NGOs Pare Down in Face of Financial Crisis

Some of the biggest development and humanitarian NGOs are laying off staff or revising programmes for 2009 as their income streams flatten because of the global financial crisis. Fundraising experts of three of the world's top NGOs - Oxfam GB, Save the Children UK and World Vision USA - said programme growth will slow in 2009 as a result of the squeeze. "The growth we had assumed when putting plans together a year ago is not materialising," John Shaw, director of finance and information systems at Oxfam GB, told IRIN. "The overall picture is essentially flat." Oxfam had envisaged five to six percent growth over 2009-10, but has now revised this to zero. Some of the biggest reductions are coming from corporate donors in the financial sector, NGO staff told IRIN. "The fall-off with corporate started six to nine months ago," said Tanya Steele, supporter relations and fundraising director for Save the Children in London. "The financial services and investment banking sector have been very generous in the past but we know it will be a tough financial year for them going into 2009. We'd expect [funding from them] to be flat or potentially decline going into 2009." "Growth from corporations won't be as much so we won't be scaling up our programmes as we'd want to do," Robert Zachritz, World Vision's director of advocacy and government relations, told IRIN from Washington, DC. As a result, NGOs such as Save the Children will not be able to make substantial investments in existing or new programmes as they had hoped. The three agencies have an annual income of US$3.1 billion.

Impact

Aid groups are doing all they can to prevent the cuts from affecting beneficiaries. "We are trying to cut back on support, rather than programme costs," Oxfam's Shaw said, estimating cutbacks of 10 to 15 percent of 'variable costs' including staff at headquarters and regional centres to create more cost-effective operations. While all agreed new money could be found should a crisis break out in upcoming months, Save the Chilidren's Steele worries some of the more neglected, chronic crises, such as in southern Sudan, may suffer. World Vision fears that recipients of micro-credit programmes, such as poor farmers who receive loans to buy tools, seeds and fertilisers, could be particularly hard hit. "Much of this relies on getting loans from banks, which is going to be a real challenge in the near future," Zachritz pointed out. "Losing this credit is a huge problem for the world's poor, small-scale farmers." World Vision is the world's biggest international humanitarian non-profit, with US$2.4 billion in annual funds, 30 percent of which comes from the US government, 30 percent from foundations, and 40 percent from individual supporters and corporations.

NGO strategies

NGOs are trying to innovate their way out of the financial squeeze. Some agencies, such as Oxfam, aim to increase funding from institutional donors which they see as being steadier in the long term. Save the Children is trying to carve out more funds from wealthy individuals. "It will be a competitive market but I cannot believe we won't grow in the next four to six years," said Steele. While corporate funding is dropping off, lay-offs provide an opportunity for redundant staff from the corporate sector to volunteer for non-profits, putting their skills to good use, said Steele. "While corporate money is diminishing, that does not mean the relationship with these companies has to come to an end." And Steele hopes that drops in television advertising costs - one effect of the world credit crunch - will mean agencies such as Save the Children can now better afford to run direct marketing campaigns on television. But on the whole, many humanitarian and development NGOs are revising down their fundraising plans. Aid agencies are less likely to be knocked down if they plan ahead, said Oxfam's Shaw. "We have been revising our plans over the past six months. If we have to take knee-jerk decisions these won't be as effective as they will be if we plan for the future."

Silver lining

There are some encouraging signs amid the uncertainty. Major institutional donors such as the UK Department for International Development or the US Agency for International Development "are taking a long-term view and we are not seeing any immediate signals that they are pulling back," Steele affirmed. US government funding is going to stay at the same level as 2008 according to World Vision's Zachritz, partly because the funding cycle runs from October 2008 to the end of September 2009, and it being an election year, Congress has passed a continuing resolution keeping US government funding steady. But it is too early to say if this strategy will endure, according to Shaw. "At the end of the day government funding is down to governments balancing their books and politics come into it, so it is too early to tell, but the commitments made so far are encouraging." Zachritz said World Vision is largely protected from corporate cuts because the bulk of the NGO's corporate donations are 'gifts-in-kind', in other words, medicine, building supplies and clothing, rather than money. Further, World Vision relies on child sponsorship for much of their individual giving. "People are very loyal to that and you usually don't see it drop, even when families experience [financial] difficulties," he pointed out. It is this loyalty that will keep them going, NGO staff told IRIN. "The public is still very responsive to international [humanitarian] needs," Shaw said. But while the NGO financial experts have not yet seen substantial reductions in individual giving, they anticipate potential dips as they approach the holiday fundraising season. "Our Christmas catalogues have already gone out, this holiday will be a real litmus test in terms of tightening belts," said Steele.

