The nonprofit sector and its funding landscape are constantly evolving. As the last year of the 2010s decade draws to a close, predictions around every field are doing the rounds. There are certain significant changes afoot for the development sector and philanthropy as well.
Here is what the sector experts and trends as observed over the last few years reflect.
Sectors attracting more funding:
With global changes taking place around the social, political and environmental issues, and giving preferences of individuals and donor agencies, the sectors that attracted more funding over the years are bound to shift. The last two decades saw a huge amount of funding in the health sector, HIV/AIDS and related areas, and then gradually education, skill-building and livelihoods also came to the fore in terms of donor priorities.
As of today, the younger generations are leading the protests across the world on the climate change issue. From Greta’s movement, ‘Fridays for Future’ to the Madrid Climate Change Conference (COP 25) taking place as you read this (December 2019), action for climate change and global warming are taking the centre stage, expected to result in worldwide political action and following the market and sector orientation. One may expect funding and support to be directed towards addressing climate change and resultant social issues- social justice, indigenous populations, women and children, livelihoods, food security, etc.
The planet is now becoming a priority for various stakeholders in the ecosystem and thus, environmental conservation, action for water bodies are also going to lead among the causes. This is expected to cut across the funding areas, and to be used as a lens to see whether programs in areas like health, socio-economic development, education, livelihoods, etc. are being proposed in an environmentally friendly and sustainable way.
Globally, peace, conflict resolution and refugee migration have been serious humanitarian issues and have attracted increased funding over the years. As per the Global Humanitarian Assistance Report 2019 published by Development Initiatives, humanitarian aid is gradually growing and it reached USD 28.9 billion in the year 2018- a big growth of almost a third since 2014. The report also acknowledges that the growth rate has been slow from 2017 to 2018, of only 1%. Data from various sources have shown that this upward trend is expected to continue and funding towards peace, conflict resolution, the migrant crisis and human rights is expected to increase from various sources.
In order to be more inclusive and to support people who are under-represented, charities, governments and funding organizations are extending support and funding will also increase in such areas. Whether it is LGBT communities, survivors of violence, people affected by war and migration, people living in poverty or any other sidelined community/ ethnicities, people of colour, etc., efforts are being taken to ensure inclusion at all ends. Diversity and inclusion will also continue to be a key factor for organizations’ credibility perspective, depending on what policies they follow to ensure they themselves follow the values they claim to work for.
Health, livelihoods, education and others:
Funding in the areas of health, education, livelihoods is expected to grow consistently as it has over the years. These are the conventional areas which will continue to remain relevant. Many established small, medium and large nonprofits work for these causes and have well-established pipelines but their donors may be diverse- individuals, corporations, foundations, etc.
Funding for areas like WASH has been increasing but still inadequate to cover the ‘coverage gap’, because of its capital intensive nature. It might continue to remain a challenging area to find adequate funding for. Microfinance, renewable energy and technology are the areas attracting a lot of funding and grants and will continue to do so in 2020 and beyond.
Other funding trends to anticipate in 2020:
- Individual giving
General or individual donor giving was recorded at lower levels in the US, the largest donor area where the retention rates were also reported to be low as compared to previous years. This trend also showed reliance on major donors and meant that efforts need to be put in to ensure the ‘voice’ of the common individual too. This trend means that in order to increase individual donations and recurrent and engaged donors, organizations need to implement strategic fundraising and engagement initiatives for the target audience, going forward in 2020.
- Increase in larger gifts
Nonprofits can expect an increase in big gifts, as donors are giving more but less frequently. These larger gifts from major donors as individuals or foundations/ corporations etc. might mean a decline in the autonomy of small nonprofits in many cases. NGOs must weigh in the advantages, responsibilities and all the caveats while accepting these donations to ensure autonomy and credibility. At the same time, once you have accepted a donation or grant, ensure that reporting requirements are met, the donors are stewarded adequately and are engaged deeply so that they give again and stay engaged with your cause.
- Intermediary bodies to empower donors and support nonprofits:
The third sector will continue to support the ‘third sector’- meaning that the intermediary organizations will continue to grow in order to empower donors and support nonprofits in their cause. These organizations are typically offering technology, services, consulting, mentoring, etc. and are acting as the connecting links between nonprofits, individuals and private sector and are supporting the overall ecosystem.
- Impact investing and sustainability:
More and more individuals and organizations want to give to the causes where their money is used wisely and with a ‘return’. As per Wikipedia, Impact investing refers to investments made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return. Impact investments essentially provide capital to address social and/or environmental issues.
As the impact investment market continues to grow, more and more stakeholders are coming forward to support and flourish the market. The biggest event in the domain is taking place in London in 2020, called the Impact Investing World Forum 2020. As per the Annual Impact Investor Survey is done by the Global Impact Investing Network (GIIN) in the year 2019, fifty-six per cent of the investors aim at achieving both social and environmental impact objectives by investing in the causes of their choice, and most allocate the greatest share of assets to areas like energy, microfinance and financial services. This trend is expected to continue in the field of impact investment. Most of the investors track the progress vis-a-vis the United Nations’ Sustainable Development Goals (SDG).
- Strategic corporate giving:
Corporate support to nonprofits usually tends to be sought after by all alike, as it provides concrete underpinning to the work, proves credibility and ensures sustainability. In 2020, your NGO is likely to reach new audiences and raise more funds through corporate giving. With more compliances in place and an inclusive outlook of most corporates, there is an upward trend in corporate giving in most of the countries. You can make the most of these opportunities, and you can increase your fundraising from the corporate sector by conducting deep research, reaching out to companies which are connected to your cause, build and nurture partnerships with them in terms of funding/ employee engagement/ volunteering opportunities.
- Operating Expenses: Still no-no?
It is well-known that the efficacy, effectiveness and efficiency of an NGO is judged by its finances- the expenditure ratios to be specific. Ideally, the programmatic expenses must constitute the major chunk of the overall spending and some organizations claim it as 85-90%. All the other expenses were considered as a single ‘bucket’ which included important core costs- communications, fundraising, professional development, administration, operating expenses and so on. This has been the cause of ongoing debate between funder and implementing organizations. However, this perspective is changing now. More emphasis is being given to the need for mentoring, professional development, technology adoption, capacity building aspects and even to operating expenses. The only considerations here are the reasoning and rationale of the support needed, transparency in conduct and finances, and like-minded donor or donor organization.