Do the examples and strategies described in IRED publications appear to differ significantly depending on the type of organization (e.g., a service NGO vs. a member-based peasant organization)?
The examples and strategies described in IRED publications appear to differ significantly depending on the type of organization, particularly when comparing a service-providing NGO (support organization) and a member-based peasant organization (popular organization). The sources highlight distinct needs, capacities, and approaches for these two types of entities in their quest for financial autonomy.
STRATEGIES AND TOOLS FOR MEMBER-BASED PEASANT ORGANIZATIONS (PEOPLE’S ORGANIZATIONS) #
Popular organizations, often made up of people with socioeconomic homogeneity and oriented towards production and/or marketing, are encouraged to capitalize on the mobilization of their members and their economic activities to achieve financial autonomy. Several specific examples and strategies are mentioned:
- Mutual savings and credit: The establishment of savings and credit unions or popular banks with members is explicitly mentioned as an option for DOs and their members. The Indian experience of organizing women’s savings and credit groups, such as that developed by MYRADA, illustrates how informal groups can evolve and even integrate into the banking sector. Tontines, such as the example of a parent-teacher tontine in Cameroon, represent local forms of savings and credit. The success of these mechanisms depends on the participation of the population, the skills of managers, and their ability to cooperate with financial institutions.
- Grain banks: These village or inter-village organizations manage grain stocks, which can be built up through purchases from members, external contributions, or through exchanges. They aim to achieve food security or collective gain by reselling or lending during lean times. The example of the NAAM groups in Yatenga, which established a revolving fund in the Sahel, linked to a millet mill, shows how an economic activity can be initiated and managed collectively by a grassroots organization.
- Collective marketing and market access: Development organizations, including farmers’ organizations, are encouraged to join together to jointly access national and international markets and become recognized exporters or distributors themselves.
- Creating small businesses: Transforming simple economic activities into real businesses is a step toward financial independence. To achieve this, it is crucial to clearly distinguish between businesses and associations and to adopt appropriate legal structures (EIGs, cooperatives, etc.). Examples of IRED in South and Southeast Asia highlight the need to reconcile the autonomy of the business with its connection to the association’s social objective.
- Mobilizing local resources: It is suggested that local elites be involved by utilizing their skills and financially supporting community-created businesses. Money from local tontines can also be channeled toward these new activities.
- Local revolving funds: The example of “Moulins Pères, Moulins Filles, Moulins Fils” illustrates the creation of a local micro-revolving fund that has become more formal, allowing members to access essential services and generate income.
- Savings and credit cooperatives: They are presented as having a dual nature: popular movement and financial institution, allowing members to be directly involved in the orientations and operations.
- Use of internal guarantee funds: The example of ADEMA, an NGO that created an internal guarantee fund to enable its members to obtain bank loans without individual guarantees, shows how an organization can facilitate access to financing for its members.
STRATEGIES AND TOOLS FOR SERVICE NGOS (SUPPORT ORGANIZATIONS) #
Support organizations, made up of professionals working with disadvantaged populations, provide services such as training, technical assistance, credit access support, organization, management, and marketing. Their financial autonomy may depend on different strategies:
- Sale of services: NGOs that provide services (support to local groups, training, management support, technological support, etc.) can sell them to third parties to generate their own revenue. Internal and external invoicing of services provided is mentioned as a source of capital.
- Establishing foundations: Establishing a foundation, based on capitalization and the use of income from invested capital, is an option for ensuring long-term financial independence. However, the distinction between a foundation and an association must be clearly understood.
- Rigorous fund management and creation of reserve funds: Accurate and orderly management of funds, including those from international aid, is essential. NGOs are encouraged to create and maintain reserve and revolving funds to ensure their future stability.
- Development of own financial mechanisms: The example of the RAFAD Foundation, promoted by the IRED network, shows how DOs/NGOs can create their own tools for access to credit, independently of bankers and donors, while cooperating with them.
- Strategic Partnerships: Support organizations can act as intermediaries and establish partnerships with banks, investment companies, and other organizations to facilitate access to financing for grassroots organizations.
- Providing competent support: Development companies (often supported by support NGOs) need competent support in management, financial flow control, and access to financing. Strengthening the institutional capacity of support NGOs in these areas is crucial.
- Use of guarantee funds: NGOs can create guarantee funds for their members to facilitate access to bank credit.
- Use of flexible and revolving funds: The creation of flexible funds, managed by farmers’ organizations themselves, is proposed as an alternative to project-based aid, allowing greater autonomy in the allocation of resources.
SIGNIFICANT DIFFERENCES #
It is observed that grassroots organizations tend to rely more on mobilizing their members’ savings, pooling risks (as in grain banks), and creating economic activities that generate income for their members and the organization itself. The emphasis is on member participation and control over these mechanisms.
Service NGOs, on the other hand, may focus more on selling their expertise and services, seeking external funding for specific programs, and creating more sustainable financial structures such as foundations. Their support role also involves facilitating access to funding for other types of organizations.
It is also mentioned that small DOs/NGOs are generally financed through separate tools and funds, while large DOs/NGOs may resort to more complex mechanisms combining venture capital, capital/promotion and banking cooperation. The size and complexity of the organization therefore also influence the financial strategies adopted.
In conclusion, IRED publications clearly recognize the diversity of development organizations and propose financial autonomy strategies adapted to their specificities, whether they are grassroots organizations based on their members and their economic activities, or service NGOs promoting their expertise and seeking more institutional funding. Financing needs and resource mobilization capacities are inherently different, which justifies distinct approaches.
