Funding and Resourcing is one of – if not- the single most important issue currently affecting Non-governmental Organisations (NGOs)/Civil Society Organisations (CSOs) in Nigeria. Writing proposals and meeting with potential grantors/donors are all very familiar activities for NGOs. The ability to raise funds and cultivate donor relationships is a “must have” skill for non-profits, yet still not well honed by many non-profit professionals.
Unfortunately, the fact that many CSOs in Nigeria are dependent on funding coming from foreign governments and institutional donors that support their cause has created a competition for funds among CSOs. This is compounded by the trend of foreign aid reduction to local CSOs.
In 2020, the UK alone announced a reduction in its annual aid budget from 0.7% to 0.5% with serious implications on projects and interventions by local CSOs in countries in the global south like Nigeria. Even within the UK, there are reports of charities standing to lose a third of their overall funds and very few organisations reporting that they could survive more than six months without additional funding.
While foreign aid reduction to local CSOs had been an ongoing trend, the COVID-19 pandemic hit the world hard forcing governments to re-prioritise and either cut or reduce foreign aid. Within the Nigerian CSO sector, many organisations now face severe financial constraints, forcing them to scale back on operations, dip into cash reserves and seek out alternative funding.
COVID restrictions on movement and travel also meant that organisations had to find creative means of implementing activities, and many times, at severely reduced costs. In the middle of all these, the need for organisations to impress and show impact became even more imperative to retain existing donor support.
Because of heavy reliance on timed donor grants, many organisations face the risk of eventual extinction. In this circumstance, a financial reset, thinking outside the box and deep conversations on financial sustainability is imperative.
Looking Ahead
Thelma Ekiyor, Photo Credit: Thelma Ekiyor
More than ever, it has become imperative for CSOs to share knowledge, learning and resources on how to weather the storm and sustain their interventions. It is often said that it is during challenging times that the greatest opportunity arises.
The question then is, what notable opportunities (if any) can result from aid reduction? How can CSOs build sustainability during periods of funding scarcity to maintain critical interventions? And should CSOs/NGOs start looking more towards utilising enterprise income? These are some of the questions that a workshop that PLAC organised in July 2021 on CSOs Resourcing and Funding sought to answer.
Coming with a strong background in civil society, development work, fundraising and impact investing, Thelma Ekiyor, a former Executive Director of the West Africa Civil Society Institute (WACSI), Pioneer CEO of TY Danjuma Foundation, and Founder of The Funding Space shared very valuable insights with participating CSOs on her experience working in the development sector and with fundraising.
Excerpts and highlights from her presentation at the workshop, which is a goldmine of information for NGOs considering alternative funding sources, are presented below.
“Non-Profit” Does not Mean “No Profit”
First off, Ekiyor challenged the thinking that the “non-profit” tag on NGOs translates to organisations not being able to make profit. Being a non-profit means that organisations should not keep or distribute the profits or income they make. In other words, a non-profit organisation can (and should) raise or generate income, as long as it is ploughed back into the organisation’s work. Oxfam was cited as an example of a non-profit that generates income. It reportedly made over 300 million pounds in 2020 in revenues alone, not donations, because they have created businesses around its mandate that helps it with sustainability.
However, it was noted that non-profit professionals have different skill sets and not everyone can run a business or enterprise. Fortunately, where the skill set for running a business is absent, it can be gained through acquiring further education on the subject. Alternatively, a non-profit can decide to focus on investing in entities instead of being directly involved in day to day running of an enterprise.
As a reminder, it was emphasised that income sought to be acquired by NGOs/CSOs must ensure sustainability and that grants are not the best for sustainability.
Understanding Some Basics
- Donors are only interested in how finances can help achieve a mandate and not because NGOs need to pay their bills or want to change the world.
- In articulating need for funding, it must facilitate achieving a mandate. An NGO’s mandate is critical; it should be simple, straight forward, and attention grabbing. It shouldn’t be longer than an elevator pitch.
- Donors are interested in “domino effect” – i.e., results spreading through multi-beneficiary channels. The causal link that is expected to create change must be clear.
- NGOs need to build themselves into strong institutions with well-defined internal administrative and accountable structures.
- Funding proposals are not reviewed to include applicants, they are reviewed to “exclude.” Therefore, language that resonates with the donor must be used if it’s expected to grab attention.
- Investment space, philanthropy and corporate sector are three different areas of focus for fundraising.
