The latest survey by the Accelerate India Philanthropy (AIP) showed that 54% of nonprofits find meeting funders’ reporting and compliance requirements burdensome. “Moreover, such processes are disproportionately focused on inputs and outputs with little focus on outcomes, creating a perverse incentive for nonprofits to prioritise the former,” the survey stated. AIP surveyed 65 Non-Profit Organisations (NPOs) of different sizes working across different sectors to understand their scaling roadmap and the key drivers and barriers that they face in the process. According to the research, 74% of nonprofits consider ‘scaling their impact’ extremely important. Despite this, most nonprofits struggle to survive, let alone grow or scale their impact.
‘Scaling impact is complex’
As per estimates, there are more than three million nonprofits in India, and over two-third of them operate at suboptimal levels with an annual budget of less than one crore. Within this, philanthropic grants from HNIs and UHNIs make up less than 20% of total grants for the majority of NPOs. “Scaling impact is complex and marred with challenges. However, successful initiatives have proved that with the right intent and by leveraging the power of partnerships, change at scale is possible,” Accelerate Indian Philanthropy Director Aditi Ray said.
The survey further found that 61% of nonprofits receive less than a quarter of their funding in an unrestricted manner. Most funding is restricted and channelled towards financing costs associated with individual programmes. As a result, critical functions and shared administrative costs essential to run the organisation, such as building robust fundraising processes, financial systems, capacity building, and training, are left perpetually starved.
Unrealistic expectations
Furthermore, there is a mismatch between the expectations of funders and nonprofits. Weak communication and poor feedback loops result in funders having unrealistic expectations about the actual cost of running a nonprofit. In a bid to meet these unrealistic expectations and secure future funding, they misrepresent their costs by lowering them. These further fuels funders’ unrealistic expectations about costs, especially overhead, capacity building, and other non-programme costs. At its worst, this can become a vicious cycle, resulting in a phenomenon termed the slow starvation of nonprofits, the survey stated.
“Indian philanthropy needs to take a leap of faith by betting on innovative and bold individuals and their vision to do the maximum good,” Ray added.