Topic 3: What kind of funding do we really need?
When it comes to sustaining the operations and impact of non-governmental organisations (NGOs), securing the right type of funding is crucial. However, not all funding sources are created equal, and prioritising where to focus efforts can significantly impact an NGO’s effectiveness and sustainability. In this section, we will delve into the various categories of funding and assess their importance and suitability for different NGO contexts.
Look at the picture below to learn more about the various types of funding.
Government Grants:
Government grants often provide substantial funding for NGOs, but they can come with strict regulations and reporting requirements. While they can be essential for funding large-scale projects or programs, reliance solely on government grants may restrict flexibility and autonomy.
Service Contracts:
Service contracts represent agreements with governmental or private entities to deliver specific services in exchange for funding. They offer a steady income stream but may limit the scope of the NGOs work to predefined activities.
Business/IGA (Income Generating Activities):
Engaging in income-generating activities provides NGOs with a degree of financial independence. However, balancing these activities with the organisation’s mission and ensuring ethical practices are crucial considerations.
Fundraising Campaigns:
Fundraising campaigns, including events, appeals, and crowdfunding efforts, can mobilise community support and raise awareness about the NGO’s cause. They are essential for generating discretionary funds and building a diverse donor base.
Membership Scheme:
Establishing a membership scheme fosters a sense of community ownership and engagement while providing a stable source of income. However, sustaining member interest and involvement requires ongoing effort.
Foundation Grants:
Foundation grants offer financial support for various projects and initiatives aligned with the donor’s priorities. While they can be significant contributors to an NGO’s budget, competition for these grants can be fierce, requiring strategic alignment and compelling proposals.
Investors funding:
Investors can also be providers of funding when the programmes of NGOs are concerned. In contrast to grant application, the process of acquiring investment funding functions more like a private sector venture. Instead of a concept note or proposal, the organisation would be asked to put together an investment pitch. MzN will soon start a specific course on building investable social businesses and investor’s pitches.
Grid analysis
Have a look at the image below, in this grid, we’ll assess various funding sources, from government grants to fundraising campaigns, using smiley faces to indicate their suitability across different criteria such as flexibility, effort required, and long-term viability.
- Flexibility of fund usage: Government grants and service contracts may come with restrictions on fund usage, while fundraising campaigns and business/IGA offer more flexibility.
- Cost-recovery & profitability: Business/IGA activities are primarily focused on generating revenue, whereas government grants and foundation grants may cover costs but might not result in profitability.
- Level of effort – Securing funding: Government grants and foundation grants often require extensive proposal writing and compliance efforts compared to fundraising campaigns and membership schemes.
- Level of effort – Managing funding: Service contracts and business/IGA activities require ongoing management and accountability, while fundraising campaigns and membership schemes demand continuous engagement with donors and members.
- Longevity & Sustainability: Diversifying funding sources, such as through fundraising campaigns and membership schemes, enhances longevity and sustainability compared to reliance on a single funding stream.
- Recurring & Repeatability: Membership schemes and fundraising campaigns can generate recurring income streams if managed effectively, providing stability and predictability for the NGO.
Understanding the nuances of different funding sources is essential for NGOs to navigate the complex landscape of financial sustainability. By assessing the suitability of various funding streams based on flexibility, effort required, and long-term viability, NGOs can develop robust funding strategies to support their mission and objectives effectively.
Activity
The smiley faces in the example above are suggestions and might not actually fit your organisation. Why not consider what funding you actually need and create your own “smiley wall”. This will later serve you as a foundation for your funding strategy development.
Use the template below to create your funding wall. Select the “smiley” face that applies to your funding strategy, and delete the faces that do not apply to each criteria.