Hedging for Sustainability: Twenty Revenue Streams for Democracy, Rights, and Governance Non-Governmental Organizations

NGOs in the democracy, rights, and governance space are facing unprecedented cuts to their funding. This blog explores new revenue streams to help them continue their critical work.

By Joseph Foti (Open Government Partnership) and Cheri-Leigh Erasmus (Accountability Lab)

The last few weeks have been turbulent for the democracy, rights, and governance community.

The United States is at the center of an ongoing storm. A partial list would include the ongoing cuts at USAID, the unexplained freeze on funds at the National Endowment for Democracy and its whole family of organizations, and the dismissal of large parts of the anti-corruption law enforcement. Other countries are also making cuts to foreign aid, like the Netherlands and the United Kingdom, while France is taking a harder look at what it funds.

It is clearer than ever that good governance matters. Stopping corruption, ensuring access to justice, and protecting democracy make us all more prosperous and safe. They also allow us to adapt to the toughest problems of today — climate change, inequality, and privacy online and offline.

Good governance presents a “problem of the commons.” Few individual actors want to pay for it but many individuals might benefit from breaking the rules. For that reason, it has made sense for a long time to pay with grants. But that model seems to be retracting, at least for the moment.

As political and funding winds shift, it is important that democracy, rights, and governance non-profits explore ways to diversify their funding streams for greater resilience. Indeed, according to some estimates, more than 60 percent of non-profits have non-grant revenue streams. This number may be lower among those groups working on democracy, rights, and governance

We offer a short list of alternative funding models with an explanation of each, including its benefits and rewards. Of course, no model–including the predominant grants model–is without its tradeoffs. Nonetheless, we hope this list (divided into the categories of financial innovation, pooling risks and assets, and payment services) can start a few conversations.

Financial Innovation

Individual Membership

• What is it? People pay membership fees to belong as a member or supporter of an organization.
• Examples: World Wildlife Federation, Greenpeace, or Amnesty International
• Discussion: The benefits of being a membership organization are a direct connection to many supporters. In addition, for organizations dealing with repressive “foreign agents” laws, they can find domestic funding. One possible downside is that significant resources must be used to market the organization, though such an effort may help governance organizations describe their impact in a less-technical way.

Results-Based or Outcomes-Based Financing

• What is it? Results-based financing mechanisms, such as social impact bonds, link funding to specific, measurable outcomes. Investors provide upfront capital for projects, and governments or philanthropic organizations repay them only if pre-agreed outcomes are achieved.
• Examples: The Educate Girls Development Impact Bond in India linked investor returns to improved learning outcomes and enrollment of out-of-school girls.
• Discussion: This model forces organizations to focus on measurable impact and attracts investment capital that might not otherwise flow to DRG non-profits. It also creates accountability for results. However, it requires sophisticated evaluation mechanisms and the upfront cost of setting up these mechanisms can be high. It may be difficult as not all governance-related outcomes are quantifiable or predictable.

Diaspora Funds and Remittances

• What is it? Diaspora bonds and similar instruments allow migrants to invest in their home countries, often financing social and governance-related initiatives. These bonds typically offer competitive returns while supporting national or community development.
• Examples: Ethiopia and India have issued diaspora bonds to raise money for infrastructure and social programs, though with mixed success.
• Discussion: Diaspora bonds could potentially tap into a dedicated base of people who care about governance improvements in their home country. Countries like Albania, Moldova, and Sierra Leone have tapped into American diasporas during their OGP action planning processes, so there is clearly an appetite for better governance. What is not clear is whether these communities would be willing to invest in specific bonds to improve governance in particular. Further, NGOs may struggle to issue such instruments without government backing.

Pooling Risk and Assets

Mergers and Acquisitions

• What is it? Two or more nonprofits combine resources, staff, and programs to enhance efficiency, expand reach, or survive financial hardships.
• Examples: Corus International formed from a combination of Lutheran World Relief and IMA World Health. Oxfam International has also recently reorganized in order to better serve national offices and shift resources to developing countries.
• Discussion: Merging can reduce overhead costs, improve coordination, and create a more resilient organization. There is some evidence to suggest that larger organizations have a higher relative impact as well. On the other hand, mergers and acquisitions can lead to tensions over governance, brand identity, and leadership structures. Additionally, mergers require extensive planning and due diligence to align missions and operations effectively.

