Business Today

Charity in crisis

The slowdown has forced Indian companies and international foundations to slash funding to NGOs in India, threatening the survival of some and endangering vital social programmes in the country.

K.R. Balasubramanyamand Anamika Butalia | Print Edition: June 14, 2009

The Akshaya Patra Foundation is in the midst of a crisis it never imagined possible a few years ago. The Bangalore-based non-profit outfit was a star in the sector, running what is now the world’s largest non-government school meal programme. The NGO feeds 10.08 lakh children, every day, for a mere Rs 1,200 per child per year, across seven states and 5,700 schools. This is a mammoth achievement, considering the organisation started providing meals for just 1,500 children eight years ago. It is also a vital undertaking in a country that sends millions of undernourished children to school on empty stomachs.

Under siege: Akshaya Patra’s Das (in white kurta) says that several companies have reversed funding commitments
Under siege: Akshaya Patra’s Das (in white kurta) says that several companies have reversed funding commitments
Today, Akshaya Patra is scrambling to continue feeding all the schoolchildren it does. Out of its Rs 80-crore-a-year programme, Rs 40 crore comes from donations— a chunk of money that is in danger of going up in smoke, thanks to the global recession. “Three metal and mining companies, which together had committed Rs 6 crore to build kitchens in two states, have deferred their contribution,” says Akshaya’s Vice Chairman Chanchalapathi Das.

“Eight IT companies that had promised 12 vehicles (of Rs 9 lakh each), in all, to transport food and fund feeding of 6,000 students have also put off their plans. Four automobile and ancillary units, who had offered to give about Rs 40 lakh, have backed off for now,” he adds. The global recession—as well as the slowdown in India—has begun to have disturbing consequences for non-profits like Akshaya Patra, which undertake programmes across India’s most neglected social sectors. India’s vast population of NGOs relies on either foreign aid or the domestic corporate sector for its survival. Declining corporate profits in the last year, bleak revenue forecast and cash-strapped foreign governments have left agencies in deep distress.

In the US, more than 25 per cent of 300 non-profits experienced negative cash flow last year and many have had to borrow money to make payroll and benefits payments. The Boston Globe Foundation has announced immediate suspension of future grants and funding applications. According to a survey by the Association of Funding Professionals, 46 per cent of non-profit organisations in the US reported a new low in fund-raising in the past eight years. For instance, US-based Smile Train Foundation, which medically supports those who have dental or lisp problems, has slashed its funding amount by as much as 50 per cent in Chandigarh alone.

“This means a collapse of the services NGOs have been providing to communities as well as the livelihoods of a million of development workers in the country,’’ says Hari Krishna, a disaster management expert who was associated with Oxfam America’s India operations. Oxfam itself has cut $1 million in grants for the next year.

Squeezed by India Inc.
Like Akshaya Patra, the Cancer Patients Aid Association (CPAA) was flying high on a legacy of robust aid, mostly from Indian corporates, such as Godrej, HUL, Citibank and the Union Bank of India. The programme required Rs 20 lakh a month for its operations but routinely ended up with more. On its annual fund-raising day for cancer patients last year—dubbed “World No Tobacco Day”, held on May 31—the organisation’s initial target was Rs 22 lakh, but it effortlessly netted twice that amount.

 Wake-up call for NGOs

  • Oxfam has cut $1 million in grants
  • Donation to Cancer Patients Aids Association down 50%
  • Smile Train Foundation?fs funding in Chandigarh cut by 50%
  • NGOs need to optimise spending and plan for a tougher future
Today, the organisation is struggling to stay above water, unable to attract even Rs 10 lakh a month for its operations. Plus, as of the second week of May, the agency had mobilised a paltry Rs 1 lakh to date for this year’s fund-raiser. “We have lost 50 per cent of donations as compared to last year,’’ says a worried Anita Peter, Director, CPAA.

