Fundraising for NGOs

1. INTRODUCTION

This paper is a quick response to some of the queries that we have been receiving from International donor agencies in the course of our consulting practice in NGO management.

Although some NGOs have begun to be concerned about how foreign funding can be gradually replaced with Indian money, since fairly substantial sums of foreign money are still available for NGO work, local fundraising has not yet become a strategic objective for most organisations.

1.1 NGO WORK IN INDIA

NGO work in India has diverse ideological origins and underpinnings. We need to have a basic understanding of these backgrounds, if we are to design strategies for the future of these NGOs, confronted by rapidly changing social, political and economic environments.

NGOs in modern India have traditions that can be traced back to the ideologies of the Ramakrishna Mission, Mahatma Gandhi, Sarvodaya, Jesuit Missions and even Marxism.

Many NGO establishments in modern India have the aura of the traditional Hindu Ashram. The accent is on austere community life in isolated project campuses, and total dedication to the poor and deprived people in the area.

This physical isolation has resulted in a situation which casts the future of Indian NGO work in an uncertain light.

1.2 NOTIONS OF INDIAN CHARITY

The Indian notion of charity has it's roots in religious beliefs as in the case of European or American charity, but the practice of charity has developed along slightly different lines.

While the Christian notion of charity is based on love of fellow men, and the change from an undesirable state to a better state of being, the Hindu notion is slightly more inward looking. According to the Bhagavad Gita:

The three key words are "Yajna" (Sacrifice), "Dana" (Giving) and "Tapah" (Penance), all of which are good for the purification of the individual's soul.

Spiritual advancement is the goal of Indian giving, and this accounts for the difficulties Western funders face when they talk of solving problems of poverty and withdrawal strategies.

Spiritual advancement could be jeopardised if the recipient of one's charitable actions is not worthy of such actions. It is common to hear counter-arguments in India that if you give money to some people, they will waste it on drinking and gambling.

Establishing the credentials of NGOs who approach the Indian charity market; and involving the public in the cause of the NGO thus become very important priorities, and reminds us that Fundraising has Communication and Financial objectives.

In India, we now have a distinction between "Charity" or "Welfare" projects as opposed to "Development" projects. In the "Charity/Welfare" category, we would for example, include projects working with disability, orphans, and opposing cruelty to animals. In the "Development" category are the "tough" issues dealing with, for example, marginalised groups, afforestation and human rights.

Fundraisers know that it is easier to raise money for "charity" projects, especially in an urban setting. "Rural Development" and afforestation projects are seen as responsibilities of the government and not the individual citizen. People find it easier to stay away from controversial projects working with AIDS/HIV patients and "Gender Relations" and support universally non-controversial projects working with child welfare.

1.3 FOREIGN FUNDING

NGO work has been called "Non-Party Political" work, because it involves organising people around issues and demanding change. In this sense, NGO work which questions the status quo should provide some cause for concern to politicians who find their omnipotence threatened.

The impact of foreign money flowing into India has been so great that it has inspired a piece of legislation called the Foreign Contribution Regulation Act (FCRA). This Act is used by the Home Ministry to control the NGO sector through it's achilles heel of funds, without which the NGO cannot function in it's existing form.

Foreign funding, which is controlled by the FCRA, forces NGOs to seek "safe" and non-controversial issues including the delivery of government programmes. Becoming an extension of the government must cause considerable dissonance for organisations which call themselves "Non-Governmental" organisations.

If it were possible for Indian NGOs to raise their funds within the country, at one stroke, it releases them from the government surveillance associated with the FCRA, and provides them with a "mandate" for the work they are doing.

In a milieu where market-driven NGOs would prefer to exchange their idealism for prudence, it is only natural that international donors should have searched out those NGOs whose rhetoric was the most strident, and whose actions did not jeopardise their survival.

In a shift from a traditional economy to a market economy riding on the back of an information explosion, it is these "successful" NGOs whose funding has become most dependent on their "Northern Partners". As a result, they have not developed the skills to talk to the public in India about their causes.

The public never gets to know about the results of the NGO's work. All they see are the air-conditioned cars, cordless telephones and other yuppie symbols, somehow incongruous with life-styles of sacrifice and penance adopted by the early leaders of the NGO movement in India.

NGOs face serious contradictions in their pursuit of social work with charity money, which sometimes conflicts with their own needs for a reasonable livelihood and the education and upbringing of their children.

