Can NGOs raise enough funds from domestic sources?

For advocacy and rights-based NGOs, getting domestic funds from CSR corpus or government sources is tough


The middle-class and corporate sector are first-generation donors who do not want to antagonize the government, says Rajesh Tandon, founder of PRIA. Photo:Nayan Shah/Mint
The middle-class and corporate sector are first-generation donors who do not want to antagonize the government, says Rajesh Tandon, founder of PRIA. Photo:Nayan Shah/Mint

A decade ago, New Delhi-based non-profit organization Aman Trust applied to the ministry of home affairs for a licence under the Foreign Contribution (Regulation) Act (FCRA) after foreign donors approached the trust with financial aid. Among them were the Ford Foundation, The Hunger Project and the Tides Foundation.

Over the years, however, the non-profit that works on violence and conflict-related issues has started attracting domestic funding. Its projects are now a combination of foreign and domestic funders. In the current fiscal, for instance, 50% of Aman’s funds are from domestic sources.

The non-governmental organization (NGO)’s own desire to raise funds from home, coupled with strict curbs imposed by the government on foreign funds, contributed to the change in its funding pattern.

Broadly, a non-profit working in India has five options in its search for funds to carry on its work—foreign funders, corporate social responsibility (CSR) funds, the government, Indian foundations or charitable trusts and the general public. A close look at each of these options gives interesting insights on how a non-profit pools together funds to keep it going.

Foreign freeze

A non-profit can access foreign funds by applying for a licence under FCRA. Recent instances of government action against NGOs—freezing accounts and suspension of FCRA registration—will lead one to believe that a sizeable number of NGOs with FCRA licences have access to foreign funds.

Yet, an analysis commissioned by Mint and conducted by howindialives.com, a search engine for public data on India, of the information available on the MHA website revealed that the bulk of foreign funds for NGOs that entered the country over the past eight years has gone to just 18% of these NGOs, and the amounts range between Rs.1 crore and Rs.10 crore. And 40% of NGOs that have an FCRA licence received no foreign funds between 2006 and 2014.

Amnesty International India (AII), the Indian arm of the international non-profit, has chosen not to take the FCRA route to funding—a decision it took soon after it resumed operations in India in 2012. “FCRA was, and is, a much-abused law, and NGOs have experienced the unfairness of it both in the bureaucratic sense of inordinate delays (especially for those that seek prior permission) and in the more overt sense of it being used too often to curb the freedom of expression of NGOs,” former chief executive G. Ananthapadmanabhan said in an April 2014 post on AII’s website.

AII does not accept money from the government and companies for its human rights research or campaigns. It raises funds through two entities—a charitable trust and a tax-paying private limited company. The former carries out human rights education work and the latter provides research consultancy and technological services to other organizations in the social sector.

Over the past two years, it has raised Rs.5 crore from more than 65,000 Indians. Last year, the average contribution per donor was Rs.317. “The charity is expected to receive as much Indian donation income as it spends. This year we hope to receive between 35% and 40% of the full budget (that covers our entire operations) from Indian donations,” said Ananthapadmanabhan in his web post.

So, how successful has the Aman Trust been in sourcing domestic funds? Availability of domestic funding has certainly increased over the years, says Aman’s director Jamal Kidwai. “Yet access to domestic funds is still not easy. Most of the funds are corporate funds that are for limited activities. There is not enough flexibility like there is for foreign funds,” he said.

Majority of domestic funds that Aman has raised is from corporate funders. Kidwai says the money is for work which is “not remotely controversial”.

Corporate social responsibility (CSR) initiatives of companies have the potential to contribute Rs.20,000-25,000 crore every year to social development. But a study that looked at the top 300 firms in India found that only 30% of the firms collaborate with non-profit organizations to carry out their CSR activities. Mostly, funds are given to the corporate’s foundation rather than to an NGO.

An Analysis of Corporate Social Responsibility Expenditure in India, published in the Economic & Political Weekly in December 2014, found that firms mostly undertake CSR expenditure for the welfare of rural communities around their areas of operation. “We did find instances of funds going to NGOs working in the health sector,” said co-author of the study Shachi Rai, a research scholar at the Jawaharlal Nehru University in New Delhi.

The findings are along the lines of how the NGO sector perceives CSR funds—narrow and inflexible in approach and not eager to support innovative projects. “Indian CSR is in its nascent stages and it may take years before it is ready to support activities with ‘not so tangible outcomes’ like advocacy or policy dialogues,” said Participatory Research in Asia’s (PRIA) director Kaustav Bandyopadhyay. PRIA is an international centre for learning and promotion of citizen participation and democratic governance.

No-go area

A major factor in determining access to funds is the nature of the non-profit’s work. For instance, an NGO engaged in promoting rights-based work is seen as “confrontational”, says Seema Misra, a Delhi-based lawyer who works on access to justice. The reason for the conservative approach to funding, according to PRIA’s founder-president Rajesh Tandon, “is because our middle-class and corporate sector are first-generation donors who do not want to antagonize the government”.

Tandon said international funders bridge the funding gap for non-profits engaged in what he calls “software development”—capacity building, mobilization, awareness programmes, and so on. “The government of India is peculiar in that it has never spent its own funds for software development. So NGOs will get money from the government to build toilets but not to make people aware or motivate them to use it,” he said.

New trend

The trend, however, appears to be shifting with more Indian philanthropic organizations filling the domestic funding space.

The Mumbai-based philanthropic foundation Dasra is a case in point. It recently set up a ‘governance fund’.

In 2014, Dasra launched a study that identified more than 120 non-profits and social businesses in India that are strengthening governance by building state capacity and expanding civil society engagement. The plan was to engage more than 200 Indian philanthropists and foundations.

“Many non-profits have relied heavily on foreign funding to sustain their work. This has been due to the fact that strategic and cause-driven philanthropy is relatively nascent in India,” said Gayatri Divecha, who heads the funding team at Dasra. “Though the role of foreign funds cannot be ignored completely, the axle needs to shift and domestic capital needs to play a prominent role.” Dasra’s governance fund has amassed Rs.16 crore so far in its quest to direct Rs.50 crore to 15-20 of the most high impact and scalable non-profits over the next 3-5 years.

Push & pull

The Indian government is a big source of funds to the NGO and voluntary sector. “And the funding available to the voluntary sector is not small, it’s substantial,” Tandon said.

Studies show that government allocations for social welfare have increased over the years, although the utilization of funds has remained low due to procedural difficulties, delays in accessing resources, corruption and political interference.

A former bureaucrat who does not want to be identified said the ministries of social justice and empowerment, rural development and the women and child development are among those that made the most allocations.

The most recent study to put a value on the funds was one carried out by the Delhi-based Asian Centre for Human Rights (ACHR) in 2013. It filed RTI queries to ascertain the size of grants given to the voluntary sector. The study found that central ministries and state governments had provided Rs.6,654.35 crore as grants to NGOs and voluntary organizations between 2002-2003 and 2008-2009—an average of Rs.950 crore a year.

“We found that in a majority of cases, only those NGOs or voluntary organizations that were close to government officials or had some political pull were selected,” said ACHR director Suhas Chakma.

The study also found that the governments were selective with funding. Only projects for service delivery were given funds. There was nothing to spare for monitoring the implementation of laws or for safeguarding the rule of law. Essentially, a non-profit doing work that “challenges the status-quo” will be turned away if it knocks on the government’s door.

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