It is obvious that finance is needed for operating any enterprise whether it is commercially driven or socially inclined. This is stressed upon more in a Ngo since it has to look for a voluntary contribution for achieving its social objectives. Generally, the Sources of funds for NGOs are from three different areas, the Government, the public at large and foreign development agencies.
The foreign Source is a major funding avenue for NGOs in third world Countries like India.
foreign source funding for ngo
Donations continue to be a major source of funding to NGOs to fulfill its mission objectives. An NGO may receive contributions from different donors like individuals, corporates, foundations or trusts supported by corporate groups, or persons of philanthropic orientation.
NGOs involved in providing microcredit approach banks for their financial assistance requirements. They can also enter into commercial ventures, which can make them sustainable enterprises.
The main sources of receipts for NPOs in India are mainly from self-generated funds, loans, grants, and donations. A survey was conducted on this issue by US-based Johns Hopkins University as part of a Comparative Non-Profit sector Project (CNPS). Contrary to popular perception, the survey revealed that more than half of all receipts of NPOs in India are self-generated through fees, charges for services, etc. Grants and donations (from domestic and foreign Sources) constitute two- fifth (41.9 percent) of total NPOs receipts in the country. Interestingly, the survey revealed that only 7.4 percent of receipts of NPOs is foreign funds.
There are no pre-registration formalities for receiving contributions from local Sources other than those required under the Income Tax Act,1961,, like when it seeks to avail tax exemptions and the donor is serious of the tax benefit available to him. However, contribution to NGOs from overseas is governed by the Foreign Contribution (Regulation) Act, 1976 (FCRA).
The NGOs operating in specific areas like women empowerment, tribal development, forest conservation, etc. can use their expertise and distribution channels to create wealth for the program beneficiaries instead of merely acting as distributors of donations. However, establishing a sustainable business, particularly by NGOs with societal commitment, is no easy task. They face several challenges like the requirement of capital, brand building, etc. This is where a partnership with corporates would help the NGOs or ngo consultancy to learn from their expertise. Ideally, an NGO-Corporate partnership, in developing the commercial arm of an NGO, would help in supporting the social cause on a sustainable basis.
