Conditions To Implement Strategies To Deal With Financial Vulnerability

• In Event: Non-profit finances 1

Abstract

NGOs have become known as sources of development finance, as well as for their ac􀆟ve
engagement in different aspects of the socio-economic development of countries, such as
educa􀆟on and health (Cannon, 1996; Riddel, 2013). In order to fulfil their mission they depend
on a diversity of funding sources from corporate enterprises, governments and private donors
(Hung & Hager, 2019; Nunnenkamp et al, 2013; Scha􀆩eman & Waymire, 2017; Ye & Gong, 2021).
In prac􀆟ce, funding providers may delay the transfer of commi􀆩ed funds, interrupt the funding
or even end projects during periods of economic downturn, or in the case of noncompliance
with donor requirements. Consequently, the NGO sector in general is characterised by
unpredictable and unstable income flows (Bulíř & Hamann, 2003; Qu, 2019; ), and NGOs are
o􀅌en considered to be financially vulnerable (Lu et al, 2019; Pren􀆟ce, 2016). In many instances
the interrup􀆟on or a drama􀆟c decrease of funding can cause NGOs to decrease expenditure on
service delivery programmes or force them to shut down opera􀆟ons (Ecer et al, 2017). This is of
grave concern to all relevant stakeholders as it harms those that are supposed to be the
beneficiaries of the programmes.
This ar􀆟cle explores this ques􀆟on and aims to iden􀆟fy those features or condi􀆟ons that must
apply for NGOs to successfully implement strategies to deal with financial vulnerability. This
entails an analysis of the impact of a decrease of revenue on the opera􀆟ons of NGOs, with a
specific focus on those condi􀆟ons that mi􀆟gate the impact on an organisa􀆟on’s opera􀆟ons, such
as the level of diversifica􀆟on of revenue sources, the surplus margin and the ins􀆟tu􀆟onal capital
in the form of networking and donor rela􀆟ons.
To explore the research ques􀆟on, a case-orientated analysis is presented of 22 NGOs in Uganda
that all experienced a drop in revenue between 2000 and 2001 (a minimum drop of 15 percent
in recurrent revenue as a percentage of total revenue). The NGOs are matched by core ac􀆟vity
of opera􀆟on, but they differ in terms of structure, assets base, years of experience, size and
networks. The study uses a (crisp-set) qualita􀆟ve compara􀆟ve analysis (csQCA) (Kumar et al,
2022). It offers a conceptual framework that highlights the possible configura􀆟ons of condi􀆟ons
that can mi􀆟gate the impact of financial vulnerability on programme expenditure. The study
offers a conceptual framework that highlights the possible configura􀆟ons of condi􀆟ons that can
mi􀆟gate the impact of financial vulnerability on programme expenditure. In agreement with
earlier empirical evidence, a preliminary finding is that where combined condi􀆟ons such as
higher diversifica􀆟on of funding and flexible donor restric􀆟ons are present, NGOs are more likely
to maintain programme expenditure in response to shrinking revenues. Furthermore, par􀆟cular
combina􀆟ons of condi􀆟ons thus explain differences in terms of outcomes among NGOs that
experience a similar drop in revenue. There is strong evidence that ins􀆟tu􀆟onal capital is a
necessary causal condi􀆟on that can improve the ability of NGOs to respond resourcefully and
crea􀆟vely to a drop in revenue.

References

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Author

• Berta Arsénio da Silva Shingirayi, Universidade de Lisboa, ISEG - Lisbon School of Economics and Management