This is the first in a series of blogs on transforming business models for community-led development.
The funding environment for INGOs has been difficult for a while now, with cuts to the UK aid budget and the Covid-19 crisis and loss of funding from the European Union.
INGOs are increasingly competing for smaller pots of money from philanthropic partners, many of whom are shifting their priorities away from international funding.
Income generation is not a new term for INGOs.There are many organisations whichhave been generating income for many years through social enterprises and consultancyto name a few, but this is not the norm, and most INGOs have a more traditional grant-led business model which is making it hard for them among increasing uncertainty.
At the start of this year, Bond was awarded a small grant from ACCESS to explore whether generating income can not only help with the financial sustainability of organisations, but also support a shift in power to social activists and communities. It was important to us to make sure that whatever we were proposing challenged existing power structures between INGOs and communities,whileenabling financial freedom and a shift in power to communities.
We are currently on the scoping stage, where we speak to people and gather insights from experts and charities.
So, what we have discovered so far?
The international sector is not unique: we can learn a lot from the domestic sector
ACCESS were particularly keen for us to learn from their existing Enterprise Development Programme (EDP). The EDP enables organisations to grow their financial resilience and impact by providing a mixture of grant and learning support to help get enterprise ideas off the ground.
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The EDP works with charities that work in England and include charities that work in homelessness, environment and equality – among others. What we foundinteresting wasthat many of the organisations we spoke to had similar concerns to INGOs when considering income generation and trading.They were worried about mission drift or had similar challenges about ensuring that communities were at the centre of their response.
Don’t jump head-first into generating income without considering how it fits with your charitable objectives
When we first started our conversations, we struggled to understand the difference between INGOs developing a trading venture for their own sustainability, andan enterprise programme in one of the countries that they work in. But now we are coming to the end of the research phase, and with help from Tej Dhami from the Change Coefficient, we have identified that generation/trading models for INGOs can be broken down into three categories:
- Monetising expertise and networks, such as consulting models where INGOs can sell their expertise.
- Monetising organisational assets. This encompassesbrand, so includes charity shops and T-shirt sales which use the charity’s brand name to generate income, or it could mean generating income by renting out space if they own a building or other assets.
- Trading models that deliver targeted outcomes. This includes social enterprises, enterprise-led development, development impact bonds and other income generating activities that help an organisation achieve their charitable objections.
There may be some examples where some models overlap between categories, such as Childhope International’s South 2 South network, which both monetises expertise andstrengthens capacity of local partners as it is one of their strategic priorities, but overall these categories are helpful when deciding what approach is best for your organisation.
Beyond trading models
These categories are helpful for INGOs to develop and adapt their business models as it helps them understand how it can support their organisational strategies and achieve their objectives.
This does not mean that INGOs should only consider trading models that deliver targeted outcomes as it may be part of their strategy to monetise their organisational assets to help fund work that they can’t find grant funding for.
Over the last few months we have realised that we need to be clear on what we are asking ourselves – is it about the sustainability of the organisation or the sustainability of the outcomes? As Katie Fowler the co-CEO of Chance for Childhood said:“We don’t want the INGO to be sustainable, we want the outcome to be sustainable.”
In the second of our blog series we will delve deeper into how income generation can support community-led development – but a sneak peak is that while it is not the golden answer, it can help!