THE EFFECT OF GLOBAL RECESSION ON NON-GOVERMENTAL ORGANISATIONS (NGOs)

An NGO is an organisation that is not initiated by government or the state that generally have goals that are non-commercial. The term NGO is very broad and can include anything thus, in some instances they may be referred to as Private Voluntary Organisations (PVO). The main aim of NGOs is to emphasize humanitarian issues, developmental aid as well as sustainable development. Due to the fact that they are primarily non-commercial in nature, they get partial funding from government as well as private sources such as businesses, public in general as well as from fundraising events. NGOs can evolve from providing immediate needs and want for societies, focusing on local development to servicing needs of societies internationally.

Every day we are bombarded with information on the financial crisis facing the world. The United Nations has also acknowledge its major impact, especially in developing countries as it will result in regression of progress made in alleviating poverty in most of these countries.

The effects of recession include price hikes, high interest rates which usually results in less production.

How does this affect NGOs

The NGOs most affected by global recession are those who focus on providing humanitarian aid especially poverty alleviation for Southern countries such as Africa. Issues of sustainability are thus raised. NGOs have been rated as poor in terms of finding creative ways to sustain themselves, thus a lot of these organisations face closure as a result. For sustained funding, NGOs are advised to form good corporate relationships with local companies to ensure sustained funding. This shows pro-activity from the side of NGOs.

The analogy behind funding NGOs is that you give when you have abundance. As much as NGOs are non-governmental in nature, there are still ties between the 2 entities with regard to funding. The business sector also has ties with the government as they are obliged to fund NGOs. This is executed in 3 ways. The first is progressive taxation, where private companies are taxed higher rates as they have high income. The more companies are taxed, the more money the state has to provide funding for government-dependent NGOs. The second is based on social corporate investment where companies are expected to donate to NGOs as a benefit, get taxed less. Thirdly is tax from the general public where individuals are taxed based on their income and a portion of the money is used to fund government-dependent NGOs.

As can be seen, global recession affects funding for NGOs at all these levels. When the economy is doing well, the government get more money from progressive taxation as a result, more money for NGOs. Social Corporate investment is also affected as companies now have to have money in reserve to sustain themselves during these trying times. This results in less money being left off for NGOs. At individual level, global recession is accompanied by high rates of job losses as companies are facing closure, or have less production. This results in less people having an income and less tax being collected. Furthermore, people do not have money to donate to NGOs as they may be focused on saving and servicing their debts. Global recession does compromise the sustainability of NGOs.