drawn to sponsors’ services, such as grantee selection, monitoring, and evaluation, that facilitate their philanthropic giving. Secondly, setting up a DAF is less time-consuming, costly, and complicated than a private foundation, making it more accessible to new philanthropists. Additionally, donors can streamline their giving processes by pooling different charity funding streams into one fund. Well-established sponsors with a strong local presence and deep community roots can be particularly attractive to donors.

APAC has a more mixed landscape of DAFs than other regions

Market dynamics in the region differ from those in the US, where commercial DAF sponsors have come to dominate the DAF market. The landscape of DAFs in APAC is more mixed. In mature economies like Australia and Singapore, commercial DAFs sponsors dominate. However, the relatively high operating costs combined with low or emerging market demands result in fewer commercial DAF sponsors in other APAC economies. In these economies, other types of DAF sponsors such as community foundations are more common. As market demands for more structured giving vehicles increase, financial institutions are likely to respond, for example, in Hong Kong, where UBS Optimus Foundation recently launched its DAF offering.

“We are pleased to present this landscape of DAFs in APAC,” said Dr. Ruth Shapiro, the Co-Founder and Chief Executive of CAPS. “As philanthropy grows in the region, DAFs are becoming more popular as giving vehicles and developing along different trajectories at different places. We expect DAFs will continue to expand in terms of the number and variety of players in the region. We believe that this report will serve as a valuable resource for donors, sponsoring organizations, and social innovators to facilitate their strategic giving in APAC.”

DAFs in APAC are evolving organically, adapting to market dynamics and existing regulatory frameworks. In economies with enabling social sector laws, the environment is conducive for DAFs to flourish. While in economies where certain forms are giving are restricted or highly regulated, DAF can offer a flexible alternative. Given the nascent stage of DAFs in APAC and thus the resulting malleability of their structure and goals, they can continue to evolve to take advantage of enabling regulations or help to circumvent potentially restrictive ones. DAFs offer an innovative solution and should be considered by philanthropists, wealth advisors, foundations, and others looking to utilize private capital to generate social impact, according to the report.

Ed.  Photo by Money Knack on Unsplash.


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