NGO Sustainability: Do you have the capabilities?
There is a growing body of evidence that suggests that many NGOs face a funding crisis. In the UK, we have seen the closure of long-established NGOs such as SkillsShare and the announcement of the end of Progressio all because of funding constraints.
This funding crisis is partly because the amount of official aid has been reduced as well as changes in the way that aid is distributed. Some countries, such as Australia, Ireland, Italy, the Netherlands and Switzerland, have reduced their total aid budgets significantly in recent years. Donations to NGOs from the general public are under threat. Opinion polls highlight increasing public cynicism as to the value of funding development projects and the ageing profile of those donating to INGOs.
Public giving and philanthropy continues to grow but not at the same pace as the growth in the number of organisations competing for it. All the projections suggest that the number of non-profits, NGOs and charities grows year on year –estimates suggest that there are over 10 million registered CSOs worldwide. In India alone the number of registered CSOs exceeds 3 million, an increase of over a million in a decade.
Even in mature non-profit sectors, such as the UK, the number of development NGOs continues to grow. Data from the UK Charity Commission identifies nearly 12,000 registered charities as being involved in “overseas aid and famine relief work”, of which nearly a thousand had been created in the last three years. In other words nearly 10% of the UK charities involved in overseas aid work are new start-ups. The picture is that of an increasing number of development NGOs competing for a relatively limited pot of funds.
The consequences of this lack of funds are projects getting cancelled, programme work getting curtailed, experienced staff being laid off and reduced investment in capacity building. Partnerships and other collaborative ventures are jeopardised. In general, organisations have to go through a process of significant change and downsizing all of which creates tensions and threatens trust and productivity. Weakened financial viability leads to a vicious circle of decline that jeopardises organisational sustainability. All of which explains the current interest in the financial sustainability of NGOs and how they can continue to fulfil their mission in such difficult times.
Practice and experience tells us that NGO financial sustainability is about having some core organisational capabilities in place. These include having the capabilities to build sufficient and positive public profile as well as the network and reputation to attract resources. Second, having suitable and appropriate organisational systems and processes to be able to attract resources and retain a relationship with the donor or those making the contribution. Third, having the internal capacity and willingness to learn and evolve.
The recent Brexit vote has made an already difficult funding environment even tougher, and it is increasingly clear that many international NGOs will struggle to maintain income levels. However, if they can develop key organisational capabilities, such INGOs have a good chance of not just surviving but also thriving in this new future. Investment in developing new skills and capabilities is crucial to helping NGOs handle these challenges and continue to be relevant and sustainable.