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The return of the ‘real’ economy

The opposite of real is fake and, after this tumultuous year, fake is how many now see the counterpart of the “real” economy, finance. Finance, however, for all the abuses and excesses, is not inferior to “real companies that make things”. A successful economy needs both.

Subprime mortgages, monoline insurers, collateralised debt obligations, the collapse of Lehman Brothers, bail-outs for everyone from AIG to the Royal Bank of Scotland and one Bernard Madoff all tell us that financial regulation has not been working. Indeed finance is riddled, as it always has been, with gamblers using other people’s money, chancers taking risks but calling it genius, and worthy people following the crowd into collective insanity. Everyone is paying the price and regulation must be rethought.

There is a more extreme view, though, which points to the growth in finance as a share of output in rich countries and says the overmighty financial sector must become smaller, both to tame its capacity for disaster and to free resources and talent for more “productive” and “real” activities. This view is wrong.

It is mistaken in seeing finance as unproductive: it may not be tangible but its economic effects are. Financiers decide which investment projects best balance risk and reward and channel money to them: they offer ways to share intolerable risks, such as the house burning down; they allow the young to buy houses by borrowing from the old; and they make possible the exchange of goods without exchanging physical currency. If finance did not exist we would have to invent it – or find some communistic central planners to do the job instead.

Nor is financial innovation mistaken in principle. The logic of turning mortgages into bonds to disperse risks and make them tradable was reasonable; the fault was in using securitisation as a way to dodge bank capital requirements, multiply fees and dump bad loans on to others. Derivatives can be used to manage as well as to take risk. Self-certified or subprime mortgages, if extended to people with the capacity to repay after proper due diligence, should be a blessing.
It is not that finance is more prone to mania, fraud and collective error. Executives and visionaries drove the internet bubble just as much as venture capitalists; the Enron and WorldCom frauds hit (supposedly) real economy companies; US car companies have all invested in the same varieties of unpopular product. The difference is that the consequences when a financial institution goes wrong are so great. When WorldCom went under the world shrugged its shoulders; when Lehman Brothers failed the world fell to its knees. The danger of finance means it must be regulated, and regulated better – but it should not be proscribed.

Another approach is to ask whether having a large real sector makes an economy more resilient. Japan and Germany are both manufacturing powerhouses, yet they seem just as susceptible to this downturn, partly because they relied on finance-driven consumption abroad to provide demand for their exports. Developing countries, where the financial sector tends to be smaller, are suffering. Commodity exporters – how real is that? – may be in the worst position of all.
Some countries, such as Britain, which has hitched its prosperity most completely to the wealth generated by the City of London, may wish that their economies were more “real” in 2009. The idea that Britain’s economy can rely solely on finance – exporting banks and importing goods – is surely dead.

Finance and production are not alternatives but complements. The real economy relies on finance both for capital to invest and for consumers able to save, borrow and so shift their consumption in time. Finance regulators must act to address the clear and specific failures revealed this year. But that, not reining in finance for the sake of the “real”, should be their goal.

Copyright The Financial Times Limited 2008

Merry Christmas and Happy New Year!

There's More to Christmas...There's more, much more to Christmas
Than candle-light and cheer; It's the spirit of sweet friendship
That brightens all the year; It's thoughtfulness and kindness, It's hope reborn again,
For peace, for understanding and for goodwill to men!

Candlelit Heart

Somewhere across the winter world tonight
You will be hearing chimes that fill the air;
Christmas extends its all-enfolding light
Across the distance...something we can share.

You will be singing, just the same as I,
These familiar songs we know so well,
And you will see these same stars in your sky
And wish upon that brightest one that fell.

I shall remember you and trim my tree,
One shining star upon the topmost bough;
I will hang wreaths of faith that all may see
Tonight I glimpse beyond the hear and now.

And all the time that we must be apart
I keep a candle in my heart.

Christmas Joys

Evergreen boughs that fill our homes
With fragrant Christmas scents,
Hearts filled with the loving glow
That Christmas represents;
Christmas cookies, turkeys stuffed,
Festive holly berry,
Little faces bright with joy,
Loved ones being merry;
Parties, songs, beribboned gifts,
Silver bells that tinkle,
Christmas trees and ornaments,
Colorful lights that twinkle;
Relatives waiting with open arms
To smile and hug and kiss us;
These are some of the special joys
That come along with Christmas.

