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09 Jun 2021

Building Strong and Resilient NGOs in India: Time for New Funding Practices

NGOs in India are chronically underfunded in the areas of administrative costs and support functions, new research by the Bridgespan Group has found. This threatens to undermine the impact that both funders and non-profits strive for.

CIFF is a member and anchor funder of the Pay What It Takes (PWIT) initiative, co-led by Bridgespan, which highlights the true cost of funding effective organisational development for non-profits in India. This is aligned with CIFF’s wider Organisation Development (OD) strategy, which supports our grantees to build institutional capacity and meet their financial objectives by maximising value for money.

Lack of evidence can be a significant hurdle when advocating for change in funding practices. To address this evidence gap, Bridgespan conducted a survey of 388 NGOs and a detailed financial analysis of 40 NGOs (including seven CIFF grantees). This marks the first stage of the PWIT project. Highlights from the surveys include:

  • Indirect costs (such as office rentals, management salaries, and fundraising expenses) varied between 5% to 51% of the non-profits’ total costs – this shows no single indirect-cost rate fits all NGOs.
  • 70% of the NGOs faced a shortfall in indirect-cost allocation; for these NGOs there is a 13% funding gap between the average indirect expenditure incurred by grantees (22%) and the 9% funding received from donors due to the historical focus on specific programme costs.
  • Only 18% of the surveyed respondents said they invest adequately in organisational development, which is fundamental to scaling impact.
  • The Covid-19 pandemic has caused non-profits to dip into their reserves, leaving 54% of the organisations surveyed with less than three months of reserves as of September 2020. Crises such as Covid-19 highlight the importance of operating with sufficient reserves which continues to be an issue across the sector.

What can we do to address the funding gap?

While the social sector in India continues to operate under the more stringent FCRA regulations and grapples with the impact of Covid-19, funders and non-profits can adopt good funding practices, to build trust and transparency.  PWIT’s efforts throughout 2021 and 2022 will focus on a four-pronged approach, engaging the community to:

  1. Develop multi-year funder and non-profit partnerships
  2. Close the indirect-cost funding gap
  3. Invest in organisational development
  4. Build financial reserves

Insufficient funding ultimately undermines impact. Pursuing a path toward true cost funding will require patience and perseverance to overcome ingrained attitudes and practices. This is a complex, systemic issue, and all stakeholders need to work together to solve it. But funders hold the purse strings and should take a lead in initiating action.

For CIFF, this has been a key principle throughout our recently updated Support Costs policy which aims to provide greater flexibility on indirect cost funding for our grantees and support the principle that funders must pay their fair share. CIFF’s OD team has gained momentum since it was set up in 2019 and continues to work with our grantees to support organisational development for increased resilience and greater impact.

For more details, see below links to the full Bridgespan report as well as a blog published in The Times of India.

Vimmi Malhotra and Benjy Smith