T R A I N I N G

  Jack and Kathy had a terrific idea for a project to help dolphins. Their new program was meant to build on the achievements of their former marine project. They completed a detailed outline of their project plan, but at the last minute they found they had to seek a new donor. When they finally obtained a backer, he had a different vision as to how they could reach their goal. Jack and Kathy started the project anyway, but they felt they didn't achieve what they wanted to, and decided that next time they wouldn't plan so far ahead. Things might have been different if they were not so dependent on one donor.

Sponsor your own projects

  While very few NGOs can achieve 100 percent self-financing, more organizations are trying to gain control over at least a portion of their funds by generating income themselves. As our table shows, there are many ways to become more independent from the typical NGO financing circle - where you have lots of funds while a project is running and practically nothing in between projects.

Less money available in CEE

  There are many ways to reach a higher level of financial independence but not all represent the same risk level, as the table shows. The further your organization strays from its core activity, the more difficulties you are likely to face. An NGO staff may not be willing, or able, to undertake fund-generating activities in which they are either not experienced, not interested or both.

  So that, while self-financing can be a successful method for generating resources to supplement project-donor-based support, it is far from a panacea. And mishandled efforts at self-financing can literally ruin your organization - either financially, or because internal cohesion breaks up.

  But it's still worthwhile to consider some of the real strategies that some Central and Eastern European NGOs have used. Many of these are covered in a study by Lee Davis, titled, "The NGO-Business Hybrid? Is the private sector the answer?" The study was conducted on behalf of the John Hopkins University's School of Advanced International Studies (SAIS) It traced the ways that different sizes and types of real NGOs around the world were able to reach a greater level of financial self-sustainability.

  The NGOs surveyed in the study used different strategies to obtain starting capital. The Azerbaijan NGO, Chris Kitchen, received a personal gift of cash from the director and an in-kind donation (kitchen equipment). Croatia's' SIQL pulled together internally generated funds, personal money from their president, an in-kind donation as well as a joint venture partner. Bolt Gallery in Hungary relied solely on personal money from its directors. Gondviseles (Hungary) received a state loan and a joint venture partner. Romania's Asklepyos generated internal funding and in-kind donations. Another Romanian group, SNHF, received an interest free private loan from a business friend as well as member donations and in-kind donations.

Different strategies of NGOs in CEE

  Five Eastern European NGOs were among the 13 surveyed NGOs (Croatia: SIQL, Hungary: Bolt Gallery, Gondviseles, Romania: Asklepyos, SNHF). They primarily used strategies in row 1 of the table (program revenues), row 2 (program related spin-off) and row 6 (unrelated extension). None of these five NGOs tried to sell their name.

  Strategy 4 (asset downtime) was used by Asklepyos. They distribute medicines and medical assistance to the poor. The vans and trucks needed for this work are made available for rental when they are not being used by the NGO for their mission purpose. Asklepyos also made use of an in-kind-donation. They were given washing machines as a present and started their own laundry service (unrelated extension).

  Gondviseles, who provides labor for young, mentally handicapped persons, produces and sells children's toys (program related spin-off). It generates 32% of its income through this activity. They also opened a child-care-equipment-rental shop (related extension).

  Croatia's SIQL, works in the field of ecological awareness raising. They take seminar fees and opened a whole-foods shop and vegetarian restaurants (40% self-financing).

Obstacles on the road to happiness

  Internally, you can expect a philosophical clash between non-profit and for-profit culture. The values of many NGO members go against the idea of making a profit. They may consider the quest for profit to be unethical. As Richard Holloway of Pact-Zambia put it: "When the main purpose becomes making money - albeit this money will be used for the work of the organization - a new set of attitudes starts creeping in; and many organizations become concerned that they will loose their internal cohesion, which comes from a shared vision of a better and less exploitative society."

  The second internal problem an NGO may experience when it opts to self-finance is that its staff may not have the necessary skills to run a for-profit venture.

Clearing the hurdles

  Even after a group overcomes any internal problems, the government and public sectors can put up further hurdles. In many countries there is an unclear regulatory environment for registration and tax treatment of self-financing activities of NGOs. It's important to look up the relevant regulations first.

  Sometimes tax regulations treat NGOs in a special way and they therefore gain an advantage over private businesses. If your NGO is in direct competition with private firms, these advantages may generate ill-will toward your group. In general, there is a risk that the public perception of your group may suffer if it seems that you are out for a profit. Perhaps the best solution to this problem is explaining your group's motivations through advocacy and educational activities.