Factors influencing financial sustainability of local NGOs : the case of Zimbabwe
Thesis (MDF)--Stellenbosch University, 2014.
ENGLISH ABSTRACT: Local non-governmental organisations play an important role in the development processes of Zimbabwe. However, they face an uncertain future, as they depend on volatile external donor funding which leaves them financially unsustainable. This research sought to determine whether local non-governmental organisations in Zimbabwe were sustainable, and to analyse the main factors that influenced their financial sustainability. Through a mixed methods research design including literature review, secondary data analysis and a survey using a structured questionnaire, this research revealed that local non-governmental organisations in Zimbabwe were financially unsustainable. A regression analysis was employed to determine the relationships between the different factors and financial sustainability. The research focused on four factors of financial sustainability of local non-governmental organisations: sound financial management practices, income diversification, own income generation, and good donor relationship management practices. Data used for the research was from 2009 to 2013. The survey of 52 local non-governmental organisations spread throughout Zimbabwe provided primary data for the research. The research confirmed findings of others that local non-governmental organisations in Zimbabwe were not financially sustainable and depended on external donor funds. The research revealed that most local non-governmental organisations were funded entirely by external donors, had no reserve funds, were not generating own income, and depended on average on about three donors. This meant that if the external donors pulled out these organisations would cease operations. The research revealed that on average donor dependency ratios for Zimbabwean non-governmental organisations were above 93 percent, while survival ratios were very low with 22 days being the maximum. These results meant that if external donors completely pulled out their funding, local non-governmental organisations would operate for at most 22 days before closing down. The research also revealed that most local non-governmental organisations in Zimbabwe were not leveraging their assets to generate income, and most were not engaged in own income generating activities while their funding sources were not diversified enough to be regarded sustainable. The government of Zimbabwe was not funding local non-governmental organisations and local donors were scant. The regression analysis ascertained that sound financial management practices had the largest influence on financial sustainability of local non-governmental organisations in Zimbabwe, followed by income diversification, then own income generation and good donor relationship management. The research recommends that international donors should provide local non-governmental organisations with some unrestricted income to support start-up of social entrepreneurship activities and small businesses to ensure the financial sustainability of the programmes they fund. The government of Zimbabwe must view local non-governmental organisations as partners that complement its work and are therefore deserving of government funding. Non-governmental organisations need to change their mind-set, start social entrepreneurship and small business activities, and refrain from just seeing external donors as their main source of funding. Networks of non-governmental organisations must fundraise to train and enhance the capacity of their member organisations in running social enterprises and small businesses, and hire staff with expertise in running profit-making activities to complement their non-profit work.