Posted by: Discover Scholars | August 11, 2008 on Philanthropy 2173

Lucy Bernholz, founder and President of Blueprint Research & Design, Inc., and author of the well-known giving blog Philanthropy 2173, recently discussed as part of the latest wave of “democratized” or “marketized” giving.

She writes:

Now, in the most direct – to – direct example I’ve seen, comes – which matches scholarship donors directly to students (or claims to). The idea is to give donors a chance to support specific kinds of students, not just the universities where those students go to school. In their words: is a public charity that seeks to award scholarships to the types of students who donors wish to support. Unlike colleges, universities, or other educational foundations, we let donors specify student attributes they care about with their donations.”

Economist Tyler Cowen took a look at the site – his comments focus on the increased competition that the site can bring to the scholarship market. (Typical of an economist) However, the larger point here is that this kind of 1:1 giving shares attributes with several other trends we’ve followed on p2173, notably:

Of coure [sic], a wise giver won’t completely fall for this 1:1 hype – all of these sites rely on institutions (many of them newly created) to manage the donations and the selection process. *Kiva works through its microfinance partners, for example, and DiscoverScholars doesn’t escape institutional middle-men, it simply created a new one (itself). So, I still don’t think philanthropy is particularly democratic, but it sure looks ever more like a market.

Ms. Bernholz does a great job of placing in the broader trends occurring in the world of philanthropy.  We do wish to respond, though, to the claim that does not sufficiently represent “1:1” giving.

As we stressed to Ms. Bernholz in an e-mail:

While it’s true that is a new “institution,” we did not prefer to structure ourselves this way.  Our current structure is actually in response to EO restrictions laid out by the IRS.  As you probably know, the IRS does not consider donors directing their funds to known individuals to be charity (because of the somewhat-legitimate fear that donors could direct their dollars to their own family, and get a tax deduction for doing so).  This is likely the reason why Kiva relies on microfinance partners as well – the IRS is OK with one organization giving contributions to another tax-exempt organization, but not to individuals.

In the original conception of, we envisioned a sort of “” for educational funding in which donors would search for and select the exact students they wished to fund.  Unfortunately, in order to preserve tax-exempt status for our organization, and to allow donations to be considered tax-deductible under 501(c)(3) law, we have chosen to structure in such a way as to allow donors to choose the types of students they wish to support.  We believe that this arrangement preserves most of the benefit that donors would receive in the “” set-up – namely, having a good sense that their money is being spent as they desire.

I suppose even in our original vision, you could make the case that we would be creating an alternate institution for giving, and therefore even that organizational structure would not represent true 1:1 giving.  But in a similar vein, I’m not sure that it would be fair to characterize the existence of the institution of eBay as somehow taking away from the auctions that occur on their site.  Even financial markets require reliable institutions to function properly and facilitate mutual exchange.

One additional point from a blog reader:  While we are creating a new middleman, is a significantly less burdensome middleman than university admissions’ offices. Morevoer, we’re just one institutional middleman, not hundreds as in the case of university admissions offices.

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