AN ECONOMIC ANALYSIS OF CHARITABLE ORGANISATIONS IN SINGAPORE

Abstract

Social science research on the nonprofit sector has multiplied in recent years. The government in Singapore generally does not believe in a welfare state, where massive provisions of welfare services to the needy are taken care of by the state. Instead, the government has relied heavily on the voluntary nonprofit sector in the provision of direct welfare services. Yet this nonprofit sector has been one of the least studied and understood aspects of our national life. An equilibrium structure of the voluntary sector may be reached when some charitable organisations choose to join the Community Chest - central fundraising body which specialises in raising funds for its members - as members, while others do not. This phenomenon is observed in countries such as Singapore, the United States, Hong Kong and the United Kingdom. As an attempt to shed light on the phenomenon of the equilibrium structure of the voluntary sector in Singapore, this thesis examines the rationale of charitable organisations for and against seeking membership in the Community Chest. Charitable organisations join the Community Chest to benefit from its economies of scale in fundraising by saving considerable expenditure of resources which would otherwise be largely duplicative. Moreover, empirical results from this study reveal the following reasons for charitable organisations in seeking membership in the Community Chest. First, when charitable organisations were confronted with deficit positions and were unable to cover their operating expenses, they may prefer to join the Community Chest. Second, there appears to be evidence ii that organisations which have joined the Community Chest in the past, are those which are providing services (such as services for the disabled) that involve extremely costly overhead expenses. Lastly, the ability of charitable organisations to secure funds for carrying out certain programmes may also be one motivation for joining the Community Chest. However, it is also found that some charitable organisations which are not as efficient as the Community Chest in terms of fundraising, have chosen to remain as non-members. This appears to suggest that there are reasons other than lower fundraising costs that may deter charitable organisations from seeking membership in the Community Chest. Charitable organisations may be concerned that they might lose their autonomy after joining the Community Chest. Moreover, they can no longer engage in independent fundraising activities after becoming members. This thesis also aims to identify the ways in which the Community Chest might promote a larger membership size. A grand coalition of the charitable organisations - whereby all charitable organisations become members of the Community Chest - may be deemed desirable in the long run. This may enhance their ability in the competition for funds with profit-seeking firms. In addition, the Community Chest is able to reap economies of scale by avoiding duplication of efforts and excessive competition among organisations in fundraising. This thesis ends by discussing some possible avenues which the Community Chest may take to increase its membership size in the future.