Anne Frank once wrote, “No one has ever become poor by giving”. But to give, you need to have. Every organisation needs funding to operate. Like any organisation, NGOs need money to cover their costs- capital costs, operation costs, overhead costs, staff costs, etc. NGOs, in particular, depend primarily on grants and donations for survival.
What happens when the organisation runs out of money? Donations are made at random, and grants are often subjected to conditions. With a limited budget and uncertain cash inflow, NGOs often have to curtail their spending at the cost of quantity and quality of their work. Under these circumstances, NGOs find it difficult to plan for the long term and ensure the longevity of their humanitarian programmes. Preemptively, NGOs should develop a stable funding source and steadily achieve autonomy from donor funds and grants.
One of the most significant challenges NGOs face is the lack of funding, which is intrinsic to the operation and success of such organisations. Diversification is the key to overcoming this challenge. Investors often mitigate the risk of loss by investing in a mixed portfolio instead of holding a single significant investment. In the case of NGOs, it would be wise to diversify their funding sources instead of relying solely on grants and donations. One such alternative source can be funds generated through business ventures. Nowadays, NGOs are being encouraged to become more sustainable with governments changing tax laws and regulations that limit the organisations’ ability to pursue profit-making activities. It is not uncommon to see non-profit organisations engage in commercial activities such as retail and food service, which direct the profits towards their operation and cause.
Goodwill is one of the oldest non-profit in the U.S, which funds its social programmes through several retail thrift shops selling donated goods.
Another approach is sponsorship by corporations. Corporate donations can be one-off since there are several social causes and NGOs to which corporations can donate to. Sponsorship, however, can be long lasting as involved parties mutually benefit from it, similar to a business deal. Companies often invest in public relations strategies such as sponsorship, whereby they support certain causes, people or organisations, which boosts their brand image and earns them the public’s goodwill. The sponsorship doesn’t strictly need to be financial. In-kind sponsorship can also be beneficial to non-profits such that corporations provide them with goods, necessary equipment or services free of charge. This type of sponsorship allows both parties to benefit- corporate sponsors from brand promotion and public goodwill and NGOs from a lower cost of operation. Sponsorship also leaves room for negotiations; something NGOs can use to their advantage for long term collaborations.
Transitioning into a social enterprise, like the YUVA Academy, is another way of ensuring an NGO’s survival without funding. Contrary to popular belief, NGOs and social enterprises are not synonymous. While both share fundamental similarities, they also share certain differences.
Although both work towards a social, economic or environmental goal, they go about it differently. Social enterprises are entrepreneurial endeavours that sell goods or services to advance their cause. They hold a structure similar to that of a commercial business and use part of the profit to reward investors and redirect the rest into their initiatives, thus creating a self-sustaining operation.
On the other hand, NGOs use donations and grants to finance their cause. Another core difference is that social enterprises are not exempted from tax while NGOs are. Despite that, it is easier to find investors for a social enterprise than donors for non-profit organisations. Investors are more likely to support an organisation if its cause matches their values and profit from it. Social enterprises are more likely to expand their operations since it is easier for them to raise capital. In this vein, social enterprises boast the type of financial security paramount to the sustainability of a non-profit organisation. Hence, an NGO can slowly transition into a social enterprise to ensure its survival in the long run.
All in all, NGOs can survive without funding by generating their funds, finding sponsors, or transitioning to a social enterprise. ‘Innovate and persevere’ should be the motto. They need not sacrifice their mission to ensure survival in the long term. The road to sustainability for NGOs may be challenging, but it does not seem impossible, with the ultimate goal being a better world to live in.
Vijeshna Ramkalawon, YUVA Intern and BSc (Hons) Finance Student at the University of Mauritius