Application of ROI to Giving

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Return on Investment, “ROI”, is defined as “a performance measure, used to evaluate the efficiency of an investment” (Investopedia).  Basically this is how we understand it works:

When considering an investment in a company or fund, the ROI is a factor of the time it takes to get your investment repaid and the amount over the investment that is obtained.  Example, if $500 is invested and it take 5 years to pay back the $500 and that is all that is obtained from the investment, bad ROI. If on the other hand, $500 is invested and in 5 years that $500 turns into a $50,000 return, good ROI.  

It is difficult for some to make the connection between an investment of money for return, also called profit, and giving to a charitable organization to help others.  After all, isn’t helping others supposed to be unselfish, and therefore unconcerned with profit? Well, in our opinion, yes - and no.

We at eMite don’t mind making the connection between a profitable investment and a charitable donation.  In fact, we believe that it’s in the best interest of both the giver and the recipient to ensure the most profitable charitable transaction occurs.  Why is this so important? Because a charitable gift with a high ROI provides the greatest benefit to those receiving the gift as well those giving the gift.  For example:

If $500 is donated toward a project or charitable organization and that $500 is used to buy a single book for a university that has plenty of books, bad ROI.  If on the other hand, $500 is given and that $500 is turned into 2,500 people being treated for ringworm in a remote village of Cameroon, Africa, good ROI.

Now, to be clear, we believe that every donation made has value, regardless of the intended use.  The value is inherent in the gift because the gift is someone’s Mite, their time and energy. But not every donation given produces the same level of result.  Sometimes a gift is made to an organization that does not need the gift. That gift stands a high likelihood of having a lower ROI than a gift made to an organization that needs the gift to accomplish its mission.  Some gifts are donated for purposes that are inherently low in ROI. This is not a problem as long as the donor understands the true purpose of the gift up front. In any event, and in every charitable transaction, it is incumbent on the recipient organization to treat a donation with honor and attention to stewardship that reflects the value of the donor’s time and energy.  

Scott ToalComment