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:

"Yajna-dana-tapah-karma
na tyajyam karyam eva tat
yajno danam tapas caiva
pavanani manisinam"
 {TRANSLATION: "Acts of sacrifice, charity and penance are not to be given
up:
they must be performed. Indeed, sacrifice, charity and penance
purify even the great souls". - Bhagavad Gita [XVIII-5]}

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.