What have we learned?

1. It’s really challenging to generate income and change a business model

It is hard to change a business model.

Business models set the tone and culture of an organisation, so you are effectively trying to change the culture of an organisation, and this is not a quick or easy process.

It may be challenging to bring staff along on the journey, especially those who have been with the organisation for a long time and have a more traditional approach to development. Being comfortable generating a profit requires a mindset change, and many people are more comfortable talking about surplus rather than profit.

Choose Love shows us that it is easier to embed an entrepreneurial spirit, right from the start, when an organisation is founded, rather than trying to change an older, more traditional type of charity. We spoke to a number of organisations that had a consulting model, but interestingly many of them were finding it challenging to make a profit and some had not even considered it as an option.

For INGOs, generating income requires different skills from a more traditional income model. Often, organisations have to recruit externally to bring in the expertise they need. This can be expensive, but it could benefit them in the long term.

If you have read our three case studies, and are curious to learn more, programmes like Access’ enterprise development programme provide guidance, expertise and support to organisations to help them strengthen their capacity and knowledge on how to generate income. Areas of support include financial planning and management, marketing and how to develop a pricing strategy.

Check them out!

2. You may not get it right immediately

To generate income, the organisation – particularly its leadership team – needs both a mindset change and the willingness to challenge itself and embrace risk. Ripple Effect explored a number of ways to generate income, including development impact bonds, but it did not proceed with this in the end and chose a different, more profitable option. It’s important that the board and trustees are supportive of the organisation and leadership team and give them the flexibility to try new things, some of which will work and some that won’t.

3. You can always learn from others

As income generation and locally led development are new to many organisations, the sector should take the opportunity to share experiences, both good and bad. Organisations should be comfortable sharing their experiences of failure and success to encourage more organisations to try new approaches, and learn from each other.

Sharing experiences won’t just support other INGOs, it will educate funders. It could encourage funders to invest in supporting organisations to generate income and shift to locally led development.

Staff at Choose Love have taken their funders on a journey, educating them on the best way to support the organisation. They have had particular success with getting funders to match funds, as this encourages the public to buy more of their products.

4. Income generation provides unrestricted funds which can go to locally led causes

Having unrestricted funds means an organisation doesn’t have to follow the money. It can choose to spend unrestricted income however it wants. This gives organisations the freedom to invest how they want and focus on what is important to them. Organisations can also provide unrestricted funding directly to community organisations and social activists for them to invest as they see fit, including in their own financial sustainability and their strategic objectives to shift power.   

A good example of this is Restless Experts, which helps move flexible income around Restless Development, contributing to the strategic objective of decentralising power across the organisation.

5. Developing trading models or enterprises with communities 

INGOs can support communities to develop their own social enterprises or provide microfinance to fund such ventures. A good example of this is Ripple Effect, who are supporting peer farmers to develop their own businesses that provide specialist agricultural services to fellow farmers. It is a common misconception that poor people are not willing to pay for services, yet most smallholder farmers in Africa are already paying commercial operators for specialist agricultural services.

Ripple Effect provide the training, and initial startup packages and connect the farmers with a customer base. The Ripple Effect farmers can now compete with the commercial sector as they are based in the communities and already have existing relationships with the local farmers.

Generating income gives a community purchasing power and social capital to build a market for its products. And it can give communities the power to make decisions on what is best for them. The process of developing an enterprise can also help communities strengthen relationships, develop new skills and build financial sustainability so they don’t have to rely on overseas donations or INGOs.  

6. Handover mechanisms can help shift power and income

An INGO can build a handover mechanism into an income-generating project, which can also shift power. For example, if an INGO is facilitating an investment or setting up a business, it can slowly hand its equity share to a local partner or community. 

Restless Development is planning to develop guidance and a methodology so that other organisations can replicate its consultancy approach.

When national and local organisations generate their own income, they become less reliant on INGOs or donors for funding. A good example of this is when a local community has an asset, such as a building or venue that it can hire out. This generates unrestricted income, which reduces the community’s reliance on external funding.  

What do all of these case studies tell us?   

We know that generating income can contribute to a shift in power, but there are still challenges to overcome. 

Institutional funders may be difficult to navigate and report to, but investors require even more reassurance, detailed reporting and due diligence. Access to finance is difficult. If you are not well connected then it’s likely you will struggle to get investors to engage, and this may be particularly difficult for those based in low and middle-income countries.

Generating income requires different skills and mindsets to managing a traditional grant model. These skills can be learnt, but they require investment, being comfortable with taking on risk and understanding organisational costs and pricing, which is difficult for some donors and INGOs.   

While it is clear there are challenges, there are also opportunities. Organisations need to be specific about what they want to achieve, otherwise, they can easily fall into a trap of generating income for generating income’s sake while ignoring the bigger picture, their values and their purpose. 

Generating income is not going to solve the challenges that we face to shift power, but for an organisation that is committed to both decolonising development and locally led development, it can contribute to it.

These case studies were developed as part of a small grant that Bond received from Access as part of its enterprise development programme. We would like to thank Farida Makame from Restless Development, Winnifred Mailu from Ripple Effect and Josie Naughton from Choose Love for their input into the case studies and Ana Van Bilsen Irias from Access for her support as we developed them.

The case studies were written by Yolaina Vargas Pritchard, Katherine Strasser-Williams and Zoe Abrahamson from Bond, with editorial support from Maryam Mohsin and Jon Hatch.