N G O S

Non-profit, non-governmental organisations (NGOs) worldwide are increasingly turning from traditional philanthropy to the marketplace.

In Central Europe, international donor resources are disappearing and local philanthropic resources remain insufficient to meet growing needs. This gap in funding leaves the future financial sustainability of many NGOs in the region uncertain and illustrates the necessity of diversifying NGO financing sources and identifying local alternatives.

In response, some 65 representatives from the NGO, business, finance, legal, government and donor communities gathered at the REC in Szentendre for The NGO Venture Forum: Profits for Non-profits from Jan. 21-23. Their goal was to discuss the future of NGO financing in the region and examine strategies for what many consider a looming "crisis" in NGO funding.

The event was the culmination of the first year of the Sustainable NGO Financing Project (SNFP) for Central and Eastern Europe (CEE), an effort initiated by NESsT, a US non-profit organisation working with partners in Central Europe and Latin America to develop sustainable financing alternatives for NGOs.

The NGO Venture Forum focused attention on one often overlooked, often criticised NGO financing strategy: "self-financing." Self-financing refers to a number of "entrepreneurial" strategies for generating income, including: membership dues, fees for services, product sales, selling or licensing the NGO name, rental of unutilised assets, business ventures and investment dividends. "Profit" is often considered an inappropriate or unattainable concept in the "non-profit" world. However, the SNFP believes that some NGOs can increase their long-term viability by generating some of their own income through "self-financing" strategies without compromising their mission.

Self-financing strategies are currently used by many NGOs in Central Europe, but have remained undocumented. The Forum was a unique chance to examine current experience in NGO self-financing in the region. It also was a chance to develop a strategy for building the capacity of NGOs to better use self-financing strategies.

Strategies, obstacles and opportunities

Participants examined models of support for NGO self-financing in other regions of the world, including Western Europe, North America and Latin America. Paula Antezanna of the Arias Foundation in Costa Rica shared the methodology her organisation has been using to establish local "resource mobilisation centres" in Central America. Jed Emerson, Director of the Roberts Enterprise Development Fund in San Francisco, explained the "venture philanthropy" approach of his Foundation to provide financial and technical support to a portfolio of businesses owned and operated by local non-profits working with homeless communities. Boreslaw Rok, a professor of environmental ethics in Warsaw, focused on the critical ethical dimensions of introducing the profit motive into NGOs and the "cultural clash" this may cause with mission-related activities.

Participants also examined the results of the year-long action research of the SNFP consortium, which documented 20 unique cases of NGO self-financing from Czech Republic, Hungary, Slovakia and Slovenia.

NGOs in CEE have succeeded in finding many opportunities to use self-financing strategies. Many have begun to employ creative and potentially lucrative "eco-enterprises." The Eco Centrum in Brno publishes, sells and distributes books on nature, ecology and healthy lifestyles and operates a graphic design and print production studio, which together generate nearly 80 percent of its operating budget. In Slovakia, Green Line generates about 80 percent of its annual budget through membership fees, seminars for schools, sale of manuals, games, T-shirts and stickers and through the leasing of space in a donated building.

But self-financing is clearly not the panacea for solving all non-profit sector financing issues. The NGO Venture Forum showed that NGOs face numerous obstacles in implementing self-financing strategies and that such strategies are not suitable for all NGOs. Questions of management, access to credit, conflicts between a for-profit and non-profit mission, legal, tax and regulatory issues, potential fallout and competition with for-profit small-businesses, public accountability and potential abuses are all issues faced by NGOs.

To address these needs, the SNFP team will now focus its attention on capacity building Ñ assisting NGO entrepreneurs to improve their knowledge and skills in business, finance and management. At the same time, NESsT is focusing greater attention on venture financing and in 2000 hopes to launch a "venture fund" to invest in a limited portfolio of NGOs in the region to start-up or expand self-financing enterprises.

(For more info: Lee Davis, Co-Director, NESsT (Budapest), <Nesst@igc.apc.org>) Support to NESsT for the event came from the Trust for Mutual Understanding and the German Marshall Fund of the US.