Franchising and Licensing

• What is it? Organizations develop a repeatable model or brand and license it to partners or affiliates in different regions, often for a fee or a share of revenue.
• Examples: Open Gov Hub, where we work, is a co-working and networking space with the specific theme of tech and good governance. It is currently part of a network of affiliates, some of which are direct spinoffs.
• Discussion: Franchising allows nonprofits to expand without directly managing every operation. It enables local adaptation while maintaining brand identity. However, ensuring quality control and mission alignment across franchises can be challenging. The franchiser needs to establish strong branding and operational guidelines as well as a system for quality assurance.

Professional Associations

• What is it? A nonprofit establishes a membership network of professionals who pay dues in exchange for networking, certification, training, or advocacy on their behalf.
• Examples: The International Association for Impact Assessment provides training and certification for governance and development professionals. Bar associations, as well, pool member fees to push for the rule of law in countries around the world. The International Consortium on Governmental Financial Management, Inc. is another organization that regularly supports open government reforms in the sphere of public accounting and management.
• Discussion: This model generates recurring revenue and builds a strong constituency. The question for DRG NGOs is whether there are matching professional associations. While lawyers, judges, and auditors are an obvious choice, other professional and trade associations may take more convincing. In addition, the interests of these associations may not always be aligned with anti-corruption and good governance.

Insurance

• What is it? Non-profits provide risk mitigation services, such as legal defense, whistleblower protection, or advisory services, funded through memberships or fees.
• Examples: Often lobbying organizations may sell insurance. In the United States, the American Automobile Association sells roadside assistance but redirects much of that money to policy and budgeting work in US state legislatures and Capitol Hill. Another example is Reporter’s Shield, a joint project of numerous investigative journalism organizations that provides legal defense funds for journalists and human rights defenders.
• Discussion: Providing governance-related insurance services can create a sustainable revenue model while offering crucial support to those at risk. However, pricing these services appropriately and managing financial risk can be challenging. Such a process must be able to comply with law and to manage the risk that comes with insurance.

Lending

• What is it? Organizations provide low-interest loans to individuals, businesses, or local governments working on governance and social impact initiatives.
• Examples: Organizations like India’s Self-Employed Women’s Association (SEWA) have different parts of their organization. While some part of their work involves microfinance and insurance, this allows them to have some representation in civic and governance-related decisions.
• Discussion: Lending creates a sustainable revenue stream if repayment rates are predictable and match lending rates. However, it requires strong financial management and risk assessment. Lending may also bring with it reputational and compliance risks if it comes to be seen as usurious. In addition, an organization will need to ensure that profits remain supportive of good governance.

Incubation

• What is it? An established non-profit provides resources, mentorship, and administrative support to smaller or emerging organizations in exchange for a share of future revenue or operational fees.
• Examples: The Tides Foundation is a large fiscal organization that provides backstops to many organizations and startups. OGP itself began using this model. Another example is the Fund for Constitutional Government, which is the fiscal sponsor for the American Governance Institute.
• Discussion: Incubation allows for resource-sharing, reducing startup costs and risks for new organizations while strengthening the ecosystem of governance-focused groups. However, managing incubated organizations can be resource-intensive, and there’s always the risk that incubated entities may not reach sustainability, their missions begin to part ways, or they become too entangled with the sponsor organization.

Pay-It-Forward Models

• What is it? Beneficiaries of a program contribute financially to support future participants instead of repaying traditional loans.
• Examples: Some legal aid organizations use this model, where successful litigants contribute toward future cases.
• Discussion: This model fosters solidarity and reduces reliance on grants. However, it requires a critical mass of participants and strong community buy-in to sustain.

Payment for Services

Consumer Goods and Services

• What is it? A non-profit sells products — such as books, merchandise, or ethical consumer goods — to fund governance work.
• Examples: The “Stand with Hong Kong” merchandise campaign helped fund pro-democracy advocacy. Similarly, Oxfam has long operated thrift shops and bookstores throughout the UK to fund its many charitable and policy activities.
• Discussion: Selling products diversifies funding but requires significant marketing efforts. It also risks mission drift if commercial considerations take precedence. On the other hand, high-quality products can create a lasting bond with the public and develop a trusting relationship.

Business-to-Business Products and Services

• What is it? A non-profit sells governance-related products to other organizations.
• Examples: Civic tech organizations can sell open-source election monitoring tools to NGOs. Two notable examples in the governance space are Mapbox, which began as a project of Development Seed, and Global Integrity’s Indaba research platform.
• Discussion: The market for governance-related products is likely limited. Therefore, organizations like Mapbox have moved well beyond their initial focus on development non-profits and international organizations.

