Adapt or perish: NGOs struggle to survive

As most funders play it safe, how will NGOs working on long-term systems change and community-led impact find the means to stay afloat?

Reliable data on civil society and philanthropy in India is hard to come by. One currently prevalent narrative claims that this is a ‘golden age’ for philanthropy, with international funding holding its own, corporate social responsibility (CSR) funding building on the COVID surge, giving by high-net-worth individuals and domestic foundations growing apace, burgeoning social impact investment and the launch of new fundraising channels like the social stock exchanges (SSEs). Most NGOs, on the other hand, manifest gloom at the loss of international funding, narrow funding preferences of businesses and affluent individuals, crippling job losses, large numbers of nonprofits ceasing operations and constrained civil society space.

It is impossible to discern where the truth might lie, given the paucity of reliable data. Data cited here are from the Bain-Dasra India Philanthropy Report 2024, the Indian Impact Investors Council, the Centre for Social Impact and Philanthropy at Ashoka University and sector experts. 

The data drought is itself an issue that needs urgent redressal, requiring greater transparency from regulators and philanthropists and increased investment in building a stronger data ecosystem. Despite the gaps, however, what broad trends might we discern?

Government spending dwarfs all other investments, reportedly accounting for 95% of all social sector expenditure. Substantial sums are channelled through NGOs for scheme implementation at both state and central levels. Despite recent attempts to improve transparency, these grants tend to be parsimonious, failing to cover all the costs involved. Budgeting is short-term, decision-making can be fickle and payouts are frequently delayed.

Foreign funding under the Foreign Contribution (Regulation) Act, 2010 (FCRA), estimated to have exceeded Rs 23,000 crores in 2023, has held up better than expected, given the number of NGOs whose licences have been cancelled over the past decade, and the dozens of international donors whose grant-making to India is constrained by the fact that they must seek ‘prior reference’ from the Home Ministry for every transaction they initiate. The ministry no longer permits access to detailed information on FCRA fund flows, leaving us reliant on occasional pronouncements in Parliament, and preventing any meaningful analysis. 

It would be fair, nonetheless, to conclude that the composition of this funding stream has changed. Support to NGOs whose work focuses on human rights, democratic freedoms, policy advocacy and the like has all but disappeared, as have funds from minority faith-based donors.

It is still possible for international funders to extend support to organisations that work in close coordination with government, those providing direct services or those working in thematic areas considered politically non-controversial. Concerted efforts by Indian NGOs to reach out to diaspora communities have also been met with success.

CSR funding, under Section 135 of the Companies Act 2013, has also proven resilient, amounting to Rs 28,000 crores in 2023, as corporate profits in the aggregate have held up and compliance has improved. CSR support is one of the few avenues open to many NGOs who lack both international connections and access to wealthy Indians. Despite gradual evolution in corporate mindsets, almost half these funds are directed towards the companies’ own programmes.

The funds channelled through NGOs are also biased towards organisations which can offer short-term, easy to measure, direct service delivery programmes. This is the most risk-averse donor segment, avoiding both long-term commitments and uncertain outcomes, and steering well clear of causes and organisations that are perceived to be controversial. These factors work against NGOs whose programmes are rights-based and systems-change-oriented, those that work in geographies outside the direct footprint of big businesses and those who work towards empowering the most marginalised communities.

Giving by India’s ultra-rich has been much heralded despite the caveat that their rates of giving as a percentage of their wealth remain low by global standards. Giving by this group of donors is most opaque. Some estimate the figure at Rs 26,000 crores in 2023. Nevertheless, it is to this set of donors that Indian civil society must increasingly turn in the wake of the crackdown on international funding. The most positive trend here is the thematic diversification of donor portfolios from focusing almost exclusively on education and livelihoods to increasingly cover health (including mental health), the climate crisis, higher education, scientific research and, on a smaller scale, nonprofit capacity building and strengthening of the social impact ecosystem. 

Regrettably, caste and gender discrimination, the ‘old’ causes that lie at the root of all India’s social and economic problems, remain sorely neglected. Philanthropic ambitions in India have soared, seeking to transform everything from education, healthcare and livelihoods to governance. But the preference for superficial, market-biased, technocratic solutions conceptualised by elites far removed from the communities they purport to serve prevents systemic, sustained impact. India’s philanthropists would do well to support grassroots work with its bottom-up, long-haul, community-driven approaches, and willingness to engage in the hurly-burly of politics. 

Even the tiny number of philanthropists who might previously have considered support for such work has shrunk from fear of political repercussions. For the average NGO working outside the big cities without marquee names on their boards or leadership teams, the chances of penetrating these elite citadels are slim. Worryingly, these philanthropists are also displacing civil society voices in policy design.

Emerging options

Newer channels and instruments such as impact investing, outcome-based funding such as development impact bonds (DIBs), and the recently launched social stock exchanges (SSEs) have raised hopes that they might open new pools of capital to a wider swathe of social impact organisations. Impact investments have grown rapidly, reportedly touching $5.8 billion in 2022. DIBs continue to grow in number and thematic range, with half a dozen bonds valued at over $40 million since 2015. And a handful of NGOs have successfully raised small sums on the SSEs this year. However, all these channels favour nonprofits which can demonstrate impact through hard metrics within a short time frame.

Where then, might the vast majority of India’s NGOs, especially those that work on longer-term, system-changing, community-led impacts find the means to survive? Where might social innovations like those that transformed policy in the 2000s find incubation? What of policy research, independent media and legal activism? A handful of organisations with the requisite knowledge and skills might find support from enlightened international or domestic funders who have evolved to flexible, long-term, trust-based models that prioritise community leadership and systems-changing strategies.

‘Retail’ fundraising, which garners resources from fellow citizens, targeting relatively low-ticket, committed support from large numbers of individuals of all socio-economic backgrounds may be the only recourse for most NGOs. Many are, however, deterred by their lack of familiarity with its methods or by the belief that this kind of resource mobilisation is too expensive or arduous. 

A useful contribution from the philanthropic community, international and domestic, might be to invest in building the capacity of nonprofits to adopt this approach and strengthen the ecosystem needed to facilitate giving of this kind, especially through digital channels, at the commercial end of which India leads the world. If estimates of retail giving between Rs 27,000 and Rs 37,000 crores in 2022-23 are realistic, these investments could go a very long way in building the sustainability of NGOs and the sector at large, besides fostering compassion and good citizenship.

For NGOs in India, the choices are stark. Conform to the straitjacket of becoming delivery channels for absent public services, pin one’s hopes on finding the elusive progressive donor, or build a public constituency for one’s work. If Indian civil society, lauded around the world for its diversity, innovation and vibrancy, is to play the full complement of roles demanded of it in a deeply unequal, highly fractured society, and protect our democratic rights and freedoms, it must build the solidarity, cohesion and capacity necessary to influence philanthropic norms and public perceptions to rally to its support.

(Ingrid Srinath is an independent expert on philanthropy and civil society.)