Helping NGOs do more with their money

Financial sustainability

 

Financial sustainability has become something of a buzzword in the NGO sector. 

With ‘donor fatigue’ in rich nations and increased confidence from developing countries, more and more people are talking about local NGOs standing on their own two feet, and becoming more financially sustainable.

But what does financial sustainability look like? Is it always a good thing for an NGO to strive for? And how might an NGO go about achieving it?

There is no agreed definition of what financial sustainability is, but it is about being able to be there for your beneficiaries in the long term. It is the opposite of having to cease your activities simply because you have run out of money. Here is one definition...

An organisation is financially sustainable if its core work will not collapse, even if external donor funding is withdrawn.

It is not automatically a good thing for all NGOs to be sustainable! Some NGOs are set up for specific purposes and close down afterwards, job done. Other NGOs exist simply to keep themselves in existence. For NGOs working in emergency relief, it is not realistic.

However, for most NGOs working in a development context, meeting the needs of its beneficiaries in the long term and in a sustainable manner is an important strategic objective.

Indicators of financial sustainability

Learning from organisations that have managed to achieve financial sustainability to some extent, the paths to success include:

Case study of an NGO's financial collapse - UK 2002

Financing strategy

A strategic plan sets out the organisation's strategic objectives for the next three to five years with an accompanying budget for how much it is likely to cost. A financing strategy sets out how the organisation plans to bring in the funds to cover those costs. The financing strategy is an integral part of deciding what opportunities and activities your NGO will pursue.

A financing strategy document could contain four sections, including:

  1. Where are we now?
  2. Where are we going?
  3. How are we going to get there?
  4. Key policies (eg ethical policy and cost recovery policy)?

These are covered in more detail in Developing a financing strategy.

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