Together we'll make it

Merry Christmas and Happy New Year!
Peace, Health and Love for all.

Making NGO's More Effective and Responsive in a Globalized World

By Ben Ofosu-Appiah

Registered Non Governmental Organizations (NGOs), variously known as ‘Private Voluntary Organizations’, ‘Citizens Associations’, ‘Civil Society Organizations’, but also increasingly called “NPOs”, an acronym that stands for “Non Profit Organizations” are on the rise world wide. This is re-shaping politics and economics both at domestic and global levels, a phenomenon almost equal to the rise of the nation-state at the end of the nineteenth century. Today, NGOs address every conceivable issue and they operate in virtually every part of the globe.

NGOs create public goods needed by citizens that are not ordinarily found in the profit oriented market place. It is commonly accepted fact that NGOs form a distinct third sector separate from business and governments. This sector provides essential social services and the profit in this case is primarily social progress. One of the biggest successes of the last decade was the campaign to outlaw landmines where hundreds of NGOs in concert with the Canadian government pushed through a ban in a year. NGO activities are not confined to governments agenda alone. For example, NIKE has been targeted for poor labour conditions in its overseas factories. In short, NGOs are increasingly playing a vital role as lobbyists and activists at the corporate, national and international levels and their criticisms sometimes lead to reassessment of policies.

NGOs play roles that go far beyond political activism. Many are important deliverers of services especially in the developing countries. Some of the biggest NGO’s such as CARE or Medecins San Frontieres are primarily humanitarian aid providers. As the initial optimism at the end of the cold war and the prospect of a “peace dividend” faded with the flaring up of ethno nationalist conflicts across Europe, Asia, and Africa, unleashing humanitarian catastrophe in an unequal proportions, the role and importance of humanitarian aid and relief providing NGOs became even more critical. In 1995, it was estimated that around 14 million people were refugees and some 23 million people were internally displaced. This provided fertile grounds for the rise of NGO activities in this area. In most cases, NGOs responded more effectively to these crises as the international organizations and states grapple with the issue of humanitarian intervention. Their operations have helped changed lives during and after conflicts. It has been argued that to make NGOs even more effective, they should think beyond relief and conceptualize their interventions along a relief-development continuum so that relief activities contribute to development programs as peace returns. The second strategic option involves providing a mix of relief and development activities that provide for immediate basic needs while creating the physical, human or social capital that will raise the likelihood of economic and social development in the future.

NGOs are partners in development or should be, especially those operating in developing countries. Many are engaged in development projects, providing technical assistance to help improve the lives of the rural poor. Through the increasing participation of NGOs in the design, consultation, operation and evaluation of projects, they are acting as agents to empower people at lower levels of society to improve their own lives thus reducing poverty. NGOs tend to be more sensitive to the needs and aspirations of the poor communities, minorities, and women thus commanding more legitimacy in their eyes than most governments. It is expected that NGOs with proper coordination to avoid dysfunctional competition will assume many of the conventional mandates that are usually undertaken by governments and specialized UN agencies. A case in point is the fact that in an era of decreasing foreign aid, the amount of aid being channeled through NGOs operating in developing countries is going up. According to the World Bank, today NGOs in Africa manage nearly $3.5 billion in external aid compared to under $1 billion in 1990. It is against this background that I see recent reports of corruption within some NGO’s in Ghana as very troubling development. It is highly unfortunate that some people see NGO’s as a business albeit making illegal money for themselves through fraudulent means. Some people use non existing NGO names to solicit money abroad and then divert them for their selfish gains. There has been a number of reports of such nature in the newspapers and on the internet lately that raise serious questions on the credibility of some of these NGO’s operating in Ghana today. This is tarnishing the image of the country both at home and abroad and needless to say, NGO’s must be made to keep proper accounting of all monies received and disbursed and have such accounts audited periodically and made public.

