Home CATEGORIES Business Ethics & Philanthropy Over 66% of Non-Profits Struggle to Access Funders in India: Report

Over 66% of Non-Profits Struggle to Access Funders in India: Report

More than two-thirds of non-profit organisations struggle to access funders for their respective causes, while 61 per cent of them receive less than a quarter of their funding in an unrestricted manner, according to a report by Accelerate India Philanthropy (AIP), a network of philanthropists. The report, based on a survey of 65 non-profit organisations of different sizes working across different sectors, aims to understand their scaling roadmap and the key drivers and barriers they face in the process. Despite the recognition of the importance of scaling impact, most non-profits in India struggle to survive, let alone grow or scale their impact.

Scaling the Impact: Importance and Challenges

The survey conducted by AIP revealed that 74 per cent of non-profits consider “scaling their impact” extremely important. However, scaling impact remains a significant challenge for many non-profit organisations in India.

1. Accessing Funders

One of the primary challenges identified by the AIP report is the difficulty in accessing funders for their respective causes. The complexity of the giving landscape in India, with numerous causes requiring attention, often results in philanthropists limiting their choice of sectors and partner organisations to their immediate life experiences or recommendations from their network. This can result in a select group of well-connected, large non-profit organisations having better access to philanthropic funders while smaller and newer organisations struggle to gain visibility and funding.

2. Restricted Funding and Unrealistic Expectations

Another challenge faced by non-profit organisations in scaling their impact is the issue of restricted funding. The report found that 61 per cent of non-profits receive less than a quarter of their funding in an unrestricted manner. Most funding is restricted and channelled towards financing costs associated with individual programs, leaving critical functions and shared administrative costs, such as building robust fundraising processes, financial systems, capacity building, and training, perpetually underfunded. This can hinder the ability of non-profits to scale their operations and impact.
There is also a mismatch between the expectations of funders and non-profits. Weak communication and poor feedback loops result in funders having unrealistic expectations about the actual cost of running a non-profit. In a bid to meet these unrealistic expectations and secure future funding, non-profits may misrepresent their costs by lowering them, which further fuels funders’ unrealistic expectations about costs, especially overhead, capacity building, and other non-program costs. This can result in a vicious cycle, termed as the “slow starvation” of non-profits, where organisations struggle to meet their operational costs and invest in essential functions, ultimately hindering their ability to scale their impact.

3. Reporting and Compliance Burden

Non-profit organisations in India also face challenges in meeting funders’ reporting and compliance requirements. The report found that 54 per cent of non-profits find these processes burdensome. Moreover, such processes are often focused on inputs and outputs, with little emphasis on outcomes. This creates a perverse incentive for non-profits to prioritise meeting the quantitative requirements rather than focusing on achieving meaningful outcomes. This can result in non-profits spending significant time and resources on reporting and compliance, diverting their attention and efforts away from their core mission and activities and hampering their ability to scale their impact.

Philanthropists’ Role in Overcoming Challenges

Philanthropists can make a significant difference by being open to new ideas and opportunities across different sectors rather than limiting their choices based on personal experiences or recommendations from their network. By expanding their philanthropic reach, philanthropists can increase the visibility and funding for different types of non-profits, reducing the systemic deprivation of resources for certain organisations. Philanthropists can also contribute to the sustainability and growth of non-profits by providing unrestricted funding, allowing organisations to invest in critical functions and shared administrative costs that are essential for their long-term success.
Furthermore, improving communication and feedback loops between funders and non-profits can help manage expectations and avoid the misrepresentation of costs. Philanthropists can work towards a more realistic understanding of the actual cost of running a non-profit, including overhead, capacity building, and other non-programme costs. This can foster a healthy relationship between funders and non-profits based on mutual understanding and trust.
Additionally, simplifying reporting and compliance requirements for non-profits and shifting the focus from inputs and outputs to outcomes can reduce the burdensome nature of these processes. Philanthropists can advocate for streamlined and effective reporting and compliance mechanisms that align with the goals and objectives of non-profits. This can enable non-profits to focus more on delivering impactful programs and outcomes rather than getting overwhelmed by administrative tasks.
In conclusion, the challenges faced by non-profit organisations in accessing funding and scaling their impact in India are significant. Working collaboratively, philanthropists and non-profits can together address the systemic problems and create positive social change in the communities they serve. It is crucial for philanthropists to recognise their power and responsibility in driving positive change and supporting the efforts of non-profits in addressing critical social issues in India. Only by working hand in hand can we create a more inclusive and equitable society for all. The time is now to accelerate India’s philanthropy and unlock the full potential of non-profit organisations in driving meaningful and sustainable change in the country.