- It must be remembered that even the best NGOs can end up dying, where a sustainability plan has not been put in place. There are many good NGOs/CSOs that existed and did great work many years ago in Nigeria, but which are now moribund.
- It is important to monitor trends. For instance, it was recently announced that the G7 countries have committed 15 billion dollars to fund women’s entrepreneurship and girls’ education. NGOs should locate where such donor funds are going.
- Investing in the organisation’s brand is key as it can attract value. This includes the face of the organisation. Sometimes, the Founder is not the best person to represent the organisation or sell the organisation’s brand publicly. In such cases, a different spokesperson for the organisation should be sought.
- The two most important roles in an organisation when it comes to fund raising, is the accountant and fund-raising officer, in addition to the Executive Director. If an organisation cannot afford having a full-time fund-raising officer, such organisation should consider the option of out-sourcing.
Challenges with Fundraising
- Limited resources vs. High competition
- Donor fatigue
- Geographical bias
- Lack of technical fundraising skills
- Low visibility
- No fundraising plan
- Mismatch with donor priorities
- Power dynamics
Five categories of people who currently support Non-Profit Organisations and Social Entrepreneurs in Nigeria, and the type of support they offer
- Foundations (private, family, corporate) – Foundations usually provide support via grants and concessionary support. Concessionary support usually involves providing support to NGOs with flexible or reduced conditions e.g., giving funds or a loan repayable in 10 years at no interest. Corporate Foundations are gaining prominence in Nigeria. Examples include Access bank’s Aspire Coronation Trust (ACT) Foundation, Sterling Bank’s Sterling One Foundation, PIND by Chevron, Tony Elumelu Foundation.
- Private Sector – The Private Sector offers venture capitalist support, technical support and loans. Technical support could include provisions of free office accommodation for a period to NGOs, provisions of loans with interests below market/commercial bank rate. Venture capital also allows non-profits to start a venture/business/enterprise.
- Impact Investors – Impact Investors offer grants and investments as support. They invest in social entrepreneurs and other types of entrepreneurs that show social and environmental impact and offer financial returns e.g., giving grants to NGOs working on energy rights. Impact investing offers the prospect of enabling NGOs to plan ahead with a more diversified pool of resources. An example of an impact investor is the Tony Elumelu Foundation. This is a good blend for civil society because they can promote rights, achieve SDGs through products and services that yield social impact and financial returns.
(Further research here showed that, unlike donor grants, where NGOs or social enterprises use private investor capital, they need to pay investors returns e.g., interest on loans. There are a number of research material available on the various financing models that organisations can adopt to use private investor capital, depending on their circumstance.) - Development Finance Institutions – They are institutions that provide development project financing. Examples include the Bank of Industry, Development Bank of Nigeria etc. They give out high value grants and make investments. However, the project must show that it has the capacity to impact and reach multiple levels of beneficiaries. More social entrepreneurs are however, accessing this type of funds.
- Governments – Governments provide support via grants, concessionary lines of credit and investments.
Note: Grants and venture capital are the best options for CSOs/NGOs just starting out. But, years into the NGO business, depending solely on grants can affect sustainability, therefore it is important to begin to consider and create a mechanism for alternatives and diverse streams of income.
Opportunities for NGOs/CSOs
Corporate Social Responsibility (CSR)
CSR is gaining prominence in Nigeria. It is where a company or for-profit entity believes that an NGO’s work aligns with their company’s social responsibility, and therefore decides to support them financially. However, there are some important questions and considerations before procurement of funds via CSR.
- Is there an alignment to the corporate goals of the company?
- Do the organisation’s values match the company’s values? This is important because if an NGO gets into a business not connected with its values or mission, there is a strong tendency for mission drift.
- Approach companies with “clear eyes” – There should also be an understanding that businesses are not charities, and they care more about their bottom-line or interest. NGOs have to avoid seeing companies through rose-tinted glasses and understand companies are not necessarily activists or altruistic. Companies therefore must be approached with a business mindset.
- Who takes credit or attribution? This should be discussed upfront. Monies given to NGOs will show up in a company’s annual report and financial report as something they have accomplished.
- Is it a sponsorship or partnership? Is it one-off or long term? What legal agreement is in place?
One-off partnerships are less complicated. Long term partnerships entails that the NGO must be in consistent alignment with the company. This also means alignment with a company’s brand reputation which may be good or bad.