Intelligence

• What is it? Providing proprietary research, risk analysis, or investigative services to clients. Organizations may, for example, brief a corporate council or provide other exclusive information on governance.
• Examples: Complex organizations like Thompson-Reuters have a mix of products, but also regularly support democracy, rights, and governance work. For example, Thompson-Reuters hosts the Media Freedom Coalition and sells actionable business intelligence and news to other media outlets.
• Discussion: This can generate sustainable income, but maintaining independence and credibility is critical.

Legal Fees

• What is it? Charging for legal services related to governance, such as transparency litigation. In some countries or sectors, there are additional rewards for citizen law enforcement, corporate whistleblower actions or other rules-based remuneration for ensuring that the law is enforced.
• Examples: Public interest law firms like the Southern Environmental Law Center (United States), Legal Initiative for Forests and Environment (India), and many other organizations are able to recover some fees in regular public interest litigation. In addition, some legal clinics at law schools are able to provide support to public interest actions by becoming parties to suits.
• Discussion: Legal fees provide revenue but require expertise and can limit access for those unable to pay. In addition, precedent-setting cases, especially in common law countries, can help cases that test the interpretation of the law. In addition, few countries have legal frameworks that support legal aid and lawyer’s fees for public interest and citizen enforcement actions.

Process Facilitation

• What is it? Project developers may need mediation, stakeholder engagement, or governance-related consulting. DRG non-profits may be well-situated to provide advice or carry out facilitation on their behalf.
• Examples: The Consensus Building Institute facilitates governance reforms and People Powered (a frequent OGP collaborator) promotes and supports participatory democracy initiatives worldwide.
• Discussion: This generates revenue but can blur the line between advocacy and consulting. In addition, process facilitators who may have a strong position on a topic will need to step back from those positions while facilitating. This can pose a risk when a topic is highly polarized.

Cultural Translation

• What is it? Often, project developers or policy experts do not speak the same language as communities. Sometimes this gap is technical. Other times, it is literal. NGOs may often be a “bicultural” translator that can speak the language of both the grassroots campaigns and corporate, professional, or business jargon.
• Examples: This model has been especially important around the Green Climate Fund projects and the Green Accountability Fund, which support NGOs to ensure the highest quality of investment in climate-related projects.
• Discussion: Similar to process facilitation, this requires a non-profit organization to take off its advocacy hat, at least temporarily. If an organization is operating in a polarized environment, this can be seen as “selling out.”

Consulting

• What is it? Providing governance-related advisory services to governments, businesses, or multilaterals.
• Examples: There are thousands of examples of consulting across the good governance field.
• Discussion: Consulting offers revenue but can create conflicts of interest, as described above.

Certification

• What is it? Companies or municipalities pay non-profits to guarantee that they follow certain governance standards.
• Examples: While it is not a governance organization, LEED (Leadership in Energy and Environmental Design) is the world’s most widely used green building rating system. There are also many consultancies around various ISO standards or the International Responsible Mining Assurance.
• Discussion: The benefits are that an organization may directly apply its expertise in a way that immediately affects operations. The downside is that, if the highest standards of integrity and independence are not followed, a non-profit’s reputation may be dragged down. Navigating this balance can be very tricky.

Educational Offerings

• What is it? Providing training, professional certification, or online courses on governance topics.
• Examples: Many organizations provide important briefings for members who pay to be a part of the organization. An example of a successful non-profit in this space is the Emerging Markets Investors Alliance, which guides institutional and boutique investors as well as ratings agencies in socially responsible investing in developing countries.
• Discussion: Education is scalable but requires marketing and investment in content development. It is also often difficult to achieve scale for smaller professional or corporate interests without allying with major educational institutions, which comes with its own costs.

Grants

• What is it? A donor gives money to carry out mutually agreed-upon activities.
• Examples: Grants are one of the predominant means of financing DRG non-profit activity.
• Discussion: Grants require negotiation between donors and grantees. This can mean that grantees are subject to mission drift, fragmentation, or other forces that might pull an organization away from its core strategy. In addition, grants can quickly dry up as new fads change priorities, even if a problem has not been solved.

In conclusion, diversification of revenue can help stabilize any organization. Diversification almost always comes with risks to a brand and will necessarily change an organization’s relationship with donors and other constituents. This is not always bad. Nonetheless, such diversification also has its limits. There are some public goods which are simply not marketable. Thus, there is also a continued need for a grant element in many governance organizations’ budgets.

Moments of stress can be moments of transformation. Clearly, many innocent people are suffering as a result of these sudden and blunt changes. Nonetheless, these are exactly the moments when we, as a community, must think outside the box. We can’t go back.