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Northern-founded NGOs: the time has come to face existential funding challenges

Guest blog written by Barney Tallack, a long-time collaborator of Five Oaks Consulting and former Director of Strategy at Oxfam International with 29 years of experience in the INGO sector. The views expressed are Barney’s. He is an independent consultant and specialist in INGO strategy, transformation, and governance, with a focus on European-founded NGOs. This post is based on his recent paper ‘The Existential Funding Challenge for Northern NGOs’. Barney can be reached at barneytallack[at]gmail.com


How the pandemic may work out for NGOs is uncertain

It would be folly to attempt to forecast with certitude the impacts on Northern INGOs of the COVID-19 crisis. Their ability to achieve the mission will change for sure   – in both positive and negative ways. On the positive side, for example, we might see a shift in normative thinking by citizens, politicians and investment funds on the need to address climate change, inequality and other global issues because the pandemic has once again highlighted our global interdependencies. On the negative side, we could enter an even more isolationist, nativist way of thinking that exacerbates rather than addresses our global challenges.

But what is certain is that the pandemic further accentuates longer term downward financial trends

I would argue that northern-founded NGOs’ sustainability (and that of their national members for those who have those) had already been a problem for some years. By sustainability I mean both financially and in terms of relevance. The current pandemic-induced crisis merely accelerates this.

In studying the long term income trends of seven of the larger INGO families, several challenges are apparent:

  • INGO income grew at a steady rate between 2003-2009, followed by a more rapid growth until 2015/6, followed by a plateauing and then decline
  • The growth has come primarily from significant increases in institutional donor aid to the point where this is now more than half of their income for many
  • All the NGO ‘families’ of (con)federated NGOs are dependent for a significant amount of their income (as much as 2/3 at times) on the largest member of their federation/confederation. This means that a decline in that member’s income disproportionately affects all of them
  • There are five markets – for both public and institutional funding (US, UK, Canada, Germany, and Australia) which these INGO ‘families’ are dependent on. They are also competing for the second-tier markets (in terms of volume of income) – Scandinavian, Netherlands, Switzerland, and Italy.

Northern INGOs were already facing pre-existing headwinds — political and public attention to international development has declined since the 2005 ‘Make Poverty History’ moment. The rise of nativism and the political environment since then means that ruling political parties have less of a mandate or are not as interested in the issues. Only 5 donors now give 0.7% or more for development co-operation and humanitarian issues. The public fundraising markets have been saturated in these same countries and the “cost of acquisition” of new individual donors grinds down the returns on fundraising investments. Humanitarian crises have increased but are frequently slow onset, protracted, and are frequently seen as political issues, making it hard to get media and public awareness.  

The economic crisis caused by COVID-19, and the need to service hugely expanded government debt will put further pressure on development co-operation budgets – in the near and medium-term. The endowment funds of the major Foundations have taken varying degrees of hit. Recruiting new individual donors at a faster rate than the rate with which existing ones are ‘lapsing’ will get harder. Nativism and hostile media have driven trust in INGOs down over the last years and these trends do not seem to let up.

Growing new markets or new (global South) members requires major investment over very significant periods and hasn’t led yet to the kinds of growth in income that would significanty improve funding source diversity.    

Alongside this, leaders of many northern-founded NGOs have been wrestling with the “relevance” challenge – in a world where most countries are or were about to become middle-income countries, where Southern civil society is (rightfully) claiming its space from Northern INGOs and where the ability to get big advocacy led impact is dependent on local rootedness for legitimacy and accountability.

Consequently, Northern-founded NGOs may be able to weather the immediate storm – but the underlying fundamentals which were a challenge for their financial sustainability before the COVID-19 pandemic have accelerated.

Therefore, now is the time to say: nothing’s off the table

Now is the time for Boards and Executive Leadership teams to make the tough decisions that have been looming for the last five years (or more). Four areas to explore are:

  1. How do we ensure we are relevant, what is our unique niche and the best role we can play – in the wider movement – to achieve the shared social justice mission?
  2. Where do we focus, to deliver at scale and with quality in our niche – and where should we be more robust (should we cut our presence in countries, or drop (sub) themes? Let’s be honest with ourselves!
  3. Do we really need to grow global South members – what is our rationale and how does this fit with our response to the increasingly vocal call for localisation?  Should we at least, in parallel mode, consider mergers between smaller global North members for greater resilience and cost-effectiveness?
  4. Be realistic about financial growth.  Question whether equating financial growth with more impact is the right approach. Set flat or lower-income targets.

Global north-founded NGOs do have options

There are options for the future of northern INGOs and their respective members. Three might be:

a) to transform: through a more focused role, niche, programming approach, geography and consolidated members – based on a role and ‘theory of change’ that can be articulated to all stakeholders

b) to ‘die well’: transitioning expertise, power, connections and other assets to other global North or South-founded civil society organisations (merge, spin-off or close)

c) to ‘die badly’ – through financial collapse, without securing an appropriate legacy and handover of partners, resources, and programs.

The world needs Northern-founded NGOs, even if in a different role, niche, form or size

Just as the high street retailers who were most challenged by the move of consumers to online shopping were the first to collapse in the early days of the COVID-19 crisis – those members of INGO families with pre-existing challenges will need to address these soonest.

The good news is that some INGO families and/or some of their members had already begun to do this, for instance through a much tighter focus on theme, target group, expertise, or geography.

A world with global challenges needs a global civil society – working in solidarity and based on complementary strengths –  alongside other actors if we are to overcome the negative impacts of the pandemic, and deal with climate change, inequality, barriers to citizens exercising their human rights and the other global challenges of our time. Realism now about the existential funding issues gives global North-founded NGOs the chance to continue and to address those global challenges.

When we admire decentralized power in other NGOs but we struggle with it in our own

“Leaders often praise decentralization when commenting on the INGO world, yet perceive various challenges of implementing decentralization when it comes to their own organizations”. Does this point to a tension between what we say and think as NGOs?

My post, part of the Disrupt and Innovate blog of the International Civil Society Centre, is based on interesting research by Long Tran, whose data, in turn, is based on a Transnational NGO Initiative interview study. Long’s article triggered these provocative thoughts in me. What is your experience with these trade-offs between centralized and decentralized organizational structures? Do we talk honestly about these in the sector? And how would you answer my questions?