Who knew that fewer airline passengers could affect the wellbeing of children, but this is exactly what happened when Jet Airways recently experienced a reversal of fortunes due to a slowdown in airline traffic. For 12 years, Jet has been a consistent supporter of Save the Children (SCF)—an NGO that focusses on child rights, education and child trafficking—donating Rs 10-12 lakh per month collected from passenger donations towards the NGO’s activities.

In the last few months, this amount has come down by half. SCF India’s travails didn’t end there. Lehman Brothers had pledged Rs 50 lakh to the organisation for a 30-month education project. Then came the subprime crisis and the collapse of Lehman. The result? The Rs 50-lakh pie has now shrunk to Rs 10 lakh.

Corporate donations are not the only thing that India Inc. is cutting back on. Corporate Social Responsibility (CSR) initiatives within companies are also under fire.

Founder-trustee Vinay Somani, of Mumbai-based Karmayog—an organisation that helps NGOs network with corporations, communities and governments—confirms that not only are companies spending less on CSR projects but that “there have also been cases of closing down of CSR cells within companies”. Somani declined to reveal names.

A similar belt-tightening is occurring within the members of Nasscom. “We are aware of the fact that many Nasscom members, who would not like to be quoted, have indicated a cut in their budgets and spending on CSR. This has impacted their programmes and scale-up plans,’’ says Rufina Fernandes, CEO of Nasscom Foundation. The foundation is apparently well prepared to weather rocky periods ahead—yet the prevailing climate has dented the scalability of some of them.

A case in point: its flagship programme, the Nasscom Knowledge Network, is in trouble. “We had intended to scale this programme to 350 centres (from 240 now), but due to lack of financial support we could not achieve this number. We have, therefore, reviewed our projections to reach this number by 2010,’’ says Fernandes. Also hit is the Foundation’s poverty alleviation programme.

Ultimately, it is the poor who suffer the most during recessions, warns P.V. Unnikrishnan, Emergencies & Conflicts Advisor (Asia & Americas), Action Aid International. “Both types of support available for poor people—government spending and charities—are getting negatively impacted. Since the poor are affected, a bailout process should focus on supporting them and their small businesses,’’ suggests Unnikrishnan.

In adversity lies opportunity
While these are tough times for NGOs, many experts feel that this is precisely the kind of opportunity that NGOs need to revamp themselves for the future. “This is a good chance for NGOs and civil society groups to see carefully how they function and work smarter and leaner,’’ says Rohini Nilekani, Chairperson of Arghyam Foundation— an organisation that promotes access to water for the poor.

“We have to be realistic and know that the future beyond our current grants is uncertain and we have to plan for this contingency,’’ adds Ashok Kamath, Chairman of Akshara Foundation, which spearheads a primary education movement in Karnataka.

Happier times: CPAA is having a tough time matching funds raised last year
Happier times: CPAA is having a tough time matching funds raised last year
Infosys Director, T.V. Mohandas Pai—who is on the boards of both Akshaya Patra and Akshara— has a plan for NGOs: they need to expand their base for funds as well as curtail administrative expenses, he says. An NGO should limit its administrative spend to around 8-10 per cent of its overall budget and spend the rest on direct activity, he says. The Nasscom Foundation, too, believes this is the right time to test more innovative ways of doing things. “We are exploring some ideas that may not necessarily need loads of money,” says Fernandes.

Also, at stake is the future philosophy— and perhaps policy—on aid. Some industry professionals feel that India should not open its development sector to foreign aid without checks. “It will create pockets of wealth, and unsustainable dependency, all of which will collapse when there is trouble in source countries,’’ says Krishna, formerly of Oxfam America. To deal with any crisis arising out of the present situation, he suggests the government activate its district machinery and infuse funds so that running programmes don’t suffer. “It is not impossible because the NGO investment is not huge and as such, most of the development fund in districts is either unused or misused,” he says.

Once the global economy climbs out of its recessionary hole and companies begin to post improved results, the NGO sector is sure to bounce back. Till then, however, they would do well to take a page from corporate India’s handbook and hunker down for the lean times ahead.

  • Print
A    A   A