Global Policy Forum

Foreign Funding Critical for NGO Survival

Nottingham University’s Centre for Research in Economic Development and International Trade released a study looking at  the impact of foreign funding on NGOs, specifically why some NGOs survive, why NGOs attract foreign donors, and how many NGOs funded by foreign donors legitimately provide aid and how many are set up as “shell companies. ” The study examined NGOs in Uganda, where the numbers rose from 3,500 to 7,000 between 2002 to 2008. The study found that whether or not an NGO received foreign funding or grants was the biggest factor for its survival, rather than the effectiveness. 

October 18, 2011

In 2002, when British and South African researchers first started to study the voluntary sector in Uganda, there were about 3,500 NGOs registered in the country. Six years later, in 2008, there were 7,000 - a similar proliferation seen all over East Africa.

Trudy Owens from Nottingham University and Ronelle Burger, from the University of Stellenbosch, set out to investigate whether foreign funding was the main reason some NGOs collapsed while others survived, why some attracted foreign donors; and how many were legitimate. Their findings were recently released by Nottingham University's Centre for Research in Economic Development and International Trade.

They chose 300 groups at random from the 3,500 then listed, ranging from small rural development organizations and conservation charities to national branches of Oxfam and Save the Children; about 20 percent had some kind of religious affiliation.

Owens told IRIN they found their suspicions about "shell" NGOs were all too justified when they did their initial trawl. "Very few of them actually existed," she said. "Many were set up just to attract the money."

Eventually, though, they came up with a list of 300 genuine NGOs, with various funding sources. Outside grants came from the UN and the World Bank, from bilateral aid - especially from the US, the UK and the Netherlands - and from international NGOs. They also received local donations and membership fees.

Six years later Owens and Burger went back to Uganda to see which groups had survived. Owens remembers meeting the director of one NGO in a café. "It had no office, it had run out of money, but it was still registered as a charity, she had no other employment and against all the evidence she insisted that it was still operating," she said.

There had been some casualties, but even among the poorest 20 percent of NGOs, more than 70 percent were still in existence, as were 68 percent of the NGOs that received no foreign funding. "They survive on goodwill. Very few Ugandans are rich, but they do give donations," Owens added.

Even so, whether or not an NGO received foreign funding was the biggest single factor in its survival. How long it had been established made a small difference, as did the experience of its leadership, but how effectively it performed made no significant difference at all.

Funding criteria

The organizations given grants tended to be larger, to have full-time, better-educated staff and to be affiliated with either an international NGO or a local umbrella group. They also were generally the same groups that had received grants in previous years; once a donor established a relationship it tended to continue.

But what Burger and Owens did not find was any correlation between whether an NGO got a grant and what it did, how it performed, or how much its work was valued by the beneficiaries.

Shortly after it was officially launched in 2001, Conflict Resolution by Youth (CRY) Uganda basically had to close its doors. Funding to support its trainings and programmes to teach youth to channel conflict into debate rather than violence had dried up.

"Some of the systems that donors use cannot let you go into a longer-term programme with them," Keith Mutebi, CRY's administration and finance officer, told IRIN/PlusNews. "Even if the donor appreciates... even if you've done a good job, you're not sure if you'll be taken on board, because competition [for funding] is so high."

According to Mutebi, the organization was able to access short-term grants for specific programmes, but it was not able to negotiate the kind of support that would allow it to operate consistently. By 2004 the team had cobbled together enough money to re-launch with a secretariat and it has been active ever since, holding peace camps and training young Ugandans in debate.

"We spend, right now, more time fundraising than implementing," said Joseph Agula, CRY's programme coordinator. "That means now, on the frontlines where people actually have needs... they have to wait and then we come back and deliver. When the money comes again, you can start."

In the case of the Advocates Coalition for Development and Environment (ACODE) - a 22-person NGO with an annual budget of around US$694,000 - a founder was able to leverage a previous position in a civil society organization to get a small grant from USAID. Over time the group built on it but it was a slow process, often using founders’ funds.

Building a successful NGO in Uganda requires consistently good work, strong partnerships and patience, according to Arthur Bainomugisha, one of the founders and head of its peace and democracy programme.

"If you are just new, the donors may not be aware of your competencies," he told IRIN. "If you are an old organization with an established record, certainly you get funding more than others.

"It takes a lot of time. First you are donor-dependent and you're writing proposals and they have to be competitive," he added. "For us, we've reached a level where most times we're solicited by the donors themselves. They know our competence. Our record is there."

While he recognized it can be a gamble for donors to fund new organizations, Bainomugisha noted that it was "important sometimes to take a risk and fund new initiatives, even when they have not had any record".


Owens noted that another major issue was accountability. At one point they offered focus groups imaginary money in the form of a pot of beans and asked how much they would pay to keep the services of an NGO. In one group, the villagers kept all the beans for themselves. "That woman's a crook," they said of the local NGO director, "We wouldn't give her a penny."

For Owens, this was the most worrying finding. "Around 10 percent of OECD [Organization for Economic Coordination and Development] aid now goes through charities. They do it because of fears that governments are corrupt but they are not looking at the accountability of the alternative."


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