(Photo by iStock/Prayad Kamhanpon)
In the United States, Canada, and Europe, donors to nonprofits often decide which organizations to fund based on how legitimate they perceive the nonprofits to be. They can readily make these choices because of a robust system of nonprofit certifications that vouch for a group’s finances and transparency.
But in authoritarian countries such as China and Russia, how much power do such certifications have in comparison with political connections to the ruling party and government officials? A new paper that looks at Chinese nonprofits finds that the same effect holds in countries with authoritarian governments: Certifications help determine how much money they receive in donations.
“Even in authoritarian regimes, where the government controls the critical resources, the certification process helps nonprofits signal legitimacy and attract donors,” says author Qun Wang, an assistant professor in the Department of Political Science and Public Administration at the University of Toledo in Ohio.
Wang’s paper is the first study to consider the link between third-party validation for nonprofits and their ability to garner donations in China, he says.
Wang analyzed data from 2,021 Chinese foundations that existed in 2013—66 percent of all foundations registered before that year—and looked at the amount of money each raised. He set that data against measures of each nonprofit’s certifications and political connections, including the presence of government officials on its board and whether it was affiliated with the government or a quasi-governmental group. He also factored in variables such as the age of the nonprofit and how much it spent on fundraising activities.
He found that “organizational legitimacy achieved through certification is tied to an increase in charitable donations.” The effect is even more pronounced for groups that don’t have government connections. “Certification lifts the amount of charitable donations to civic foundations that are not formally affiliated with the state more than it does for politically affiliated foundations,” he writes.
This finding is especially surprising given that some donations in China are state mandated, which would be expected to funnel charitable giving toward nonprofits tied to state entities. But instead, the unaffiliated groups were raising more money with the help of their verified credentials.
“The certification definitely signals quality, performance, and credibility of the nonprofit,” Wang says. “That gives potential donors a signal that this organization is worth the money.”
Why does certification have this effect, especially in an increasingly statist country where proximity to government power is linked to better availability of resources? “Even in China, the certification process is relatively fair,” he says, including expert review and public comments. Additionally, the nonprofits that seek certification are self-selected and benefit from the process itself. “When a nonprofit makes an effort to be certified, the whole effort helps the nonprofit improve its performance,” Wang says.
The growth of nonprofits is relatively new in China, which long operated with state-run entities solely in charge of social projects. The Chinese nonprofit sector took off after the 1990s, and in the early 2000s a wave of governance scandals spurred the central government to enact tighter restrictions. Three voluntary certification programs, all government-run, launched during this period to evaluate different aspects of nonprofits’ performance and, in some cases, confer tax exemption benefits to donations.
Chinese donors today look to certifications—even by government programs—to decide whether to entrust money to nonprofits. This is likely a change from previous decades, Wang says: “Probably in the past, organizational legitimacy just means political connections, but being connected with the government is not an indicator of legitimacy anymore.”
This trend points to a change in how Chinese donors think about doing the most good with their donations, since they no longer are using charitable giving mainly to declare political allegiance.
“Organizational legitimacy probably used to be irrelevant when almost all NGOs were created in a top-down manner,” Wang writes. “Nowadays, it can be responsible for NGOs’ donation income and moderating political connections in a way that enables civic foundations.”
“This paper affirms the Chinese government’s dominant role in the NGO sector, not only through resource control and policies, but also through establishing the public legitimacy of government-endorsed NGOs,” says Meng Zhao, a senior lecturer at Nanyang Business School in Singapore.
In the future, Wang notes, further studies could look at data from a longer period of time than just one year, use interviews to understand donors’ motivations better, or take a closer look at the nature of the certification programs.
Qun Wang, “What Matters for Charitable Donations Under Authoritarianism? An Examination of Organizational Legitimacy and Political Connections,” Nonprofit and Voluntary Sector Quarterly, 2022.
Read more stories by Chana R. Schoenberger.