1.4 PUBLIC PERCEPTIONS OF INDIAN NGOs

Indian NGOs fall into two broad categories - the "Government-funded" NGOs and the "Multinational NGOs" which receive their funds from foreign sources.

Anil Singh of VANI (Voluntary Action Network India) has been quoted in a hard-hitting article titled, "Most of the Funds they get never reach the Poor" [ Prasannan R., in THE WEEK: Sept. 15, 1996, page 31] as saying that the Government Agency responsible for NGO funding, CAPART is corrupt and charges commissions ranging from 10-40% in return for sanctioning projects.

If CAPART has sanctioned about Rs.330 crore to about 7,500 NGOs in the last nine years (in addition to grants from other ministries), we can imagine the number of bogus organisations and front organisations which have mushroomed to siphon off this easy money in the name of rural development.

Many foreign funded NGOs are viewed with suspicion by the Home Ministry as trouble makers in sensitive areas. Politicians grudge their resources and grassroots influence. One of the bogies raised by the media attack on NGOs is that some of them are pushing their donors' agenda of disarmament at a time when the arms race in the subcontinent has become an explosive issue.

The BJP leader Mr. L.K.Advani is quoted as having made a call to NGOs to raise their funds within the country. Oxfam (India) Trust's achievement of raising Rs. 9.23 lakhs within the country has been lauded, and to the rational observer, provides proof that it can be done.

The public perception of the Indian NGO appears to be that they are centres of fraud, self-aggrandizement and destabilisation.

While it is almost impossible to substitute the foreign funding overnight with Indian money, when will donor policy begin to change? When will foreign donors who give their NGO partners "Corpus Funds" and farms to encourage "sustainability" take the fist steps to help build a capability to raise funds in India? Who else can underwrite the cost of "brand-building" and risk involved in launching NGO "products"?

We may be sure that many of the incompetent or fraudulent NGOs will disappear in this market-led selection, and that could be the best thing that ever happened to the Indian NGO sector. Appealing to the Indian public for funding will also create an awareness among the Indian public about issues championed by NGOs and the results of their campaigns.

2. NGO BUDGET RESOURCING

Indian NGOs have three basic sources from which to find money for their work.

2.1 FUNDING

There are many International donors interested in the work done by NGOs in India. There are some Indian institutional donors, although access is not quite so easy as in the international system.

International donors may be NGOs or government (bilateral and multilateral) organisations.

In India too there are government agencies, although for various reasons NGOs are reluctant to work with them.

2.2 FUND GENERATION

Money from the rent of factors of production is classified in this category.

It would include income from land (agricultural and dairy farms seem to be a particular favourite with NGOs, especially those with a rural orientation) and assets like buildings and facilities.

Income from consultancy or training and workshop fees would also fall into this category.

Interest on funds deposited in banks or return on investment from business enterprises is yet another example of fund generation.

2.3 FUND RAISING

This is a distinct category, where the NGO appeals to the public and persuades individuals and groups to support it's cause. By far the most difficult of the three methods, it also raises many ideological problems, which could actually be surrogate counter-arguments to involvement with an unfamiliar and intimidating approach which calls for new skills and attitudes.

3. WITHDRAWAL

One of the anxiety creating words in the NGO lexicon is "Withdrawal", a concept actively promoted by donors. The essence of the concept is simple. How long does the NGO plan to work in a given location? If after 10 years, the NGO is still required to promote awareness in the area, has it achieved anything more than creating dependence? Has the NGO become a neo-Zamindar or benevolent power-centre, well entrenched into the local system, availing all the benefits that go with such a position?

The term "Role-Transformation", possibly introduced by the German donor agency, EZE, has removed some of the emotional content of the expression "Withdrawal", and raised some new issues.

We know that markets are imperfect and that it is this phenomenon, often referred to as "Market Failure" which provides the stimulus for Government interventions. But with the best intentions, in what is known as "Policy Failure" in Economics textbooks. Government programmes too fail. When market failure is compounded by policy failure, the only option available is Social Action. This then is the justification for social work, and by extension, the only justification for NGO work.

The exasperation of funders and Aid bureaucrats at stagnant programmes that become "bottomless pits" with no "results" in sight must be understood in the context of social campaigns aimed at specific social problems or issues which both the market and the government have failed to address.

Campaigns built around issues have a clear beginning, middle and end. A campaign built around a single issue cannot sustain itself and an organisation for ever.

