How does IRED approach the strategy of generating own revenues? ? What types of economic activities or “NGO/OO-created businesses” are explored? What advice or viability criteria are given?
IRED considers the strategy of generating own income as an essential pillar of financial autonomy for development organizations (DOs/NGOs). This approach is based on the principle that to ensure their sustainability and increase their impact, DOs/NGOs cannot depend indefinitely on external aid and must develop economic activities capable of generating income.
IRED’S OWN REVENUE GENERATION STRATEGIES #
IRED’s strategy for generating own income revolves primarily around business creation by DOs/NGOs. The central idea is to transform the DO/NGO into a “development enterprise” that rigorously applies private sector management rules while pursuing its social objectives. IRED highlights several key steps and considerations in this process:
1. Valorization and Mobilization of Local Resources : Before considering business creation, IRED emphasizes the need to value and mobilize locally available resources (physical, human, financial). Identifying these resources is the first step toward building local capital and reduces initial dependence on external aid.
2. Development of Profitable Economic Activities : The objective is to create businesses that can generate income, a source of self-financing and autonomy. IRED emphasizes that the financing of the social activity of an OD/NGO depends on the profitability of its economic activities.
3. Rigorous Management: IRED recommends that OD/NGO leaders draw inspiration from the management methods of private companies to ensure the economic and social profitability of their activities. This includes controlling supplies, marketing, and financial flows.
4. Capitalization of OD/NGOs: Profits generated by economic activities can be reinvested to strengthen the financial capacity of the organization and finance new initiatives.
TYPES OF ECONOMIC ACTIVITIES OR “BUSINESSES CREATED BY NGOs/DOs” EXPLORED BY IRED #
IRED explores a wide range of economic activities that DOs/NGOs can undertake to generate their own income. These activities can be initiated at the micro (local) level or take the form of full-fledged businesses or even business consortia controlled by DOs/NGOs. Here are some examples from the sources:
- Processing and Marketing Local Products: In rural areas, IRED suggests focusing on processing agricultural, artisanal, fishing, and forestry products for local or foreign market sale. The example of a Cameroonian NGO that identified imported products that could be manufactured locally (fruit juices, jams, chalk, and school notebooks) illustrates this approach.
- Sale of Goods and Services: DOs/NGOs may generate income from the sale of goods (for example, a peasant movement in Southern Africa selling building materials) or services. The main service that a DO/NGO may sell is the expertise of its senior staff (training, technology transfer, support to other organizations). Maintenance contracts with the government may also be a source of income.
- Small Business Creation: IRED encourages the creation of genuine businesses, which requires a clear understanding of the distinction between social and economic development. The goal is for these businesses to become financially self-sufficient and contribute to the self-financing of the DO/NGO.
- Businesses Related to Members’ Production: In rural areas, this may include the processing of agricultural products, the sale of fish by fishermen or animals by livestock farmers. In urban areas, this may involve the production of goods useful to residents (furniture, construction).
- Leveraging Existing Assets: An NGO/DO can generate income by selling old, depreciated machinery or vehicles or by leveraging its capabilities to the fullest (e.g., a garage/gas station to maintain the organization’s vehicles and generate profits from the sale of gasoline).
- Consulting and Support Services: The skills of an NGO’s staff can be leveraged through consulting contracts with other NGOs, governments, or international aid agencies. Managing this expertise requires an inventory of available and marketable skills and rigorous organization.
ADVICE AND VIABILITY CRITERIA GIVEN BY IRED #
IRED highlights several tips and criteria to ensure the viability of economic activities created by ODs/NGOs:
- Market Research: Before launching, it is crucial to analyze market needs, competition, potential customers, and suppliers. A business must meet a credible demand and align with the NGO’s mission.
- Planning and Forecast Budget: It is essential to establish a detailed forecast budget of income and expenses for the first years in order to determine the break-even point and anticipate financing needs.
- Skilled Management: Productivity depends on a skilled workforce and competent management. Managers must acquire skills in management, marketing, and accounting. It may be necessary to recruit skilled staff from outside the DO/NGO.
- Quality of Products and Services. It is necessary to ensure the quality of “products” or services in order to better market them and increase sales.
- Cost Calculation: It is essential to calculate the cost price and the selling price to be competitive.
- Innovation and Adaptation: The ability to innovate is crucial for long-term survival, especially in the face of competition. Finding a specific “niche” where the organization excels is recommended.
- Separation of Economic and Social Objectives: Leaders must not confuse social and economic development. Funding for social activities depends on the resources generated by economic activities. Economic and social profitability must be reconciled, and priorities must be defined in the event of conflict.
- Risk Analysis: Creating and managing a business involves financial risks that must be anticipated and managed.
- Growth Plan: It is important to define a growth plan for the company.
- Corporate Ethics: The company must respect the values and ethics of the OD/NGO, even in its commercial activities.
- Suitable Legal Status and Business Model: Choosing the appropriate legal form (cooperative society, commercial company, etc.) and defining a clear business model are important steps.
- Long-Term Viability: The goal is for the project to become self-sufficient within a reasonable timeframe. Profitability ensures the long-term sustainability of programs.
In summary, IRED advocates an entrepreneurial approach for DOs/NGOs, where the creation and rigorous management of diversified economic activities allow for the generation of their own revenues and strengthen financial autonomy. The viability of these businesses relies on in-depth market research, competent management, attention to quality, innovation, and a clear articulation between the organization’s economic and social objectives.
