Abstract: Do Revenue Diversification and Income Generating Activities Promote Financial Sustainability of NGOs in Sub-Saharan Africa? (Society for Social Work and Research 20th Annual Conference - Grand Challenges for Social Work: Setting a Research Agenda for the Future)

Schedule:

Sunday, January 17, 2016: 9:00 AM

Meeting Room Level-Meeting Room 11 (Renaissance Washington, DC Downtown Hotel)

* noted as presenting author

Mathieu R. Despard, MSW, Clinical Associate Professor, University of North Carolina at Chapel Hill, Chapel Hill, NC

Bernice Adjabeng, MSW, MA, Program Associate, University of North Carolina at Chapel Hill, Chapel Hill, NC

Rhoda Nanre Nafziger-Mayegun, MEd, MSc, Executive Director, Linking the Youth of Nigeria through Exchange, Lagos, Nigeria

Background and Purpose:

To implement and sustain efforts to meet community needs non-governmental organizations (NGOs) in lower-resource regions like sub-Saharan Africa (SSA) need sufficient and stable resources. These NGOs have historically relied heavily on international sources of revenue (Alymkulova & Seipulnik, 2005; Barr et al., 2005; Bingen & Mpyisi, 2001), which are dwindling, leading to financial challenges such as a lack of sufficient funding for staff to implement projects (Harley, Rule, & John, 2004; Jacobs, 2011, Odindo, 2009). Securing multiple types and sources of revenue and generating revenue by selling goods and services are strategies that may help nonprofit organizations, including NGOs, secure sufficient and stable revenue (Alymkulova & Seipulnik, 2005; Dees, 2004; Germak & Singh, 2010; Linton, 2010). Yet little evidence exists concerning the relationship between revenue diversification and earned income strategies and the financial health of NGOs in SSA. This study aims to help fill this knowledge gap.

Methods:

Data for this study was from an online survey completed by a convenience sample of leaders (N = 179) of domestic NGOs primarily in Ghana, Kenya, and Nigeria. The dependent variable, financial challenges, was measured as a count of the number of distinct financial challenges each NGO experienced, including: delayed payments from funders, funder disallowances for general expenses, inadequate financial reserves, reducing services due to a lack of funding, and difficulty in complying with funder requirements. Independent variables of interest were revenue diversification (i.e., number of different sources of revenue) and whether the NGO engaged in income generating activities. Poisson regression with covariance control (tenure, size) and robust standard errors to adjust for clustering by country were used to assess the association between revenue diversification and income generating activities and the number of financial challenges each NGO experienced.

Results:

NGOs had been in operation for an average of 9 years (SD = 6.89), addressing a wide range of missions including HIV prevention, human rights, child welfare, and livelihoods. Most NGOs (86%) were small, with less than 20 paid staff members. The most common financial challenges experienced by nonprofits were inadequate financial reserves (79%) and reducing services due to a lack of funding (74%). Revenue diversification was positively associated with financial challenges (β = 0.94, SE = .016, p < .001). Though income generating activities was also positively associated with financial challenges, this relationship was not statistically significant (β = 0.15, SE = .134, p = .259).

Conclusions and Implications:

Despite common recommendations that NGOs diversify and generate their own sources of revenue to promote financial sustainability, these strategies were not associated with fewer financial challenges among NGOs in this study. Securing the resources needed to reliably meet community needs may be a more complex and difficult challenge to overcome for small, domestic NGOs based in and serving SSA countries. Overcoming these challenges likely requires greater, longer-term, and unrestricted financial support from stakeholders.