In spite of the few bad nuts in the NGO’s in Ghana, some are doing a real good job. Every single day, they are helping to put tools in people’s hands, hope in their hearts, and bringing back the smiles on their faces. Some of the greatest strengths of NGOs over governments lie in advocacy and participatory models of development that focus on human development. They are very effective in demonstrating that poverty, no matter how endemic can be tackled by involving project beneficiaries in planning, implementation and sustainability of the projects. According to a 1997 United Nations Industrial Development Organization (UNIDO) working paper, the strength of NGOs lies in their “proximity to their members or clients, the flexibility and the high degree of people’s involvement and participation in their activities, which leads to strong commitments, appropriateness of solutions and high acceptance of decisions implemented. For example in Africa, many donors view NGOs as an important part of Africa’s democratization process, acting as watchdogs and advocates for human rights and good governance. NGOs often tackle issues that governments are unable or unwilling to take up. They provide efficient, innovative and cost effective approaches to difficult social and economic problems. In some cases, they provide leadership and inputs in producing and advocating public policy, and operate in spheres where government officials are constrained by bureaucratic or political considerations.

It is one of the greatest paradoxes of our time that globalization has been associated with increased intra-state tensions, and has exacerbated a host of worries; over the environment, labour rights, human rights, consumer rights, and so on. NGOs have and do play an important role in highlighting and addressing these concerns. Through the power of the internet, NGOs provide network services, by building coalitions through a network of contacts domestically and internationally providing information on important issues to concerned interest groups and individuals. Through these networks and coalition building they can organize to demonstrate against or even derail the gathering of any organization whose operations they feel detrimental to the environment, labour rights, poverty reduction etc. as happened in Seattle during the 1999 WTO meeting.

NGOs are confronting globalization not only by demonstrations at the international level but also at the grassroots level, where NGO’s are already developing a number of strategies to help poor people address the realities of their position in global markets and play a creative role in re-shaping economic forces. First, by improving the endowments of the poor so that they can compete more effectively and achieve a basic level of security, voice and equality of rights, without which economic alternatives are hard to come. This continues the traditional role of NGOs in developing skills, building capacities and institutions, and increasing access to credit facilities and economic opportunities but also underpinned by a more systematic attempt to link different levels and sectors of the economy. Secondly, NGOs can turn market forces to the advantage of the poorer groups by reducing the benefits normally siphoned off by intermediaries. An example is an attempt by NGOs in South Africa to work with community associations to help them negotiate better contracts with commercial hunting and tourism concerns thus eliminating middlemen who would take huge consulting fees from the process of contract negotiations. All over the world, NGOs are acting as agents of change and empowering many of the disadvantaged to improve their lives.

In the field of international relations, scholars now speak of NGOs as non state actors (a category that can also include transnational corporations). This term suggests NGOs emerging influence in the international policy arena where previously only states played a significant role. The former United Nations Secretary General Mr. Kofi Annan, has called them “the conscience of humanity” and technical NGOs have been consulted on relevant issues by the World Bank and other UN agencies before policies are implemented and treaties drafted. It is certain that their role will grow as global governance becomes more pluralistic and less confined to state based systems.They will continue to be a beacon illuminating the way forward as the World rises to confront new challenges.

About the Author: Ben Ofosu-Appiah is a senior political and social analyst based in Tokyo, Japan. He is also a public policy expert and policy strategist who has written extensively on Third World issues.

The funding problem for NGOs

The work of NGOs in developing countries is vital to millions of people. However, fund-raising for these organizations is particularly difficult, for numerous reasons:

• There is often great competition among numerous local groups for scarce local financial resources.
• International funders are reluctant to fund community-based NGOs “directly”,because of a perception of lack of accountability, difficulty in establishing crediblereferences, practical issues with resource transfers, and numerous taxquestions.
• Some community-based organizations lack what donors regard as the necessary prerequisite structure for being able to process donations, financial or otherwise.
• For many organizations, this becomes a “Catch 22”: resources would permit the necessary administrative changes to become more donor rule-compliant, but they cannot get those resources without making the changes.

Fund-raising: Some things You Should NEVER Do:

• post to online discussion groups or send letters via post with desperate pleas for money. You will not gain funds this way. You may even harm your credibility and create bad feelings about your organization among potential supporters.
• send out information riddled with spelling errors.
• WRITE EVERYTHING IN ALL CAPITAL LETTERS. This is shouting online or in print.
• Give Up. If you are not successful with your first attempts, keep trying. Review the reasons a donor has rejected your request, and use the information you gather to improve future requests. If you don't receive a reason, ask, respectfully, and say it is because you would like to be able to do better in the future. Don’t pester the same donor with multiple requests, but if your NGO changes its work or administration and you believe your NGO's operations now better fit a funder's guidelines, consider contacting a potential donor again, emphasizing how your proposal is different than the one previously rejected.