MUMBAI—June 23, 2022. Better communication between philanthropy and NGOs in India can help close a gap in how they perceive the funding of crucial costs beyond programmes, according to a new publication by global nonprofit advisory firm The Bridgespan Group.
A survey of 77 funders found that while 68 percent of them believe their policies allow for flexibility in financing expenses for administrative and support functions not tied to a specific programme, 83 percent of NGOs say they struggle to secure such funding. Additionally, 75 percent of funders said they invest in organisations’ institutional growth and sustainability, yet 70 percent of NGOs said that most funders do not support these needs.
The report also underscores that few funders help NGOs build reserves: Only seven of the 77 survey respondents noted support for this. “Reserves matter,” said Pritha Venkatachalam, Bridgespan partner and coauthor of the study. “Without cash on hand, NGOs cannot pay salaries or bills when faced with an unexpected funding shortfall, and they’re often unable to cover the cost of research and innovation to invest in their futures."
The new research is a part of Pay-What-It-Takes India—a multi-year collaboration between Bridgespan and anchor partners A.T.E. Chandra Foundation, Children’s Investment Fund Foundation, EdelGive Foundation, and Ford Foundation—that aims to end the chronic underfunding of NGOs.
The publication also describes three distinct funder archetypes, which provide a framework to approach them and inspire change:
Programme proponents share the mindset that programme support is the best use of their limited resources. These funders limit what they spend on indirect costs to a fixed rate, generally between 5 percent and 15 percent at present—less than half of what Bridgespan’s 2020 research showed NGOs actually need.
Adaptive funders, the largest group among survey respondents, have predetermined indirect cost rates of between 15 percent and 25 percent at present, but they aren’t completely rigid in their grantmaking. Some negotiate bespoke rates based on conversations with grantees or fund organisational development based on their relationship with a particular grantee.
Organisation builders see greater value in financing organisational strength and resilience, in addition to programmes. Indirect-cost rates typically are determined with NGO leadership and might exceed 25 percent. These funders also provide specific types of organisational development funding based on NGO priorities. However, even among this group, only a small minority consistently help NGOs build their cash reserves.
To help bridge the gap between donors and grantees and to facilitate communication on what it takes to build strong NGOs, Bridgespan soon will also release an organisational development toolkit in partnership with Dasra, Dhwani Foundation, Samhita, Sattva Consulting, and toolbox INDIA.
For both funders and NGOs, we hope the three funder archetypes and the OD toolkit will facilitate collaborative journeys leading to more investments to improve NGOs’ impact and sustainability,” said Shashank Rastogi, Bridgespan principal and coauthor of the report. “The time is ripe for such guidance. Working together as long-term partners, funders and NGOs can build a stronger social sector that achieves greater impact.”
The Bridgespan Group (www.bridgespan.org) is a global nonprofit that collaborates with social change organisations, philanthropists, and impact investors to make the world more equitable and just. Bridgespan’s services include strategy consulting and advising, sourcing and diligence, and leadership team support. We take what we learn from this work and build on it with original research, identifying best practices and innovative ideas to share with the social sector. We work from locations in Boston, Johannesburg, Mumbai, New York, and San Francisco.