Module 11: Gifts in Kind

Gifts in Kind and Socially Responsible Giving

Gifts in kind (GIK) are defined as the charitable giving of goods and services instead of money.  They have long been used in lieu of monetary contributions due to a number of advantages for corporations, the most common source of these donations. Primarily, corporations receive significant economic benefits from donating gifts in kind. “Being able to donate hard-to-sell or unwanted goods and receive a tax write off is appealing to businesses...Expired (or nearly expired) medicine, outdated equipment, and old machinery are regularly donated as tax write offs.”(1) This allows corporations to dispose of unwanted items with little value, while receiving economic incentives for doing so. From a social perspective, GIKs are more cost effective because companies can provide them at a lower cost due to economies of scale.  They are also more practical in cases where money may be subject to grafting (political corruption), or when essential resources are in short supply and an injection of money would therefore be useless.

From a corporate perspective, GIKs provide an opportunity to turn non-cash surpluses, which might otherwise become liabilities, into social good.  When taking on projects of social responsibility, companies are able to improve their public image, providing further motivation for giving GIKs.  This is the case for World Vision, which annually accepts 100,000 unwanted Super Bowl T-shirts pre-printed with the name of the losing team and distributes them in impoverished areas.(2) Moreover, programs such as the One Laptop Per Child Initiative and TOMS Shoes - which promote attractive models in which one unit of their product is donated to poor children for every one unit purchased - provide a convenient manner in which to fundraise not only from corporations, but also from consumers.  This works particularly well in environments where consumers want to be involved in charity, providing a selling point for the company for their products and also an opportunity to raise awareness.

Current Problems

The idea of giving GIKs has extensive emotional appeal. Nonetheless, it is not an idea that can always be justified.  In fact, many of the advantages previously mentioned have a flip side to them.  GIKs are less susceptible to political corruption, but are also less liquid than monetary assets which can be apportioned based on local priorities.  The flooding of a developing economy with donated goods can also serve as an imposition to the formation of local jobs. Most fundamentally, GIKs are often misallocated, making the donated goods inappropriate for use in a different context.  For example, donated shoes may not be durable enough to withstand the stresses of the local environment.

Quality is also a problem faced by many recipients of GIKs.  Gifts are prone to a decline in their reported functionality when they are broken or lack proper support for their operation.  Many donations of goods that have been previously used may not only be unhelpful, but may also reflect an unintentional shifting of the burden of disposal from the donor to the recipient.(3)  Expired medications must often be discarded by recipients who are reluctant to turn down donations, sometimes because of power relationships between donors and recipients, or where recipients are eager to maintain partnerships with wealthier and well-established organizations for money and attention.  In reality, there exist laws against the exportation of expired drugs because drug decomposition may result in adulterated medications which are not only less effective, but potentially dangerous; nevertheless, many times expired drugs are exported to developing countries under the pretense that such drugs are better than nothing. For example, it is estimated that 50-60% of the donated drugs and medical materials that entered Bosnia and Herzegovinia between 1992 and 1996 were inappropriate (either expired, unlabeled, spoiled or damaged).(4)

Similarly, donations of broken equipment which would require too much money or effort to repair are left to collect dust.  This is analogous to sending untrained volunteers to developing countries on global health field experience internships, as this often burdens the host institutions more than it benefits them.  Thus, it is important to maintain the standards of quality control that exist in the donor country when it comes to GIKs; it is immoral to send expired medications to developing nations knowing that they may potentially dangerous. Moreover, it is likely that any complications from these expired drugs would be magnified by the lack of an established health care infrastructure in developing countries. 

Ethics and Economics in Giving

Overall, the systems and mechanisms used to deliver resources in the form of GIKs to developing nations remain inefficient, with ethical issues stemming from decisions about who should be the recipients of GIKs when it is not specified.  The inevitability of imperfect information adds a layer of difficulty that only further complicates the decision of choosing where to send certain goods.  Instead, the decision-making process behind donation and delivery is heavily economic in nature, and the output results are likewise economical.  A study published in The Lancet in 2009 found that in addition to slowing local economies, in-kind drug donations deterred the entrance of generic drugs into a more competitive market because of the costs associated with research and development, thus leading to long-term dependence.(5)

Uncertainty over future payments and their timing can deter generic entry and price.  Acceptance of donations of just one drug might create uncertainty about whether donations of other drugs will be forthcoming, possibly deterring entry of generic drugs for AIDS, tuberculosis, and malaria in general. Additionally, accepting donations could have important negative effects on future costs of life-saving medicines and on future therapeutic choices. Since most GIKs are supplied on a conditional basis depending on sales or convenience, they are not a reliable source of medications or other essentials for those who need them.  Thus, dependency can become a problem for the receivers of GIKs that prevents sustainability and independence.

Donors often fail to recognize that the true value of a given good or service may be less than expected in a developing country when taking into consideration all of the additional costs that are incurred along the way, and the final utility of the donation when it is received. Effective program development also requires an emphasis not only on outputs, but outcomes.  Though billions of dollars of GIKs are placed in developing countries each year, what is the impact that this has had upon the local populations that donors have tried to help?  Are T-shirts actually needed where they are being placed?  Even though this need for outcome-driven actions is gaining attention by the humanitarian community, a lack of communication and cultural dialogue has rendered useless many of the GIKs transferred from donors to receivers. For example, according to a 2007 study from Duke University, 96 % of foreign-donated medical equipment fails within five years of donation — mostly because of electrical problems, like voltage surges or brownouts or broken knobs, or because of training problems, like neglecting to send user manuals along with the devices.(6) Clearly, there is still work to be done in this area, but careful management of the quality and placement of GIKs will do more than simply throwing more goods and services at the problems.

In the end, perhaps we should follow the advice of Dennis R. Young, who suggests that nonprofits considering implementing a GIK program start by asking themselves the following: Are GIKs directly relevant to the mission of the organization? Can we use GIKs to serve constituents (e.g. automobiles for delivery, office furniture for functional support, etc.)? Can constituents use GIKs to meet their own needs (cell phones, health-care supplies, etc.)?(6)

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Footnotes

(1) “World Vision, the new 100,000 shirts.” Accessed on 3 May 2011.

(2) Freschi, Laura. “In Zambia, Pittsburgh won the Super Bowl: Why is World Vision perpetuating discredited T-shirt aid?” Aidwatch, 14 February 2011. Accessed on 29 March 2011.

(3) Ferguson J, Hurd-Knief P, McGuirt M. “In-kind giving: it’s a good thing … but don’t be naïve.” Fund Raising Management, 29 August 1998.  Accessed on 29 March 2011.

(4) Ette, E. “Conscience, the Law, and Donation of Expired Drugs.” The Annals of Pharmacotherapy. 38.7 (2004). Accessed on 3 May 2011.

(5) Baker, Brooke and Ombaka, Eva. “The danger of in-kind drug donations to the Global Fund.” Lancet, 9 October 2008. Accessed on 29 March 2011.

(6) Drexler, Madeline. “Looking under the hood and seeing an incubator.” The Partnership for Maternal, Newborn & Child Health, 16 December 2008. Accessed on 29 March 2011.

(7) Young, Dennis. “Financing Nonprofits.” Accessed on 29 March 2011.