If a campaign does not come to an end, it is obviously because it was too ambitious, given the available resources and power structures.

On the other hand, if an issue campaign comes to an end, should the organisation disband? Or move to new issues, using it's experience, networks and public credibility to fight better campaigns?

We wonder whether the word "Withdrawal" as used in NGO and International donor circles signifies the end of an issue campaign.

It would be a great waste if an organisation that was successful in fighting a campaign had to be abruptly closed down. This is why it is necessary to constantly examine the achievement levels of each issue and determine what new issues need to be identified for organising around.

3.1 SUSTAINABILITY

One of the magic words in the NGO lexicon today is "Sustainability". We find workshops on sustainability with business entrepreneurship being touted as the panacea for the crisis arising out of possible donor withdrawal.

There is a notion that sustainability of NGO projects depends on funding continuity. In many cases NGOs are dependent solely on foreign donor funding and no strategic plans have been prepared for the eventuality that such funding sources may dry up in the near future.

At a workshop held in 1995 by the AGA KHAN FOUNDATION, the following model was developed to illustrate the participants' understanding of sustainability.

This model clearly perpetuates the myth that sustainability of an NGO is based on availability of funding and other resources which are required for institution building. We firmly believe that it is such tunnel-vision which creates dependency on foreign funding, and actually prevents NGOs from taking the first steps to being self-sustaining.

3.2 SUSTAINABILITY OF WHAT?

An important question to ask is, "Sustainability of Who or What?" Are we talking of sustainability of project activities, communities and NGOs? Or are we talking of the sustainability of activities of NGOs and communities of NGOs?

Every NGO programme is an organisational response to an issue. The community is organised around an issue, and the campaign arising out of it. It is only in this context that the NGO derives it's raison d'etre.

The sustainability of the NGO depends, therefore on it's relevance, and not the size of it's funding or other resources. The chart below depicts the "The Product Life-Cycle Model", frequently used in Consumer Marketing.

The products may come and go, but the campaigns and the organisation go from strength to strength, as suggested by the upward sloping curve touching the stationary points of each life-cycle curve.

It is clear that many NGOs are working in areas where both markets and government policy have failed. The works of such NGOs need to be supported with public funds, whether they are from international donors, Indian government sources, or an as yet unlikely source - the Indian public or various "publics".

The time has come for the NGO community to consider going to the Indian public (or publics) to raise funding for their work. Fundraising, which involves "going to the market" for funds, calls for knowledge, skills, attitudes and resources which are not identical with those required for running a successful social project.

Fundraising has not only a financial objective, but also a communication objective. Talking to the various "publics" of an NGO is going to become a critical activity for NGO leaders in the years to come.

One of the clear implications of going to the public, rather than to one individual - the Field Director of a donor agency - is the accountability and possibly closer scrutiny, closer home, even by donors of relatively small amounts of money.

Collecting money from many Indians will also involve many Indians in the work of Indian NGOs, and have a significant impact on at least some segments of Indian society. At present, the economically successful middle class and upwardly mobile young men and women in India have no avenues for systematic giving and involvement in the serious moral issues facing our society.

4. NGOs and BUSINESS

We have already discussed very briefly the notion of "Fund Generation" where "business activities" generate income for NGOs through "rent" on factors of production, and the skilful combination of these factors in "income generation programmes".

Many Indian NGOs are asking their donors to give them a "Corpus Fund" from which the bank interest could pay the salaries of core staff and other overheads like rents and facilities.

Some NGOs offer consultancy services, particularly in the areas of Training and Project Evaluation, against fees.

Some NGOs are renting out buildings, tractors and other productive facilities and earning modest incomes. We know of an NGO which runs a STD Booth which earns Rs.2,000 per month for the project.

4.1 STRUCTURING FOR BUSINESS

While the Articles of Association of many NGOs forbid them from engaging in any commercial activity, the real difficulty is that NGOs are structured to do social work and not business. This structure and the ethos within which NGOs work create conflicts between social and business goals.

The very idea of dabbling in business speculation and risk-taking with an eye on profit making appears to be anathema to NGOs. Many simply do not have the skills to do any kind of business - that's why they are there in the NGO sector, anyway.

Business firms that wish to do social work, frequently set up a society or trust which are the accepted legal structures for doing social work or non-profit work.

