Types
of funding
Getting a good mix of different
types of funding from a range sources increases your financial sustainability.
NGOs
receive restricted and unrestricted income.
Restricted
funds
Restricted funds can only be
used for specific purposes that have been agreed with the donor. The
restrictions may be very tight (eg to pay for a new photocopier) or rather
general (eg to help fight HIV/AIDS).
Project-based funding from
external donors is nearly always restricted. It is useful because it provides
money for an NGO to pursue its objectives. But, it also brings problems,
including:
It may need a big investment in
writing proposals and developing relationships with donors - and in writing
reports.
It is unpredictable - you may
win a grant, or you may not.
It tends to be tied to donors'
priorities - not your NGOs' priorities.
It can create dependency. What
will you do when the grant ends?
It often comes with specific
conditions attached to how you spend it.
Specific project plans can make
it hard to adapt to changing local circumstances, or meet unforeseen costs.
Unrestricted
funds
Unrestricted funds can be used
for any purpose that helps your NGO achieve its mission. It is liberating
because it allows you the flexibility to pursue whatever objectives and
strategies you and your beneficiaries think are best. It also helps you plan
for the long term. Three sources of unrestricted funding are:
1. Self-financing. NGOs may be
able to generate income themselves, e.g. by charging membership fees, selling
services or renting out spare office space.
2. Local financing. NGOs may be
able to raise funds from the local community and local institutions, such as
businesses or specific professions. (This can also generate restricted funds or
gifts-in-kind, like office furniture.)
3. General donations. NGOs may
be given unrestricted donations. These may not always be reliable year after
year.
Every NGO has different opportunities
and constraints in winning unrestricted funding. It needs an entrepreneurial
approach, careful planning and commitment from senior managers. Generating your
own income can have a big impact on your NGO's culture and may also have legal
or political implications.
The more different sources of
funds you have, the more financially sustainable you are.
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