Ever heard of a charitable lottery? If you have, do you know what it does?
If you haven’t, I don’t blame you. I didn’t either until I read an article about them and visited the Dutch Charity Lotteries, located in Amsterdam, the Netherlands. Through three main privately owned lotteries (the Dutch Postcode Lottery, the FriendsLottery, and the BankGiro Lottery), the Dutch Charity Lotteries donated more than $500 million away to charity last year.
The three Dutch lotteries are part of a family of charitable lotteries: besides the Netherlands, there are similar lotteries in Sweden, Great Britain, Germany, and Norway, all privately owned companies. In total, this family is the third largest private donor in the world, with only the Bill & Melinda Gates Foundation (U.S.) and the Wellcome Trust (U.K.) giving away more. However, the Netherlands has a population of 17 million, ranking 66th out of over 200 other countries and islands around the world.
So how does an organization in a country with a population approximately five percent of the U.S. donate so much money?
The Dutch Postcode Lottery is the largest lottery, so that’s the one I‘ll focus on. It’s an ingenious system; a postcode in the Netherlands contains a section of a specific street. Each member of that postcode can sign up for a subscription to the lottery (it’s not like the U.S., where you buy individual tickets). If your postcode is called, your whole postcode wins. There’s a catch though. You have to buy a subscription in order to win yourself or win as a member of your postcode. If you don’t buy in, then your whole street would win, while you would not earn a cent. It’s set up on a whole system of “peer pressure”: can you imagine if your entire street won a large chunk of money and you didn’t?
In this way, the Dutch Postcode Lottery entices people to sign up because of the chance that they or their neighbors might win. However, while individuals may sign up to win money, they continue to play because of the unique charity funding angle I mentioned earlier. Fifty percent of the total earnings—brought together by the lottery players—goes to charity, with the next 35 percent going to the winners and the final 15 percent covering the organizational costs.
Not only that, but the Dutch Charity Lotteries offer flexible, unrestricted, multi-year support. In other words, organizations supported by the lotteries that are chosen to receive money, receive it and then can spend it as they wish for five years. After receiving funding for those five years, organizations can apply to have support renewed.
Granting unrestricted, flexible-multi-year support is rare, but encouraged in the nonprofit sector. We hear about how unrestricted funding can buoy organizations and allow them to be the drivers behind their visions. However, foundations hesitate about giving this kind of support. How can you evaluate the impact of operating support? How can you explain that keeping the lights on or hiring new staff members will enhance the nonprofit’s mission? Admittedly, it can be tough to sell to donors, but this kind of support can empower nonprofits to do what they do best: provide support and invest in others to reach their full potential.
And the Dutch Charity Lotteries fully believes in and follows this innovative approach. “We’re not the experts in the field; the nonprofits are,” explained Margriet Schreuders, head of the charity department. “We believe that civil society organizations are engines for change and provide innovative ways to better the world overall. We want to promote system change, and we believe that by providing flexible, multi-year funding, we’re able to assist these organizations in doing just that.”
Schreuders identified four attributes that the Dutch Charity Lotteries strive for: trust, modesty, curiosity, and courageousness.
- Trust. “The organizations we partner with are the experts, not us. We trust them to do what is best for their beneficiaries.”
- Modesty. “This ties into trust, but we think daily about how lucky we are to work with our partners to achieve large goals of making an impact and creating a better world.”
- Curiosity. “By continually staying curious, we’re able to see change made through our partners. We ask questions in order to better understand the work that they do, which helps make us become a better partner every day.”
- Courageousness. “We’re not afraid to fund independent and activist projects that may not or don’t accept funding from institutional funders.”
One benefit of providing long-term, strategic funding? It assists organizations by allowing them to refrain from asking for corporate funding. The Dutch Postcode Lottery funds Greenpeace, which refuses to accept donations from corporations they view as complicit in creating environmental problems.
The organization can also fund a variety of projects committed to improving civil society in some capacity. The Postcode Lottery has funded projects that combat HIV in eSwatini, empower indigenous communities in Ecuador to fight for land rights, and promote rapid responses to health and humanitarian crises around the world.
And the approach works. For example, Schreuders described how funding system change in eSwatini helped decrease HIV in the country by 40 percent and helped stop its rapid spread. The World Health Organization adopted the project’s method due to the impact the work had on the ground.
She also explained how funding lawyers for indigenous groups in Ecuador helped those groups win court battles and protect their land.
Not only that, but flexible, multi-year support allows organizations to hire more individuals, including fundraisers, which helps the organization raise more money in the long run. “This gives our partners the ability to raise more money to support their missions and goals, while also creating less dependency on the Lottery over time,” Schreuders said.
Over time, trust built between the nonprofits and the Dutch Charity Lotteries helps balance the power imbalance between funders and grantees.
“Our goal is to give the power to the partners we work with. We hope to stimulate innovation, entrepreneurship, and impact and help make powerful change.”