This raises the question of whether or not NGOs should be looking at alternate structures for doing business and fundraising.

4.2 ALTERNATE STRUCTURE

If NGOs are to concentrate on what they can do best - social work, then Marketing and Fundraising become boundary management activities, which are of utmost importance, and yet should not demand too much time from NGO leaders, who very frequently may not have the best skills and attitudes for such work.

We have been discussing with NGO friends, the idea of a society which NGOs can join, and which will commission professional Market Research, Strategic Planning, Advertising and Marketing agencies for specific activities.

It is most important that this society will only direct professional activities as clients and not attempt to control such activities as managers. Apart from laying down ethical standards in alternate trading and ensuring that the implementing agency maintain highest standards of transparency, the NGO society should resist the temptation to interfere in professional decisions. The reasons should be quite obvious. It is not very difficult to imagine that an NGO managed enterprise can easily display all the ailments of a Public Sector Undertaking in which politicians interfere.

The promoters of INTERVENTION (INDIA) PVT. LTD. also set up a Society named INTERVENTION PROJECTS SOCIETY, which we are prepared to make available for such an experiment.

5. NGOs and FUNDRAISING

Many NGOs have begun their own fundraising programmes in India and there is general awareness that fundraising must become an integral part of an NGO's business activities.

It is recognised that fundraising is no easy task, and requires not only expertise, but some venture capital to establish as a going concern.

At INTERVENTION, we have developed a modest capability in event marketing, on a small scale. If it is to be done on a larger scale, additional investment would be required. Indeed, to be where we are, with a small fundraising department run at the lowest cost possible, we have incurred cash losses over a three year period. Even after this, we are not able to earn any surplus, as we are raising funds for NGOs, not for our activities!

Many NGOs would rather pay a fee to any professional organisation which will raise funds for them rather than manage the function in-house. On recent project visits and introductory workshops, we came across the following statements and implied attitudes:

"All this marketing and advertising activity is...business! We are doing social work. We don't know how to do business. If we knew, we'd be busy earning money. If you train NGOs to do business, they may abandon social work altogether!"

"We are not accustomed to all these urban business practices. We would much rather do some rural work like dairying or poultry keeping if we have to raise funds. We would much rather keep goats and multiply our money rather than appeal to the public for funds!"

"It is shameful to go and ask people for money for NGO projects. We might ask once or twice. How can we ask on a regular basis?"

"We have dealt with our `Northern Partners' for a long time. They understand our problems. We prefer to continue to work with them."

However, there are a handful of NGOs some of them very small, which have been able to see the writing on the wall. They have started raising modest amounts of money and involving the public in their work.

NGOs have the problem of attracting suitably trained and motivated staff for fundraising. Once selected, these staff have to be able to fit in with the ethos of the organisation and it's key staff. Part-time fundraising staff appears to be one of the solutions to this problem.

It is clear that as foreign funding becomes scarce, those NGOs with fundraising skills will not only survive the crisis, but emerge as strong organisations which can implement their agendas with no fear of government reprisal.

6. An Organisational Solution

We have been suggesting to some of our concerned NGO friends and donor friends that the way forward might be to encourage intermediary agencies to start work on Indian fundraising rather than ask NGOs to do their own fundraising. This approach recognises the specialisation of the fundraising activity and the likely internal conflicts and contradictions that can arise within an NGO.

However, we are against the idea of some skills developing outside NGO control, which can exercise a monopolistic control over NGOs. We are advocating the control of such fundraising organisations by NGOs, to the extent of demanding accountability and transparency at a Board level. We are sure even the most die-hard NGO will agree that NGO leaders who are good at doing social work should not meddle with routine marketing operations, which would be a repeat of our Indian Public Sector culture.

While it is possible for a specialist agency to do fundraising on a continuous basis, since the fundraising is for NGOs and not for the specialist agency, there is the problem of the initial investment which has to be risked. If this risk can be underwritten by donor agencies, they would be creating a fundraising capability in India when they withdraw. A resource that is far more useful than corpus funds and farms which can never sustain any serious work.

The risk could be underwritten by capital contributions from a handful of NGOs to a specialist agency, who will undertake to raise a specified amount of money within a specified period, taking into account the set-up and initial brand launch costs.

This risk capital or venture capital has to come from the NGO sector, not from the private sector, if efficient fundraising systems are to be developed over a period of time, as Western donors gradually withdraw from partnerships with Indian NGOs.