Since the announcement in early December by the Governor of the Central Bank that Trinidad and Tobago has experienced its fourth consecutive quarter of negative economic growth, the “R” word is becoming more commonplace in conversations – recession. Perhaps morose in business conversations but slowly making its way into the jargon of the everyday citizen.
Coming on the heels of, and obviously related to a sustained period of decreasing oil prices, it is fair to say that in our current recessionary climate it can no longer be ‘business as usual’. But while business and households alike grapple with falling revenues and incomes and make adjustments to company and personal budgets, how does this translate in the NGO sector?
What is the state of philanthropy in times of recession?
Despite increases in the number of welfare type programmes that we have seen in recent years in Trinidad & Tobago, there is still a significant number of people that depend on the benevolence of the NGO sector, primarily funded through private, non-state sources, for their survival. The landscape of this country would be significantly different without the NGO sector.
So how are NGOs faring, and what will happen to their funding sources?
Unlike the North American experience where much of the funding towards charitable causes comes from individual donors and private foundations, much of the funding for the NGO sector in Trinidad and Tobago, (outside of state subventions) comes from the private sector, and how they respond will be critical to the work of NGOs. So what can we expect?
Reduction in corporate giving
No surprise here, there will be a reduction in corporate giving; as budgets in all departments are cut, so too will budgets for philanthropy and social investment. And even for the few organisations that strive to maintain the same percentage of revenues towards philanthropic investments, reduced revenue will mean reduced giving in real terms. There is likely also to be a shift away from one off ad hoc giving to more structured, longterm partnerships arrangements.
Greater emphasis on impact
As companies strive to do more with less, so too will they want their charitable investments to yield a greater return. Organisations will now, more than ever be looking for impact and the NGO sector will need to be able to measure and demonstrate the impact of their work. Available funding is likely to move towards those NGOs who can show tangible results and demonstrate that their efforts are having, or will have, longer-term impact on the lives of their beneficiaries.
Increased focus on governance and accountability
Whereas this trend has already been increasing, in times of recession we can expect more due diligence on the part of donors in assessing and evaluating the NGOs that they support. More demands will be put on the sector to demonstrate good governance as well as financial accountability and reporting for funding received from the private sector.
The NGO response
It may seem clichéd but it is often said that in every crisis there is opportunity and this is how the NGO sector needs to view this period of recession. This is the opportunity for NGOs to examine their business model, reviewing the way business is done; focusing on both revenue and expenditure.
On the revenue side, NGOs must consider not only their current sources of revenue, but where will revenue come from in the future. It is important to understand what both current and potential donors are looking for to determine whether donor requirements are being and can be met. A strong focus on governance and accountability is necessary for the survival of any NGO in today’s climate.
On the expenditure side, NGOs need to be looking at impact ‘bang for the buck’. What percentage of every dollar spent is going towards the cause and how much is being used to support administration and overheads? Monitoring and evaluation, demonstrating and measuring impact are also critical factors for successful NGOs.
Finally, while Trinidad & Tobago may be in a period of recession, it is not all doom and gloom for philanthropy, the NGO sector is critical to the socioeconomic landscape of this country and plays an important role that is unmatched by the private and public sectors. Now, perhaps more than before, is an opportunity for the sector to balance the increasing demands that are being placed on it by donors and beneficiaries alike to help the economy through this period of economic downturn.