FAITH-based NGOs are looking to move from awarding grants to other means of funding international development, including loans and investment funds, but are held back by concern over reputational risk, a new study suggests.
A discussion paper by Christian Aid explored the interest in alternative funding of 25 faith-based NGOs in Europe and North America. It found that there was overwhelming interest in other mechanisms for funding development rather than just traditional grant-giving, but that many have not yet begun to offer grant alternatives.
Damage to the charity’s reputation in the eyes of its supporters was identified as a risk holding some back, owing to concerns that supporters might misunderstand alternative funding mechanisms as profiteering.
The director of international programmes at Christian Aid, Ojobo Ode Atuluku, said: “The risk is you are jumping into bed with strange bedfellows. They have different characteristics. You don‘t know whether you can maintain your stand, your values, your ideologies and principles, or whether you will be co-opted.”
Many NGOs also simply did not have the capacity or the staff expertise to allow them to get involved in other means of funding, the paper said.
One respondent said: “Faith-inspired organisations are used to looking beyond ‘markets’ to reach those left behind or ignored. They operate from a place of scarcity, not the abundance that is common in the more commercial world. Finding a third way is critical.”
About 60 per cent of faith-based agencies are already exploring other means of funding projects, although these alternative mechanisms represent only a small amount of their funding.
The advantages of other mechanisms include longer-term sustainability and an end to dependency on grant aid for some communities; greater autonomy for the recipient and a challenge to the perception of a “paternalistic donor”; and increased impact, through access to different categories of donor funds.
The paper concluded that the advantages of offering other finance options were significant, and that the risks were not “insurmountable”.
The global-partnerships director for the Lutheran World Federation, Dr Matthias Braeunlich, said: “For many NGOs, the gut reaction to profit is: ‘What? We’re going to make profits on people’s backs?’ But, when you explain you are creating a model that is profitable because otherwise the money is just gone, their mindset changes.”
The CEO of Stewardship, Stewart McCulloch, said: “A small profit reinvested regularly is something that can give huge amounts of leverage. Quite often a grant is given once, whereas with an investment, every pound could be used 20, 30, 40, 50 times.”