Switzerland offers an attractive and highly developed backdrop for philanthropy, with more foundations and more giving per capita than other European countries. The total endowment of domestic not for profit foundations exceeds SFr70 billion, while total grants run to between SFr1.5bn and SFr2bn a year. While most foundations are based in the main cities of Basel, Geneva and Zurich, some less urban areas also have a remarkable concentration. One particular feature of Switzerland as a home for foundations is its strong international links. Not only does the country host numerous foreign givers, it is also home to some important international foundations.

Since 2000, however, the landscape has been changing fast. About 400 new foundations are created each year. Since 2010, there have been about 20 major donations of SFr10-100 million. Foundations law was revised in 2006; more recently, federal supervision was reformed and additional staff hired. Foundations themselves have become more professional, thanks to innovations such as knowledge-sharing platforms and more specialised advisors, along with the creation of philanthropy units at many banks.

But there are weaknesses alongside the strengths. The sector is highly fragmented; many foundations are small – some indeed wholly inactive. About 85% of Switzerland’s foundations have an endowment of less than SFr5m, while 80% employ no paid staff. Despite that, each year, a mere 0.1% of foundations join forces through mergers. Transparency is also often limited – as the occasional scandal shows – while there is poor aggregate sectoral data. Worse still, cantonal supervision has become even more opaque after reforms to Swiss pension law. Drawing partly on best practice abroad, Avenir Suisse suggests some innovations that could improve conditions for the sector and stimulate giving at the same time.

1. Create incentives to boost mergers. Closer co-operation between foundations would combat fragmentation. Regulatory barriers to mergers should be removed. Umbrella bodies grouping foundations could create synergies and reduce administrative costs. More radically, the state could set a minimum quota for annual grants, as in the US, where non profit foundations must disburse at least 5% of their assets each year via grants and other philanthropic spending. Such a reform would help to reduce the number of inactive foundations (whose sole activity is self management).

2. Boosting transparency: Switzerland’s Federal Statistical Office should collect comprehensive data about the sector and create a national register, through an online databank covering all not for profit foundations. The authorities could also consider obliging foundations to publish more financial data.

3. More effective legal rules. To protect against abuse, Swiss foundations law should be extended to include an article requiring “sound management”, articulating key principles. These could include stronger rights for supervisory complaints and measures to avoid conflicts of interest. Foundations which remain inactive for years should have their special status revoked.

4. Firmer supervision. Cantonal supervision of non profit foundations should be split off from oversight of pensions funds and treated separately through wider regional units (as is already the case with pension funds). Such reforms would boost specialisation and allow synergies, as well as improving supervision.

5. Open public sector activities to wealthy private patrons. Transferring public sector functions to foundations (for example in culture) could stimulate greater private sector involvement. In contrast to Germany, Austria and Liechtenstein, such foundations still play a scant role in Switzerland.