GLOBAL: NGOs pare down in face of financial crisis

Tuesday, October 28, 2008

Some of the biggest development and humanitarian NGOs are laying off staff or revising programmes for 2009 as their income streams flatten because of the global financial crisis.

Fundraising experts of three of the world’s top NGOs – Oxfam GB, Save the Children UK and World Vision USA – said programme growth will slow in 2009 as a result of the squeeze.

“The growth we had assumed when putting plans together a year ago is not materialising,” John Shaw, director of finance and information systems at Oxfam GB, told IRIN. “The overall picture is essentially flat.”

Oxfam had envisaged five to six percent growth over 2009-10, but has now revised this to zero.

Some of the biggest reductions are coming from corporate donors in the financial sector, NGO staff told IRIN. “The fall-off with corporate started six to nine months ago,” said Tanya Steele, supporter relations and fundraising director for Save the Children in London.

“The financial services and investment banking sector have been very generous in the past but we know it will be a tough financial year for them going into 2009. We’d expect [funding from them] to be flat or potentially decline going into 2009.”

“Growth from corporations won’t be as much so we won’t be scaling up our programmes as we’d want to do,” Robert Zachritz, World Vision’s director of advocacy and government relations, told IRIN from Washington, DC.

As a result, NGOs such as Save the Children will not be able to make substantial investments in existing or new programmes as they had hoped.

The three agencies have an annual income of US$3.1 billion.


Aid groups are doing all they can to prevent the cuts from affecting beneficiaries. “We are trying to cut back on support, rather than programme costs,” Oxfam’s Shaw said, estimating cutbacks of 10 to 15 percent of ‘variable costs’ including staff at headquarters and regional centres to create more cost-effective operations.

While all agreed new money could be found should a crisis break out in upcoming months, Save the Chilidren’s Steele worries some of the more neglected, chronic crises, such as in southern Sudan, may suffer.

World Vision fears that recipients of micro-credit programmes, such as poor farmers who receive loans to buy tools, seeds and fertilisers, could be particularly hard hit. “Much of this relies on getting loans from banks, which is going to be a real challenge in the near future,” Zachritz pointed out. “Losing this credit is a huge problem for the world’s poor, small-scale farmers.”

World Vision is the world’s biggest international humanitarian non-profit, with US$2.4 billion in annual funds, 30 percent of which comes from the US government, 30 percent from foundations, and 40 percent from individual supporters and corporations.

NGO strategies

NGOs are trying to innovate their way out of the financial squeeze. Some agencies, such as Oxfam, aim to increase funding from institutional donors which they see as being steadier in the long term.

Save the Children is trying to carve out more funds from wealthy individuals. “It will be a competitive market but I cannot believe we won’t grow in the next four to six years,” said Steele.

While corporate funding is dropping off, lay-offs provide an opportunity for redundant staff from the corporate sector to volunteer for non-profits, putting their skills to good use, said Steele. “While corporate money is diminishing, that does not mean the relationship with these companies has to come to an end.”

And Steele hopes that drops in television advertising costs – one effect of the world credit crunch – will mean agencies such as Save the Children can now better afford to run direct marketing campaigns on television.

But on the whole, many humanitarian and development NGOs are revising down their fundraising plans. Aid agencies are less likely to be knocked down if they plan ahead, said Oxfam’s Shaw. “We have been revising our plans over the past six months. If we have to take knee-jerk decisions these won’t be as effective as they will be if we plan for the future.”

Silver lining

There are some encouraging signs amid the uncertainty. Major institutional donors such as the UK Department for International Development or the US Agency for International Development “are taking a long-term view and we are not seeing any immediate signals that they are pulling back,” Steele affirmed.

US government funding is going to stay at the same level as 2008 according to World Vision’s Zachritz, partly because the funding cycle runs from October 2008 to the end of September 2009, and it being an election year, Congress has passed a continuing resolution keeping US government funding steady.

But it is too early to say if this strategy will endure, according to Shaw. “At the end of the day government funding is down to governments balancing their books and politics come into it, so it is too early to tell, but the commitments made so far are encouraging.”

Zachritz said World Vision is largely protected from corporate cuts because the bulk of the NGO’s corporate donations are ‘gifts-in-kind’, in other words, medicine, building supplies and clothing, rather than money. Further, World Vision relies on child sponsorship for much of their individual giving. “People are very loyal to that and you usually don’t see it drop, even when families experience [financial] difficulties,” he pointed out.

It is this loyalty that will keep them going, NGO staff told IRIN. "The public is still very responsive to international [humanitarian] needs,” Shaw said.

But while the NGO financial experts have not yet seen substantial reductions in individual giving, they anticipate potential dips as they approach the holiday fundraising season. “Our Christmas catalogues have already gone out…this holiday will be a real litmus test in terms of tightening belts,” said Steele.