New Delhi, March 2 : A recent report by Kearney and Dasra, titled the India Nonprofit Report, has revealed that 72% of NGOs in India are struggling with a funding deficit, primarily due to short-term and inconsistent funding. The report further highlights that only 22% of NGOs maintained a corpus fund in the last fiscal year, leaving the vast majority vulnerable to financial instability.
The findings underscore a critical challenge for India’s nonprofit sector—the lack of predictable, long-term funding. Many NGOs rely on short-term project-based grants, which limits their ability to scale impact, sustain operations, or invest in crucial areas like infrastructure, technology, and talent development.
Key Challenges Hindering Financial Stability
The report, based on a survey of 400 NGOs, points to several systemic issues contributing to the funding crisis:
1. Short-Term Grant Cycles:
– A significant portion of nonprofit funding in India is allocated on a yearly or project-specific basis, creating uncertainty about continued support.
– NGOs often struggle to plan long-term interventions due to unpredictable cash flows.
2. Restricted vs. Unrestricted Funding:
– Most grants and donations are earmarked for specific projects, leaving NGOs with little flexibility to cover operational expenses such as salaries, administrative costs, or infrastructure development.
– Only a small percentage of donors provide unrestricted funding, which is crucial for sustainability.
3. Unequal Access to Large-Scale Funding:
– Larger NGOs tend to have better access to corporate and international donors, while small and mid-sized NGOs struggle to secure substantial funding.
– Many grassroots organizations lack the resources to develop fundraising strategies, putting them at a disadvantage.
4. Limited Focus on Building Corpus Funds:
– With only 22% of NGOs maintaining a corpus fund, most organizations are unable to build financial reserves that could help them sustain operations during periods of funding shortfalls.
– Without a steady corpus, NGOs must constantly seek new grants, making them financially fragile.
Impact on the Social Sector
The lack of stable funding has serious consequences for NGOs across various domains, including education, healthcare, livelihoods, environmental sustainability, and women’s empowerment. Many organizations are forced to:
– Reduce program reach due to uncertain financial support.
– Cut essential services like free education, healthcare, and skill development initiatives.
– Struggle to retain trained professionals, leading to frequent staff turnover.
Need for Sustainable Funding Strategies
To address this crisis, the report suggests key recommendations to ensure financial sustainability in India’s nonprofit sector:
1. Encouraging Multi-Year Funding Commitments:
– Donors and grant-making organizations should prioritize long-term funding agreements to enable NGOs to plan and execute sustainable programs.
2. Expanding Unrestricted Funding Support:
– More donors need to provide flexible funding that allows NGOs to cover core expenses, scale operations, and invest in infrastructure.
3. Building Stronger Corpus Funds:
– NGOs should work toward establishing endowment funds and persuading donors to contribute towards long-term financial stability.
4. Diversifying Fundraising Models:
– Organizations should explore social impact bonds, CSR partnerships, crowdfunding, and earned income models to reduce over-reliance on grant-based funding.
Despite these challenges, Indian NGOs continue to play a crucial role in addressing critical social issues and supporting marginalized communities. Ensuring their financial resilience is essential for India’s progress towards achieving its Sustainable Development Goals (SDGs).
The report’s findings highlight an urgent need for systemic changes in the funding ecosystem to create a stronger, more self-sufficient nonprofit sector.
(Courtesy: Kearney and Dasra India Nonprofit Report)
