How effective are NGOs?
One of the largest industries in the world might need a new structure
Being poor is neither coincidental nor can it be attributed to bad choices. It is rooted in an unequal economic system. Untangling the knots of a complicated system is difficult. For some, it is easier to just blame the poor and say, “that’s what they deserve”. Fortunately, all NGOs and non-profit organizations are trying their best to untangle these knots. Are they successful? Or is the vision that they once had straying in shareholder and donor reporting?
We have an abundance of NGOs floating around, circa 10 million of them. To put this into perspective, if NGOs were a country it would be the 5th largest economy in the world. The largest contributors behind making this industry huge are beyond doubt, the donors. The World Giving Index states that 50% of the world’s population has helped, donated, or volunteered in the last 10 years. In the US in 2019, an estimated $449.64 billion were donated to charitable causes.
On the flip side, approx. 736 million people in the world live in extreme poverty. To date in 2020, poverty has killed 3.8 million children, and there were 5.5 million deaths due to hunger. In these times when we can’t think of anything worse than the Pandemic, poverty has still been silently boasting its killer trophy.
What are these numbers telling us? It is a simple calculation: we have 1 NGO for every 750 people in the world. Since the 80s there has been an explosion in the number of NGOs. Reasons range from decolonization/globalization to an increase in the number of global issues. Yet, the decrease in poverty (see graph) does not stand proportionate with this growth. Of course, like in any other industry, there is some corruption level involved. Also, a lot of donations are going to the wealthy (e.g. private universities/private foundations) rather than the poor. Logic says, even after considering all that, much better results should have been achieved.
“The cost to end poverty is $175 billion per year for 20 years. This yearly amount is less than 1 percent of the combined income of the richest countries. Moreover, it is only four times the United States’ military budget for one year”, says Jeffrey Sachs, one of the leading experts on economic development. Now, that is something to ponder on.
Nonetheless, money is not the most trivial issue in the aid sector. In 2019, $449.64 billion were donated in the US alone. That is more than double the required amount that Mr. Sachs has calculated to end poverty. The US has been donating more the $175 billion every year since 1990. However world poverty does not seem to come to an end. Are we missing something?
The problem does not lie in the funding rather somewhere else. It is time to look deeper and see if the sector requires a structural change in its operations. So that the donors receive an enhanced positive customer experience and NGOs are enabled to generate a bigger impact. The World Giving Index has established that people are becoming more helpful but are giving less to charities. Amongst others, the lack of confidence in charities can be blamed on the lack of visible relatable results and structure. In todays digital era, it is possible to track the delivery of new shoes in real-time. But people cannot generally see the actual impact of their giving. They are in a constant dilemma, whether the money they donated is helping or going into a black hole? Media coverage on scandals like Oxfam’s only makes them more reluctant to donate. Sometimes some results can be seen but are so far strewn that they are not relatable anymore. In a survey done in the UK, nearly 60% of younger generations agreed that seeing the impact of their donation significantly affects their decision to give. Such visibility is only accessible to large donors. Recently there has been a soar in sustainable for-profit social organizations. I wonder if the skeptical donors are moving towards buying green products to satisfy their need to do good.
Some NGOs have understood that a positive donor experience is a significant part of a holistic business strategy. Many are now focusing on donor retention instead of a frantic search for new donors. Having a substantial, quicker, and sustainable impact adds to a positive donor experience. Technology is the best tool to achieve that. It helps accomplish faster, widespread, and trackable results. However, technology alone cannot get help an NGO to generate impact. More supporting pillars like innovation, accountability, grassroots orientation are required. It gets complex to deploy such tools while solving an issue like poverty. Thus, I am adding another terminology to this word puddle: systematic cross-sector collaboration. This tool is applied too little and at a far too small scale.
Effective cross-sector collaboration enables pooling in different methods and expertise. It also brings cost-effectiveness, efficiency, and capability to work at a larger scale. Besides, a charity will not have to waste time reinventing service expertise, that it does not need to. It is time-saving and economical to utilize already available resources. There are some very successful examples of cross-sectoral collaboration in this industry. But it is far from a scale that can make the desired sustainable impact. Individuals, INGOs, NGOs, and governments must come together to create a better world.
With new ideas, fresh wind, and an alliance of aid and trade, it is possible to end extreme poverty at a low cost. The aid industry is losing its client base and to some extent the trust. It is time to put immediate attention to the issues that the industry has been schlepping with it incessantly.