Cause Related Marketing or Commercial Co-ventures
NGOs/CSOs can have a business venture alongside their organisation. Commercial Co-ventures are a type of arrangement where a non-profit agrees with a business to receive a percentage of the sales of their product. In other words, the company supports the non-profit by donating a portion of the proceeds from sales by the company of its products or services.
A person or for-profit company that enters into such arrangement is known as the commercial co-venturer. This arrangement is common in the United States (US) where they are described as “any person or firm who for profit regularly conducts a charitable sales promotion or underwrites, arranges or sponsors a sale, performance or event of any kind which is advertised to benefit a charitable organisation.”
Commercial Co-venture also refers to when two charitable non-profits agree to sell something together and jointly benefit from the profits.
Cause marketing arrangements are based on the principle that consumers are motivated to make purchases if they believe that a percentage of sales will go to a “good cause.” Also, it benefits the company by improving their social consciousness/responsibility reputation with customers, boosting sales and wider publicity for their products and services. It is therefore a mutual benefit arrangement.
An example of a commercial co-venture arrangement is between Apple and (RED). (RED) is a division of the ONE global campaign. For 14 years, Apple has been selling red products such as iPhones, iPods, etc., and a portion of the proceeds from such red products are donated to (RED). According to Apple, their partnership with (RED) has led to almost $250 million in donations to fund HIV/AIDS treatment programs and this is being extended to COVID‑19 Response.
Another type of cause-marketing is licensing of a non-profit’s logo or brand. As an example, the American Heart Association endorses grocery store products and items that meet heart health standards by putting their logo on the product. By so doing, it steers consumers towards products the association certifies as being healthy and helps the association earn revenue from the license.
Commercial co-ventures/Cause marketing has been described as a “billion-dollar-a-year industry” and very powerful for generating profits. An NGO could have several commercial co-ventures, thus creating multiple streams of income.
Such arrangements can be considered if contracting with an American Company, however it should be noted that it is heavily regulated in the US and usually requires due diligence. There are no regulations for such arrangements in Nigeria and therefore presents an opportunity for exploration by local NGOs.
Every Nigerian NGO/CSO interested in sustainability should seriously look into designing such arrangement as it ensures consistent financial returns if well done.
Developing an Entrepreneurial Mindset
- CSOs need to have an entrepreneurial mindset (even something as basic as monetising technical/sectoral knowledge via provision of research services to corporations or businesses for a fee is entrepreneurial)
- CSOs should think of beneficiaries as clients and customers
- CSOs should view those who provide funding as investors
- CSOs should ensure to develop and have a fundraising plan for 3 years with an annual review
- CSOs should develop a branding and marketing plan
- CSOs should endeavor to identify their competition, find out what their competitors are doing, and try to improve upon it
- CSOs should benchmark an organisation and strive to be as good as such an organisation. Hence, CSOs must look globally for organisations they admire that is doing something similar to what they are doing as well and try to emulate those organisations.
- Finally, CSOs should ensure that their organisations are visible.
Concluding Tips for Fundraising
- Fundraising is both a science and an art – It is a social science because of how systematic it is. It is an art because of the ability of an organisation to tell a compelling story.
- Build skills around fundraising and marketing.
- Network outside of one’s comfort zone.
- Do not be afraid of changing strategies.
- Create a database highlighting the people or companies willing to pay for the value being offered by your NGO.
- Visualise your organisation 5, 10 or 20 years from now and map out how to get there.
- Take “No” as a starting point in fund raising. Always try again even when rejected.
- Do not be complacent with success. Seek for more resources as there would be an inevitable increase in the demand for funds in the running of the organisation.
- Lack of money kills passion – Passion alone is not sufficient for non-profit work; money is crucial to sustaining the passion and changing the world.
See Image Explaining Impact Investing (Financial Return) Spectrum for Investors
- Philanthropy: Grants that have an anticipation of generating social and/or environmental impact with no expectation of any return on capital
- Program-Related Investing (PRI): Investments made for the primary objective of achieving a social and/or environmental impact, with an expectation of a partial or full return of capital, and/or a limited return on the investment
- Impact First Investing: Investments that are willing to accept a lesser financial outcome – either taking greater risks or accepting lower returns- in order to achieve social and/or environmental impact
- Market-Rate Impact Investing: Investments that seek a full market-rate return, AND some measurable beneficial social and/or environmental impact
- Mainstream Investing: Investing with an expectation of a full market-rate return, but no beneficial impact
Cover Photo Credit: The Small Business Site