"Two-tier" NGO system fails to reward effectiveness
The NGO sector is degenerating into a two-tier system in which grants are not awarded on merit and priorities are increasingly misguided, a new study has warned.
Research by economists in Britain and South Africa says there is scant evidence of an “ideal world” in which the wishes of donors and communities are aligned. Instead grants are conferred “out of habit”, intensifying the risk of many NGOs placing the objectives of benefactors above the needs of beneficiaries. The study claims the situation highlights the importance of greater transparency in the sector amid growing allegations that NGOs lack accountability.
Co-author Dr Trudy Owens, of the Nottingham School of Economics, said: “The reality is that there’s little sign of an efficient mechanism for grant allocation. On the contrary, all the evidence points to a system in which grants are allocated out of habit rather than on merit – creating two parallel worlds of NGO existence. In the upper tier revenues are high, funds are accessible and survival is likely. In the lower tier funds are hard to come by and the likelihood of survival is low. Also, those NGOs that manage to move between the two worlds do so through experience of working the grant system rather than through their achievements. This should be of enormous concern, since the effectiveness of the NGO sector, given its pivotal role in alleviating poverty, is absolutely vital.”
Dr Owens and fellow study author Dr Ronelle Burger, of Stellenbosch University, examined the performance of NGOs in Uganda in 2002 and 2008. They set out to investigate whether the survival of organisations depends on effectiveness and achievements or a reliance on grants. They also looked at the question of what kinds of NGO attract money – and whether the funding system weeds out those whose work is ineffectual.
Effectiveness was measured by asking members of local focus groups which organisations helped their communities tackle the most pressing challenges. More traditional measures of survival rates – including size, number of years in existence, available infrastructure and leadership quality – were also considered.
The research found more than 90% of NGOs that earned only “medium satisfaction” among community members were still active in 2008. Yet only 88% of those that garnered “complete satisfaction” survived, suggesting effectiveness is not a factor in whether NGOs endure.
By contrast, money proved a key factor, with 97% of NGOs in the top-fifth revenue bracket remaining active – compared to just 72% in the bottom fifth. Source of income was also significant, with 88% of NGOs that received a grant surviving – compared to only 68% of those that received no grant.
Dr Owens, an expert on poverty and growth, said: “The higher the proportion of revenue received in the form of a grant, the more likely an NGO is to survive. This has clear implications for the grant allocation system, because if NGOs endure primarily on the back of grants then the allocation process itself has to be efficient.”
Dr Burger added: “Unfortunately, our analysis shows effectiveness isn’t a significant factor in determining whether a previously grant-less NGO changes its fate. Instead the factors that make a difference revolve around the manager’s level of education and length of service and whether he has any other form of employment. One implication of this is that the odds are stacked against young NGOs that want to tap into the grant funding stream – irrespective of the quality of their work. Another worry is that studies have already suggested NGOs that depend on grants are guided by donors’ wishes rather than the needs of the communities they serve. These two sets of objectives would align in a world where grant allocation is based on merit, but the reality appears to be increasingly removed from such an ideal.”
A version of this article originally appeared on the IRIN website. IRIN is the humanitarian news and analysis service of the UN Office for the Coordination of Humanitarian Affairs
Notes:
Trudy Owens
Dr Trudy Owens is a Lecturer at the Nottingham School of Economics. Her research focuses on poverty, growth and NGOs in sub-Saharan Africa. She is also a Research Associate at the University of Oxford’s Centre for the Study of African Economies.
Ronelle Burger
Dr Ronelle Burger is a Researcher at the Department of Economics at Stellenbosch University, South Africa. Her work centres on NGOs, poverty and socio-economic development, including in post-Apartheid South Africa.
The Nottingham School of Economics
The NSE has a world-class reputation for its research on a broad range of economic subjects, particularly globalisation, experimental economics and time-series econometrics. Its standing among the elite economics departments in the UK was reinforced by the 2008 Research Assessment Exercise, which ranked its “research power” among the top three in the country. The measurement of “research power” takes into account not only the quality of research but, crucially, the number of staff put forward for inclusion in the RAE. To underline the strength and depth of its work, the School put forward every member of its staff. All of its research was classed as of international quality, and 85 per cent was defined as “world-leading” or “internationally excellent” – the top two possible ratings.