I. Concerning the concept of autonomy #
- Expand the concept of financial autonomy even if it remains the main one
- Introduce the concept of political autonomy because we will have to conduct negotiations, especially with aid agencies and lobbying actions with international aid, local and Northern governments
- Il y a plusieurs types t’autonomie financière :
- The one that is the result of own recipes only without external local or international aid
- The one that is achieved thanks to international aid (this external aid generally does not last more than 5-10 years) and when the aid is withdrawn, the local association disappears)
- The one that depends on the local government which obliges the association to follow the policy developed by the State.
Self-reliance that depends on outside help is, in fact, not sustainable.
The aim of this study is to help our partners progress, year after year, towards total autonomy, which will give them freedom in their decisions.
- Management autonomy through the recruitment of human resources (expertise and loyalty of staff, especially managers)
- Autonomy in the development of our strategies and methods for managing local resources, as well as in the rigor of the management of our associations
Capital Funds #
The concept of autonomy is based on a scheme for the formation of Funds (sustainable capital which is managed while maintaining its initial value over time.
Financial autonomy is therefore based on the principle of capitalization, that is to say the creation of funds whose capital is sustainable.
The evolution of autonomy then follows the following pattern;
Year after year, financial independence gradually increases while the demand for assistance decreases.
The association must distinguish three types of institutional organization in its management #
On the right page (New management manual by F Vincent) it is proposed to manage three types of NGO/CSO in a distinct way:
The parent NGO, which is difficult to achieve financial independence because it pursues a social goal and works with partners who do not have the means to finance the costs of the services provided
The NGO Services (Study Office) which sells its services to requesting partners at market prices
The Enterprise NGO must, soon after its creation, make profits which will enable it to finance the Mother NGO.
But let’s get back to Fund/Capital management:
If this capital is used for development activities, it must be renewed quickly.
Such capital must therefore be placed in a bank, separately from the operation of the association and generate income (interest or other) which will in turn serve to strengthen the capitalization mechanism and therefore further strengthen the autonomy of the association.
Some large NGOs/POs/CSOs will choose to create a special foundation (which they will control) for the management of such reserves and capital.
II. Concerning the importance of distinguishing the type of partners #
It is important to distinguish between the different types of partners because the possibilities of obtaining financial autonomy depend largely on the financing capacity of their clients or partners.
It is therefore appropriate to distinguish between the following types of partners: Autonomy
- Those whose objective is humanitarian aid (struggle for survival) (dependence on aid from the local government or international humanitarian aid 0% autonomy)
- Those with very limited income (health care, self-consumption, housing assistance, etc.) 5 to 10% autonomy
- Those who sell their services (Design offices) 50 to 80% ”
- Companies, cooperatives, SMEs 100% autonomous
III. The negative effects of lack of autonomy and the positive effects of autonomy acquired over the long term #
- The negative effects
- Inability to plan for the future
- Inability to recruit and retain long-term staff
- Cash flow problems resulting in inability to pay staff and other debts on time.
- Bad image of the association abroad
- Inability to secure financial participation from cooperation agencies etc.
- External dependence on governments and funding agencies
These effects are therefore extremely dangerous for the association and must be analyzed and managed rigorously.
2. The positive effects
- Independence of planning of the institutional development of the association
- A very positive external image that strengthens cooperation with governments, the private sector and cooperation agencies
- A more positive working atmosphere among employees due to greater job security and an improvement in the quality and quantity of work
- A healthy treasury capable of meeting the association’s management needs
- Etc.
IV. TOOLS to create and propose to obtain more financial autonomy #
This chapter should provide a number of useful tools to help you progress towards greater autonomy year after year.
Appropriate technical sheets will be developed for each of these tools. Specific case studies of partners who have already implemented the content of such sheets will be cited to enable those who wish to apply this advice in their own organizations.
A. TOOLS related to the mobilization of local resources #
- Resources of villages or neighborhoods and their inhabitants
- Local savings,
- contributions,
- individual shareholding,
- donations in kind,
- the creation of tontines for local investment.
- Use of equity capital shown on the association’s balance sheet: Reserve funds, cash/bank savings, other funds.
- Participation of the elite and donations from the rich, the private sector and also the diaspora.
- Guarantees, direct investments, provision and donations of premises, equipment and other assets.
B. Tools related to coverage of association risks #
Every association must plan to cover its risks. There are many of them:
Environmental, bad customers, market failure, poor management, lack of cash, and so on.
These risks are very dangerous for the future of the association. They risk bankrupting the association and seeing it disappear.
It is therefore appropriate to cover these risks.
The creation of a Risk Fund is therefore a priority, and the subscription of insurance contracts is a necessity.
C. Tools related to local and national official aid #
- Grants/donations, participation from the State or national funds or the municipal budget
- Bank guarantees
- Low interest loans, etc.
- The provision of suitable personnel or equipment to the association by the local government
D. International aid tools #
- Financing by projects or programs with a limited duration
- Unallocated funding (flexible funding)
- Funding to cover institutional costs (overhead)
- Financing through a system of bank guarantees, limited-rate loans, equity participation, etc.
