In charts: The sorry state of fundraising at India’s NGOs

Just 19 nonprofits had incomes of over ₹100 crore in 2021-22, showed an analysis of annual reports by impact consulting firm Sattva Consulting. Contrast this with the corporate social responsibility (CSR) spending of India's largest companies: 34 exceeded a budget of ₹100 crore in the same year, and the combined incomes of the top 100 NGOs was 30% less than the combined CSR budget of the top 100 spenders.

The study, whose data was exclusively shared with Mint, analysed the incomes of 176 of the largest non-governmental organizations (NGOs) in India in 2019-20, 2020-21 and 2021-22. The 138 entities that had data in all three years earned a combined ₹22,274 crore in income in this period, but as much as 59% of this went to just the top quintile (20%) of the set. The annual donation incomes ranged from ₹4.4 lakh to ₹817 crore in 2021-22: note that this is already a very tiny elite set out of India’s estimated 3 million nonprofits. Overall, NGOs were left with a surplus of just around 5% of their incomes after making their spending.

While 85% of the organizations in the full set in 2021-22 were India-headquartered, their share in funding was only 72%. Global NGOs were concentrated at the top. Vrunda Bansode, partner at Sattva Consulting and the author of the study, said the data showed that promising homegrown NGOs needed support in the form of unrestricted grants and capacity-building programmes to help them grow as robust organizations.

 

Children-focused causes have caught the fancy of generous funders the most, with entities working on them getting close to 25% of the total funding for the NGOs analysed in the three years.

Volatile finances

The nonprofit space is strongly reliant on foreign donations: for around 46% of the organizations, overseas sources made up more than half of their donation income in these three years (whenever data was available). Organizations working on causes such as sustainability, gender, healthcare, and sanitation were more likely than others to rely on foreign funding.

However, the government’s crackdown on foreign funding of NGOs has meant that domestic donations have grown slightly faster in recent years. While foreign donations for domestic NGOs grew 20% in 2021-22, donations from domestic sources rose 24%. “Indian domestic philanthropy has been growing and more new-age givers are actively exploring the space, adding to domestic donations," Bansode noted.

The total pool of capital procured by the set of NGOs in the study was somewhat stagnant over the three years when adjusted for inflation, pointing to a greater and urgent need for domestic funding to step up to fill up the vacuum. Finances also remain volatile. About 28% of the cohort saw an income change of over 50% on-year in 2021-22, while 15% saw a decrease of 10% or more. This uncertainty makes scaling up tough: while not all NGOs need to scale up, the ones that intend to for greater impact would do well with more reliable streams of funding.

Newbies shine

Most of India’s best-funded NGOs have sprung up after the turn of the millennium. Among the top 50 in 2021-22, as many as 26 were incorporated in 2000 or after. Improved CSR norms and increasing professionalization of the sector may have helped attract younger minds to the social impact space. Does this mean that older NGOs failed to evolve with time to attract better capital? Bansode agrees. “In the digital era, being able to showcase work and build a brand presence online, fundraise through multiple channels, and maintain donor relations professionally have become important skills that can mean the difference between the next grant or not," she said. “Older nonprofits that did not evolve with the times have plateaued."

The influx of new younger philanthropists and professional management talent in the sector, and the changing nature of our economy and problems may also be behind the growth of new NGOs, Bansode said.

 

 

Delhi on top

Entities headquartered in key urban centres have the largest budgets. Delhi tops the list, sharing 35% of the total 2021-22 income of the NGOs analysed, followed by Karnataka and Maharashtra. The numbers capture only the state of registration, for which organizations may prefer large cities: a Delhi-based NGO could well be operating across the country. However, it may also be important for less developed states to have more regionally headquartered NGOs. “It's a chicken and egg situation that can be resolved by funders taking a long-term view and making strategic investments in first developing the local NGO ecosystem in these areas before they can deploy large amounts of impact capital capably," Bansode said.

She called for uniform standards for accounting, reporting and disclosures for NGOs that could bring about much-needed clarity and trust for the philanthropic ecosystem to flourish. On their part, nonprofits need to be more and transparent about their operations to build trust, Bansode added.

Note: The analysis covered data from annual reports of India’s highest-budget independent nonprofits having their own mission statements and funded by multiple types of funders. This excludes corporate CSR wings, donor agencies, multilateral bodies, educational institutions and hospitals, and global nonprofits that do not report data on their India units separately. However, the list was subject to availability of data, and may exclude large entities whose data was not reliably available. While the overall pool had 176 entities, only 138 had income data available in all three years.