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How foreign FCRA funding for conversion is reinvested within India: Part 1

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How foreign FCRA funding for conversion is reinvested within India: Part 1
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Introduction

Over the last decade, FCRA remittances by Evangelical organizations into India have mostly been the preferred route to funnel foreign money into India for conversion activities. And NGOs have been the majority of the recipients of this FCRA-routed Evangelism money.

But foreign remittances via the FCRA route is just a partial view of a much bigger and worrying picture. These remittances are fairly straightforward to track—the Ministry of Finance website has the relevant data.

However, it is tougher to track what happens to the money once it reaches India. One obvious use to which this money put is to carry out conversion activities. In this report we will examine the others by analysing the following parameters:

· Earnings on FCRA Evangelism money by way of bank Interest

· Return on investments of this FCRA money

· The quantum of FCRA money which is circulated within India.

Note: For this report, we have analysed the break-up of these parameters over the last seven years across different states of India.

Objective, methodology and focus of analysis

An example will demonstrate our objective, methodology and focus of this analysis.

Consider Shalom Global Foundation (SGF) located at 7/2-97, Anandammal Shopping Complex, Inam, Karisalkulam Post, Srivilliputhur Taluk, Virudhunagar (Kamarajar District), Tamil Nadu-626125.

Website: http://shalomglobalfoundation.org/

FC6 return for 2011-2012: http://fcraonline.nic.in/fc3_verify.aspx?RCN=076110031R&by=2011-2012

The following is an extract of Shalom Global’s FC6 return. (All amounts are in INR)

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Figure 1

The total amount that SGF received as fresh funds (either from abroad or from other FCRA registrants within India) is in Blue colour and is Rs. 4.21 Crore. Apart from this, SGF had two other sources of funds. Marked in Red is the Interest earned in that year by SGF for the money that was present in its FCRA-designated Bank account. Marked in green is the amount it earned on the money it had invested, say, in Fixed Deposits or similar instruments.

Needless to state, FCRA rules forbid an Organization to invest in speculative investments such as shares, mutual funds etc.

From the same FC6 return, we get a country-wise break up of foreign money received by SGF.

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Figure 2

What is interesting is the entry for “India”, marked in a black rectangle. The acronym FCRA stands for Foreign Contribution Regulatory Act. In which case, it definitely sounds bizarre that India is itself a foreign contributor.

And it is bizarre because the law provides for Organizations registered under FCRA and receiving FCRA money to remit the funds that they received from abroad to other FCRA-registered Organizations in India.

And it is this intra-India FCRA money from various organizations across India that this report will compute and analyse.

Part-A: Interest Earned

Following the method used with SGF, we can add up the red boxes for all the FCRA-recipient Organizations located in a given State. For instance, 3285 Organizations located in Tamil Nadu reported FC6 returns in 2011-2012. We can put a Red Box in each of their FC6 return of 2011-12 and add up all those numbers. This process will be repeated for each of the seven years under consideration.

We can thus obtain the Interest earned by these Organizations in Tamil Nadu over these seven years. And we can repeat this for organizations in other states as well. Table 1 shows the result.

Table 1: Interest earned by Organizations in the Bank Account maintained for foreign fund receipts via FCRA

Table 1: Bank Interest

PART-B: Return on Investments

Next, we can repeat this process for the Green box, which gives the money earned by these organizations through investments in instruments like Fixed Deposits and the like. Table 2 shows the result.

Table 2: Returns (gain) on Investments made by Organizations by way of Fixed Deposits etc on foreign funds received via FCRA

Table 2: ROIThus, if Rs. 600 Crore is the return on Investments, one can reasonably conclude that the amount invested by these Organizations would be around Rs. 6000 Crore. That then is the aggregate amount invested by Organizations (mostly NGOs) which received money from abroad via FCRA for activities ranging from upliftment of India, empowerment of Indians, teaching Indians, disseminating the message of goodwill among Indians and so on.

PART-C: Intra-India Fund Flows

The last item we shall study is the quantum of fund flows within India. It is worth recalling that the FCRA law permits organizations registered under FCRA and receiving FCRA funds from abroad to remit those funds to other FCRA-registered organizations in India. This is the reason that the FC6 returns that lists the countries from which money was sent to India also shows India as a foreign country.

We shall add the numbers highlighted in black (see the FC6 return for SGF above) of organizations in a given State for seven years. Table 3 shows the result.