- Free allocations in the form of donations or very long-term loans of goods: land, buildings, equipment, provision of qualified personnel, etc.
- Then :
- The creation of Debt Redemption Funds with the creation of counterpart funds, in local currency, created by the government for the financing of development projects proposed by CSOs/POs/NGOs
- PRI Funds (Programs related Investments) or Investment Funds for the launch and cash flow of the first years of launching SMEs or any other economic activity and therefore profitable as soon as possible
- National funds linked to the sale of food aid at reduced prices (WFP)
- International aid grants to construct buildings allowing some of them to be rented out and thus create clean and sustainable income for the CSO
E. Tools related to the management of funds allocated to programs financed by international aid #
Apply methods for managing agreements with international aid. For example
- Budgétisation adaptée avant le dépôt officiel des dossiers de demandes d’aide :
- Overhead (10-12-.15% maximum) according to the agency; creation of Reserve Funds for
- Provision for the payment of salaries and severance pay in the event of resignation or departure of staff
- Provision for the renewal of equipment and vehicles
- Legal commitment regarding building rents
- Fund for innovations and research
- Funds for new projects.
- Take into account the salary value of volunteers engaged and working for the CSO.
The creation of such funds allows the use of funds still available for the justification of aid received or the preparation of budgets for projects to be financed.
Here is an example of the creation of funds entered in the balance sheet of a large European development association:
- Short-term commitments
- Short-term provisions
- Short-term third-party capital
- Long-term provisions
- Long-term third-party capital
- Third-party capital
- Capital of funds with linked allocation Third-party capital and capital of funds
- Free capital
- Tied capital
- Capital of the organization
- Total liabilities
If a European government funds this association and its contributing members do so, it would normally be advisable for international cooperation agencies to do the same. Unfortunately, this is not the case; several agencies require the reimbursement of “unspent” funds, which often represents good management.
This should be one of the elements of IRED’s future policy: a lobbying campaign to obtain the same rules in the countries of the South as those applied in the North!
V .Other comments and suggestions #
- Include in-kind aid in total project costs sent to aid agencies
It is appropriate to impose on international aid (future negotiations with it) the local participation in kind is quantified and represents a real participation of the local association and this contrary to the rules of many associations in the North which refuse this proposal.
This assistance may include the provision by the local association of training and administrative premises and possibly accommodation.
2. Problem of poor management of aid and own resources
We have three examples of associations where the reserves accumulated by the former directors were squandered by the new managers. (IPD and RAFAD/PHILEA according to FV and ADISCO according to Déo). Significant reserves have disappeared for various reasons (not only due to a lack of results in the search for funding, but also when the official managers attribute to themselves income that is difficult to accept….
3. Other proposals regarding the study methodology
- Like Deo, I think we should not spend too much time studying the current situation.
- But note, through some detailed cases (IPD, Adisco, ADD, Roppa, OP, etc.) that the efforts made exist but have not given the expected results and that these rates of autonomy are different according to the types of OSC (see above)
- It will be more effective to identify partners and interview them to help them answer key questions and cite their experiences with financial independence and relationships with help than to ask them to complete questionnaires.
- This study must be linked to the future of our IRED action. I believe this study is an introduction to an action aimed at two audiences intended to help CSOs individually and together develop tools and funds to promote the launch of economic activities.
- Prepare a regional seminar between OP/NGO/CSO first, in Africa, to qualify the results of our study and discuss the management tools that each must use in their management and also:
- Organize a seminar between delegates from POs/NGOs/CSOs with delegates from aid funding agencies who are more likely to be involved in building and financing the long-term, regional/national training program and a support service (DAA). Invite as a priority: FGC, SDC, BFW, Baudoin Foundation, OXFAM, etc.
- It is therefore a question of currently working with a study introducing a partnership between OP/NGO/CSO on the one hand and with the funding agencies that we will need to approach in the coming years.
- In fact, it would be part of IRED’s new strategy and a specific multi-year pan-African program.
- I propose to give priority for our study to some detailed case studies and certain key partners of IRED or others in order to draw the conclusions that we are already beginning to perceive (importance of IRED action in the past: FV/IRED manuals which are the capitalization of experience mainly in Asia but also in Africa (Brazzaville seminar, documents sent by Déo
Among these partners I cite: IPD global and regional, Saild, ADD Mbalmayo, Adisco Bujumbura, Roppa Ouaga (or/and FONGS/CNCR), La Maison de l’entrepreneur de Bujumbura (Déo, SME support), a Study Office (Lionel? etc. (see types of partners cited above.
I propose that these detailed case studies be prepared by a questionnaire from Gabriel and carried out by personal interviews via WhatsApp by Gabriel and his team or other members of the CE/IRED.
I fear that the answers we get through the Internet/questionnaires/Facebook and directly will be of little use.
Let each of us (Stan, his ADD, Alain and the FIG follow-up, Mila and Philippe, their ideas and partners) bring their analyses and proposals so that Gabriel can synthesize all these contributions and disseminate them to ensure follow-up, by interview with each of us.
