Financial Sustainability in Responsible Transitions

Issue Paper

January 1, 2020
Organizations Involved: CDA Collaborative Learning Projects, Peace Direct & Search for Common Ground
Author: David Yamron, Search for Common Ground

Based on the case studies, as well as consultations with donor, INGO, and CSO staff, the Stopping As Success project team identified the topic of financial sustainability as critical to responsible INGO aid transitions.

The term ‘local’ has different connotations in different contexts and is a contested term. In the context of SAS’s research, ‘local organization’ is used to refer to CSOs or NGOs in the global South that are undergoing a process of transition in their partnership with an INGO. This encompasses organizations that work at the local and national level. The broader term ‘local actors’ recognizes the diversity of this group, which can include individuals, communities, newly created NGOs or CSOs, NGOs that have devolved from an international federation, or local and national governments.

Financial sustainability in this context refers to the ability of local organizations to remain operational after a transition of ownership and responsibility for governance from an INGO to local leadership. Twenty case studies, an online consultation, two regional workshops and dozens of formal and informal discussions with leaders and employees of local NGOs and CSOs have made clear that this topic is critical to any conversation about successful transitions and true locally led development. INGOs have access to a wide variety of funding mechanisms, whether through grants, subscriptions, private donations, or government contracts. After transition, however, designing a funding model and raising money as a new local entity can be difficult.

Financial management, donor compliance, hiring business development staff, establishing a track record, making connections, and winning grants all pose significant challenges. Many organizations also feel pressure to follow the “INGO model” of winning grants from international donors, which means competing with large Northern NGOs and other local organizations with established processes and relationships. Our research suggests that decisions made before, during, and after a transition can have wide-ranging effects on a new organization’s ability to meet these challenges.

This issue paper will begin with an examination of the role of the external aid context in shaping the financial sustainability ecosystem.

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