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COMMENT: CSO financial sustainability

Ensuring minimal or no disruptions in the transformational journeys of disadvantaged communities after cessation of funding needs rethinking

By Ayiga Patrick Obita

Sustainability is a major concern for many Not For Profit Organisations commonly called CSOs.  What would happen if a CSO had their funding source cut off? Would they be able to survive for more than six months? These questions are not new. Similar questions were asked at a Strategic Health Leadership workshop that two colleagues from our organization and I attended in 2007.

Back then, the professor leading the action planning session told us flatly that “If it cannot be quantified, then you need to get another issue”.

I realised then that the concept of CSO financial sustainability needed serious (re)thinking among development practitioners who continue to grapple with it.

Financial sustainability occurs in many forms but it boils down to the ability of a CSO to have funds for the continuation of the organisational operations with minimal or no disruptions at all in the transformational journeys of the disadvantaged communities after a cessation of a funding stream.

Usually, the rhetoric about ensuring financial sustainability is still pegged on improved effectiveness and efficiency of financial utilisation. It involves programming, engagements with different stakeholders and partners, branding and visibility, diverse funding sources, and more.

These are good practices but they do not ensure CSOs have the needed funds for the long term operations in case of funding cessation. They only show that the CSO is doing the expected in order to access external funding. They do not guarantee financial independence which is the only way CSOs can avoid dancing to the tune of donors.

Having worked in the CSO sector for over ten years, I have realised that interventions that have the most profound impacts involve the benefitting communities contributing their resources in terms of energy, time, and money.

Why is this? It is possibly because the contributing beneficiaries feel the pinch and so do not want the project fail.

In the same way, CSOs facing cuts in funding can reduce their scope of operations, lay off workers, or even shut down operations. Or they can feel the pinch, be more innovative, and ensure steady funds for their operations.

It is to deal with such a situation that I recommend some of these strategies. Their objective is to attempt to avert the severity of the impact of financial unsustainability for CSOs and include;

  1. Change from the traditional concept or proposal to include income generating activities. The mind-set of doing things the way others are doing to access funding is killing creativity and innovativeness.
  2. Learn from financially sustainable CSOs. These would provide answers to the questions about how to plan for financial sustainability. What to do and what not to do.
  3. CSOs should be active players in the value chain to earn a certain percentage from the proceeds of the final products. CSOs can take up the packaging and marketing of the products in the value chain processes to earn.
  4. The CSOs could set up processing plants or industries for the raw materials in their operational areas. This could put actual cash into the hands of the beneficiaries, which is the driver of economic and social transformation. To avoid redundancy, CSOs can take up the maintenance and operational costs to avoid wastage of donor resources, time, and energy.
  5. Set up a parallel organisational income generating or the business arm. The CSOs might need to advocate for waiver of some laws and policies regarding the general business operations like taxation because the profits are to be invested back to improve the welfare of the neediest people in the country.
  6. There are some grants by donors or foundations for income generating ventures to organised groups. With the parallel business arm, CSOs can then seek for these funding.
  7. CSOs need to be social entrepreneurs. They can create a unit like Grants Acquisition or Resources Development to come up with viable investments options that provide services at a lower rate to the communities and in return build their financial reserves.
  8. There is need for purposeful inclusion of a certain percentage for income generation when generating ideas for funding and the donors should be aware.
  9. CSOs have constructed buildings in the communities which are handed over to the local leadership at their phase out. These can be used to earn income instead if they continued managing them even after the exit.
  10. The CSOs have capacity in most of the processes e.g. Design, Monitoring and Evaluation, capacity building, Management, etcetera. These can be developed into a research and consultancy unit that brings in certain percentages of income to the organisation.
  11. Proceeds from sales of items like vehicles, computers, and others can be put in a fixed account or treasury bonds to earn interests.
  12. Change in disbursement of funds in bits from donors to lump sum. With this they could fix for six or more months part of the money to gain interest. Imagine a CSO with US$50 million a year was given that money at once. They would make some good amounts from say 17% interest from the amount if it was on a fixed account.
  13. Advocate for the governments to come up with a law that they sub grant monies to CSOs to implement their interventions. In the long run this provides them with a sound financial backup.

In conclusion, in this resource strapped economy, and with shifting donor priorities, there is need for a radical shift in not only the operations but the mind-set of all stakeholders in development. The shift should be from expecting hand-outs to business for transformation model. It would be rewriting the concept of financial sustainability. Financial sustainability of CSOs is their independence. Period.


Ayiga Patrick Obita is a Development & Management Consultant and Author / Writer with The Manager Resource Centre.


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