It has become very common to expect that the financial support for civil society organisations should come from international philanthropy of one kind or another. This raises two very important observations:
- Very many civil society organisations, particularly the smaller, membership, community organisations do not get such support, and are financially self reliant.
- In the cases where international philanthropy plays this role, it depends, to a large extent, on political decisions in the rich countries – which might well change in the future if countries decide that other issues, rather than international development, are a better use of their resources.
It seems to me, therefore, that substantial effort needs to be made to consider how CSOs can finance themselves – from their own initiatives and resources, rather than, as happens most frequently these days, to seek ways of finding the key words that unlock donors’ resources.
My own book “Towards Financial Self-Reliance – a handbook on resource mobilisation for CSOs in the South” (Earthscan, London) 2004) – together with its Trainers Manual (downloadable free from the Aga Khan Foundation website (www.akdn.org) – identifies the following sources of finance for CSOs:
- Resources from members
- Resources from the public
- Resources from the state
- Resources from the business world
- Income from CSO owned enterprises
- Resources from sympathetic supporters in other countries, both Government and non-Government.
All of them have their possibilities, but also their limitations, and many of them require an initial grant to get moving. One of the most vivid examples has been the field of micro-finance where CSOs have been successful in running banks (or bank like entities) which provide valuable services to their clients, and are sustainable because they cover their costs. Their are some such entities which are able to create a surplus from this kind of business which they can use for other work. The leading example of this is the Grameen Bank which has exported its way of operation to many other countries. (www.grameenbank.com)
Also from Bangladesh is the amazing example of BRAC, now the largest CSO in the world, which has created a whole range of businesses that are able to improve the lives of those involved, and produce profits that are ploughed back into the work of BRAC more generally. Both Grameen and BRAC, however, have depended on philanthropic grants for over 20 years to bring themselves to the self-reliance they now exhibit. (www.brac.org)
One of the notable developments of the last decades has been the increase of philanthropy from the business world – typified by the Bill and Melinda gates Foundation – which move comparable amounts of money to the pre-existing development agencies. A substantial amount of such funds are in the form of grants, but there is also a strong movement from the business sector to offer investments in CSOs (which have to be repaid), rather than grants – in the belief that this is a more realistic and sustainable way for public spirited organisations to operate. This “social investment” does, however, depend on the CSOs entering the world of business in the sense that their clients are prepared to pay for their services, and these payments can be aggregated into paying back investments. For many who have been used to thinking in grants terms, there have been many fascinating innovations in making education, health care, insurance, even prisons into profit making enterprises – often led by people who call themselves “social entrepreneurs. The danger is always that the poorest will not be able to afford to pay for such services – but there has also been substantial research into what the poor can pay for, and what markets exist that cater to the poorest. The seminal work has been “The Fortune at the Bottom of the Pyramid – eradicating Poverty through Profits” by C.K. Prahalad, and these ideas have been brought together in two linked books by Lester Salamon, “Leverage for Good” and “The New Frontiers of Philanthropy”.
There is often a disconnect, however, between those involved in the new ideas of philanthropy, and the huge number of CSOs which serially look for one more (usually international) donor to support their work. The new philanthropists are unlikely to entertain the idea of serial philanthropic grants, and the traditional donors are very unlikely to support CSOs with capital or investments. Very few international donors to CSOs have a vision of a future in which their existing way of working through serial grants (which makes for serial dependency of CSOs on them) will change. One of the reasons for this is that few NGO and CSO managers think like business people, few of them have any background in entrepreneurial business behaviour (BRAC with its founder and leader, Fazle Abed, with a background in business, is the notable exception).
The only organisation that I know which offers to train CSOs to escape from serial dependency on donors is the Resource Alliance, based in UK, which has been for the last decade, offering training and capacity building in various forms of financial self-reliance (www.resource-alliance.org).
The other aspects of financial self-reliance which depend on support from the public, the business sector, and the government in the CSOs own country immediately confront the problem that most CSOs which receive foreign funding do not try to persuade their own public, businesses or government about the value of the work that they are doing, and how important it is to support them – rather promoting themselves to foreign donors. It requires a mind change for most CSOs to consider moving away from the largesse of donors – although the increasingly stringent requirements of donors for due diligence, value for money budgeting, very tight monitoring and accommodation to the donors rules and regulations, make this more attractive.