How can we support local CSOs to be financially sustainable?

Financial sustainability is crucial for local civil society organisations (CSOs) if they are to become resilient, effective organisations.

An overreliance on international funding makes local CSOs vulnerable to changing aid priorities and donor withdrawal. Without this security, local organisations can’t plan for the long-term and have less ownership of the development process.

Local CSOs face a range of external and internal issues which challenge their financial sustainability. But the way donors and international NGOs (INGOs) approach partnerships can also have unintended impacts on local organisations’ financial sustainability.

INGOs and donors have a key role to play in facilitating local CSOs to be more sustainable. Unfortunately, support is often limited to capacity building, rather than addressing structural changes or partnership approaches.

There are large gaps in understanding the importance of local CSO financial sustainability at a systemic level and local CSOs continue to struggle to resource their work. This creates a greater power imbalance between INGOs and local CSOs.

At Peace Direct, we’ve been involved in a three-year USAID-funded research and testing initiative looking at how local CSOs can achieve long-term financial sustainability and lead their own development agenda. Alongside our partners Linc and the Foundation Center we’ve been working to better understand how different factors reinforce one another and support the financial sustainability of local organisations. And yes, capacity building does feature, but not in isolation.

Here are three findings from our research:

1. Social capital is powerful

Social capital, which includes areas such as high credibility with the local community, volunteer support and community participation, is often overlooked. Yet it is the strongest driver of financial sustainability, particularly in challenging environments.

A good example of an organisation benefitting from strong social capital is Jeunesse a l’oeuvre de la charite et du development (JOCHADEV) in the Democratic Republic of the Congo (DRC). Since 2005, JOCHADEV has operated with little to no external funding. Despite this, the organisation has extensive social capital in the form of local volunteers and community contributions which has allowed it to remain flexible in the face of financial shocks.

2. Unrestricted funding should be capitalised

On their own, small amounts of unrestricted funding might not amount to much but pooled together these small amount help empower CSOs. Unrestricted finance might come from membership fees, contributions from community members or social enterprises. It allows organisations to put structures in place that further improve their financial position or undertake activities that increase impact and generates greater social capital – without being tied donors or INGOs.

For example, FIDA Uganda has used contributions from members and friends to provide rapid response services to women with dire legal needs that fall outside of the scope of grants from institutional donors. This has helped build FIDA’s local reputation and has allowed them to generate further revenue from their community.

3. Land and people are as valuable as money

Resources are about more than money. Contributions like land, housing or volunteer time can support sustainability just as much as financial power.

We found that local CSOs maximising the use of land is particularly prevalent in Uganda and has advantages such as saving on rent or providing opportunity for organisations to generate further revenue through sub-leases, for example.

So what can INGOs and donors do?

Here are three ways INGOs and donors can help empower local CSOs:

1. INGOs and donors should provide general support grants to cover core costs, in combination with long-term support grants. This gives local CSOs the flexibility to be innovative and responsive to local needs which in turn builds social capital and generates further support.
2. INGOs and donors need to reconceptualise their partnership approaches and stop viewing local organisations simply as implementing partners for INGO-led programmes. Rather local CSOs should be viewed as co-creators, recognising that they have the crucial knowledge, relationships and capacity to deliver successful development and peacebuilding efforts.
3. This relates to one final shift, and it’s a more difficult one: INGOs and donors need to challenge their own negative perceptions about local organisations’ capacity and motivations, which ultimately inhibit efforts to shift the power.

“Facilitating Financial Sustainability” is a three-year USAID-funded research and testing initiative looking at how local civil society organisations (CSOs) can achieve long-term financial sustainability. The research consortium is led by LINC, in partnership with Peace Direct and the Foundation Center.