Table 3: Quantum of money received by organizations/NGOs in Indian states from other organizations/NGOs within India. The quantum includes interest amount (Part-A) and return on investments (Part-B) listed in Tables 1 and 2.

Table 3: Quantum of money

 

These amounts include money “earned” by the organization/NGO within India via Bank Interest and Return on Investments. Therefore, in order to obtain an understanding of the magnitude of intra-India fund flows (money transfers from one organization/NGO to another within India), we need to subtract these amounts from those in Table 3. The intra-India fund flows are presented in Table 4 after this working:

Table 4 = Table 3 – Table 1 – Table 2

Table 4: Exact amounts of funds received by organizations located in a given State from other FCRA-registered Organizations in India. (Amounts are in crores INR)

Table 4: Intra-India transfer

From the earlier calculations and FC6 returns, we arrive at a figure of Rs. 10,500 Crore as the approximate amount received by these organizations/NGOs each year via FCRA. From Table 4, it is clear that the quantum of intra-India FCRA funds is around 10-15% of the total FCRA remittances into India.

And when we now take the yearly totals for all states of all the FCRA monies under the four heads (from Table 1 thru Table 4 above), we arrive at this chart.  Needless, the years surveyed include 2006 thru 2012.

Evangelism yearly totals of FCRA

 

And that gives rise to two important questions:

One, why does this happen?

Two, who sends and receives these monies?

We get a hint at the answer in the FC6 return of SGF (shown earlier in this report).

Case Study: Examining the returns of Shalom Global

SGF received Rs.0.209 Crore from Caruna Bal Vikas, Chennai, which in turn is strongly associated with Compassion International, USA. So, has it sent money to other organizations in India?

To understand that, we need to examine the FC6 returns of the recipient organizations. We can begin by examining the FC6 return of SGF itself.

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Figure 3

Shalom Global Foundation is tucked away down South in Srivilliputhur, Tamil Nadu. But as the returns show, it has been quite active in spending money way up in North Indian states. What is more alarming is the fact that SGF has been operating completely under the radar—few people even know that it exists. And so when the returns show that it has expanded its footprint up to remote Meghalaya, one can only be awed. The question also arises: how many Shalom Globals are operating across India, and what is their reach?

The nature of organizations which send out funds

Typically, the organizations which send out FCRA funds within India play the role of a local leader. They can also called “Control” Organizations. They receive money from abroad via FCRA and disburse it within India to other organizations/NGOs.

Let us look at the Tables of numbers again (Tables 1 thru 4). In 2012, we see that Tamil Nadu (which receives around Rs. 1600 Crore per annum from abroad) got only Rs. 150 Crore (Table 4) from within India.

The contribution from within India has been decreasing with time as well. Thus, one can say that Organizations in Tamil Nadu disburse money rather than receive money. The same conclusion applies for Kerala as well, which receives around Rs. 800-900 Crore per annum. (For example, read here for details on total receipts).

Andhra Pradesh too has many such Control Organizations and therefore, intra-India fund share is only about 10% of its total receipts.

An interesting development is with respect to West Bengal. The intra-India numbers too, have been decreasing with time whereas its overall receipts via FCRA have been increasing. This means that its NGOs are “maturing.”

Caveat: Can the intra-India fund flows shown in Table 4 have had multiple counting? For example, let’s say X receives money from Y in 2011 and “returns” it back to Y in 2012 (like a loan). Will the above analysis count that money as part of X’s receipts in 2011 and of Y’s receipts in 2012? The logical answer is yes, it will. But we have no data to show whether such moneylending happens on the ground.

Summary

· Organizations gain Rs. 150 Crore by way of interest each year.

· Organizations gain Rs. 600 Crore by way of Return on Investments each year. Thus, they are likely to have invested around Rs. 6000 Crore in Fixed Deposits and similar instruments.

· A significant amount of intra-India flows of FCRA-derived funds take place.

 

Sources and Acknowledgements

· The FCRA data is sourced from the Ministry of Home Affairs site: http://fcraonline.nic.in/fc3_amount.aspx

· The 2012-2013 FCRA data continues to be actively updated on the MHA website. Hence the value for 2012-13 above can be taken as a lower bound. The data used in this report is accurate for returns filed up to February 2014.

· Thanks to Rangesh Sridhar, (@kshetragnya on Twitter) for pointing the authors of this report to the Activities portion of the returns.

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IndiaFacts Staff

IndiaFacts Staff articles, reports and guest pieces