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Earmarked or unearmarked donations

By SDK, 14 July, 2022
Lamb earmarked unearmarked

Many people find it preferable to donate for a specific purpose. They want to be sure that their donation will reach those in need and will be used for a specific mission. The designation of a donation purpose is experienced as concrete and binding. Behind the motivation, there is sometimes also a feeling of mistrust toward an aid organization.

Charity organizations, on the other hand, prefer to receive donations that are not earmarked for a specific purpose (so-called unearmarked donations), which they can use where it is most needed. Nevertheless, from a charity's point of view, it is much easier to appeal for donations by linking an appeal to a current crisis, such as helping people in Ukraine. Child sponsorships are also considered earmarked donations.

In many countries (e.g., the United Kingdom and Germany), aid organizations are required by law to respect donors' intentions. This may not be the case everywhere. But all over the world, aid organizations are committed to respecting the earmarking of your donation.

Biggest advantage of the donor-restricted contribution: The donated money must be used for the purpose to which it was dedicated. The donor can therefore be sure that his donation will not be used elsewhere.

Biggest disadvantage of the earmarked donation from the perspective of the aid organization: the donated money must actually be used for the purpose to which it was dedicated. Otherwise, recipients of the contribution would ask the donor for permission if they plan to use the money for a different purpose, or even refund the donation. Earmarked donations incur higher administrative expenses than unrestricted donations, since both the income and corresponding expenses must be recorded separately for accounting purposes. This reduces - albeit slightly - the proportion that can be used for the organization's actual work.

Another - often more serious - disadvantage comes into play. If more donations than needed are received for a specific purpose or a specific appeal for donations, the aid organization is faced with a problem under which people are actually suffering who could otherwise receive urgent emergency help from the donations. Because the organization is not allowed to spend the money where it is needed, it must wait until it can be used for its actual purpose.

So there are good reasons to recommend unearmarked donations as a matter of principle. In case of doubt, one should donate without designation to a specific purpose. Such donations come into question in particular if the exact use of the donation is not of high importance for the donor, since he knows that he has chosen the right organization and trusts that the gift will be used in his interest. On the side of the aid organization, there is less administrative work and maximum flexibility in the use of the funds. The funds can be used where the aid organization considers they are most urgently needed.

The right decision can be the earmarked donation if it is a matter of the donor's heart to give exactly for the specific purpose. And without this incentive, he would lose interest in giving and the purpose of the gift would be lost. So it may be that an aid organization is active both at home and abroad. But the donor wants the money to benefit those in need abroad. Often, aid organizations are engaged in both long-term development cooperation and short-term humanitarian disaster relief internationally. If the latter is more important to the donor, he or she should also consider making an earmarked donation.

A final tip: It is unfavorable for all parties involved - donor, organization, recipient of the aid - to go with the flow, i.e., to donate for what many others are giving to at the same time. Then it may well be that more funds are collected for a purpose than an aid organization can use in the short term. Then the small donation makes little sense in the masses, while it could make a big difference when used for other crises.

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