Charities seek revenue streams as donor funding wanes

In the precincts of Nairobi’s Mombasa Road, the Red Court Hotel stands out, but for a different reason.

While all other hotels in this Jomo Kenyatta International Airport stretch are owned by private companies, the Red Court is owned by the Red Cross, a humanitarian organisation.

With donor funding drying quickly or diverted to other needy disaster prone areas, humanitarian organisations are deepening forays into commerce as they race to reduce reliance on dwindling inflows.

“The hotel is yet to recoup its initial investment, but we expect it to cushion our revenue inflows as donor funding continues to come under pressure,” said Abbas Gullet, the Kenya Red Cross secretary general.

The Kenya Red Cross injected Sh400 million into the hotel and joins other humanitarian organisations such as Amref Kenya and Action Aid Kenya which have diversified to ambulance leasing, fire fighting, property and training to cushion their subsiding revenues.

For years, international donors accounted for more than 95 per cent of non-governmental organisation (NGOs) annual funds, but this has dropped to about 70 per cent, according to the National Council of NGOs.

Figures from the National Council of NGOs show that donor funding declined from Sh87 billion in 2007 to Sh81 billion in 2008 and Sh73 billion in 2009.

Officials at the council said the downward trend is likely to be sustained in coming years.

Despite the ongoing recovery from the global financial crisis that saw donors reduce their official development assistance, lack of discretionary funds due to huge budget deficits has continued to stifle donor funding, forcing humanitarian organisations to dig deeper into alternative activities to finance projects.

“The donor community in Europe and the US especially Britain have threatened to reduce funding and this has been driving investments in long-term projects in anticipation of less funds from abroad,” said Mr Gullet.

He said the British government owing to a large budget deficit last year has cut funding to NGOs in order to meet their spending needs.

The National Council of NGOs also says lack of commitment from local NGOs to account for their spending has made donors shy away from funding them.

Officials say the lack of consistent reporting by various NGOs is raising suspicion over prudent management of the funds.

“There are serious credibility issues in the way some NGOs manage their funds,” said a council official.

The move by Kenyan companies to broaden their corporate social responsibility projects by starting foundations to help the needy like the Safaricom Foundation and the recently launched Kenya Commercial Bank Foundation has also diverted funds that were once channelled to NGOs.

The growing number of NGOs in the last few years is also resulting in less funds as they are divided among the many recipients.

To plug the budget deficit, in 2008 NGOs lobbied the government to allow them engage in commercial activities in order to boost earnings.

In 2009, the state gave its green light, allowing the firms to venture into full-scale commercial business with tax free profits as along as they are ploughed back into project financing.

“The relaxation of rules by the government allowing NGOs to engage in commercial activities has been a welcome relief, “ said the finance and administration director at the National Council of NGOs, Fred Olendo, adding that donor support was becoming increasingly unreliable.

Kenya Red Cross has also invested in the ambulance industry in partnership with the Cooperative Insurance Company through which clients in need of ambulance services will pay monthly premiums of Sh100 per year for the maintenance of the project.

“Despite the low premium per year we shall be banking on the huge numbers of clients we have by providing this as an additional advantage to both our existing and new clients,” said the chief executive officer CIC Nelson Kuria.

It has set up a department called Eplus which runs the emergency response system with 20 ambulances operating in 12 towns in the country.

The organisation also offers emergency training services to the corporate sector.

Amref has also invested in the property market, health sector with hospitals facilities in Homabay, residential houses in Magadi and recently completed its health and conference facilities in Kibwezi and training of health personnel at a fee.

“A declining trend in donor funding has been quite worrying in the last two years, this saw the organisation undertake restructuring changes to cut costs,” said a senior manager at Amref.

For other NGOs like the Institute of Economic Affairs which depends on donor funding, they say most of the money is restricted to specific projects making it difficult for NGOs to run other supporting activities.

Others like Action Aid, World Vision and Greenbelt Movement have also strengthened their foot prints in the provision of conference facilities, training services and in the hospitality industry.

The move by donor agencies to only fund projects and keep administration costs to the minimum has also seen NGOs lose the talent they needs to carry-out special responsibilities.

The reduced budget has made it hard for NGOs to compete with government and the private sector for qualified personnel as many seek job security.

Mr Olendo said the reduced funding is bound to hold in the foreseeable future and most firms will only receive funds for certain projects and may not cover other costs like salaries, a move that will see them they will struggle to raise administrative costs and keep talent.

Oxfam Kenya country director Elizabeth Mueni said NGO directors have debated on how to ease pressure on their constrained budgets without divided attention on core projects.

For NGOs, low funding is not the only challenge they are facing.

Other hurdles include shift in donors interest in-terms of where to put their money with a country’s stability and good governance attracting more funds.

Mr Olendo also said following passing of the new constitution, the perceived determination to fight corruption among other key changes has been interpreted by donors as major pointer to improved governance.

“This has created an impetus for donors to channel their funding to the government rather than to the NGOs”, he said.

Kenyan NGOs are following in the footsteps of those in developed countries like in the United States where humanitarian agencies have set up other businesses and have evolved into huge organisations with strong financial muscles fuelling debates whether the non taxation policy on NGOs should be left in place.

Poverty goals

The UN has pressed debt-ridden donor countries not to cut aid to the poor despite their budgetary woes, saying this will hold back progress in alleviating poverty.

“We should not balance budgets on the backs of the poor,” Ban Ki Moon, the UN secretary general told 140 leaders in a summit to review progress in meeting UN poverty goals by 2015, last year.

Spanish Prime Minister Jose Luis Rodriguez Zapatero, whose government cut development aid in the face of a fiscal crisis and high unemployment, said countries were grappling with difficult decisions as they try to revive economic growth.

He urged the world to consider other ways to fund programmes that tackle poverty, hunger and climate changes.