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Funding, corporate governance hitches slow not-for-profits in anti-poverty fight

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Ogiek Peoples’ Development Program executive director Daniel Kobei hands over sheep to members of a local women’s group in Narok to mark the Day of Rural Women on October 15. FILE PHOTO | NMG

Summary

  • The belief that NPOs represent the voices of poor people has made it much easier for them to work with communities at the grassroots.
  • Poverty eradication, particularly in developing countries, has mostly been associated with success stories of NPOs.
  • NPOs engage in a variety of activities that help provide impoverished populations in many developing countries with necessities, such as shelter, education and health — especially where government infrastructure and resources are deficient.

Not-for-profit organisations (NPOs) have succeeded in closing the gap left by the government and the market’s failure to provide basic social services as well as reduce poverty especially in remote areas and developing economies.

The belief that NPOs represent the voices of poor people has made it much easier for them to work with communities at the grassroots where governments and international development agencies lack the supportive infrastructure.

Development partners, multinational donors and governments have continued to focus on fighting extreme poverty and promoting shared prosperity. This has resulted in tremendous success over the past three decades. According to the World Bank Group, 10 percent of the world’s population lived on less than $1.90 a day in 2015, down from nearly 36 percent in 1990.

At the heart of this progress toward attaining the first of the UN sustainable development goals (SDGs) are the NPOs championing and implementing social interventions leading to better social outcomes at the grassroots.

Poverty eradication, particularly in developing countries, has mostly been associated with success stories of NPOs. They work as valuable agents alongside governments, the private sector and international development partners in building critical social infrastructure

NPOs are credited with spurring innovations, and their knowledge of local markets and ability to provide specialised solutions for dealing with poverty.

They seek to create positive social change in local communities by providing several services aimed at rectifying societal problems and supporting a disproportionately impacted population. This has made these organisations increasingly sought after by major donors to bring about social change.

NPOs’ main characteristics are that they are self-governing and have an explicit social mission. Whether local, regional, national or international, NPOs direct their resources towards social justice causes. Often, they are run by a few employees and volunteers and rely on grants or donations from the government, private sector, or international donors to fund their initiatives.

NPOs engage in a variety of activities that help provide impoverished populations in many developing countries with necessities, such as shelter, education and health — especially where government infrastructure and resources are deficient.

This makes NPOs integral agents in implementing development projects on behalf of donors and international development partners.

They contribute immensely to developing economies in two contexts; during humanitarian crises and emergencies and; promotion of social outcomes and growth of grassroots economies.

NPOs play a vital role in reaching remote populations, using their specialised knowledge and networks of local staff as well as volunteers to provide essential support such as the distribution of medical commodities, food and cash transfers.

They are well known for their participatory approaches and understanding of the grassroots landscape.

The role of NPOs in poverty eradication continues to expand especially post the health crises that the world is now facing. NPOs have the advantage of enjoying some level of public trust and knowing their markets and communities well. These organisations can effectively bridge the gap between governments, international development agencies, and targeted end-users to deliver more efficient services

Despite their crucial role, NPOs face major challenges in their operations. The greatest threat to NPOs is the betrayal of public trust arising from poor governance. Some of them have been entangled in governance scandals in recent times.

It is vital to empower NPOs with information, tools, and resources to deal with challenges like a conflict of interest, risk management and personal liability, outcome measurement, financial oversight, ethics and accountability.

This helps in inspiring the highest level of confidence among stakeholders. Because of limited financing and the fact that most of their operations are targeted towards remote areas, many NPOs struggle to acquire the right personnel thereby affecting how programmes are implemented. Often, they rely on volunteers who are not qualified to implement their programmes.

Over-reliance on donations and grants by NPOs to support the implementation of their social programmes is yet another challenge. This makes NPOs vulnerable to economic, and political shocks as well as changes in government regulations both locally and internationally.

Further, with an increased number of NPOs within a specific sector or focus area, there is greater competition for donor funding thereby reducing the funding quantum. This exposes NPOs to financial constraints. Thus, NPOs need to develop sustainable and innovative funding channels or sources to reduce this perpetual risk and opportunity.

Poor technology like limited mobile phone connectivity, and poor road networks, which are synonymous with places where NPOs operate in developing countries, also inhibit their activities.

So do taxation and other government regulations which have a direct impact on their funding and operations. For instance, taxes imposed on corporations and individuals affect NPOs, given their reliance on donations and grants to support their activities.

Nyakundi, Senior Associate in Advisory, Portfolio & Programme Management at PwC East Africa