Maximize NGO funding impact in today’s emerging markets
NGOs play a vital role in our global ecosystem; they bridge the gap that governments often cannot easily fill – particularly in emerging markets. NGOs provide not just economic support but also social, environmental, political, educational, capacity building and disaster relief services.
NGOs are extending their global reach to emerging markets and regions that are beginning to engage with global markets themselves as they develop economically.
When geopolitical conflict or natural disasters hit, even corporate giants may be forced to flee. That is when non-governmental organizations (NGOs) step in as the brave humanitarians helping the victims with a hand up. With that, funds are an NGOs’ assets and need to be protected—for immediate relief as well as for ongoing operations that align with the mission.
What’s the challenge?
For NGOs working internationally, among their key objectives are to secure and protect foreign funds, manage currency risk, disburse funds appropriately, and finally account for spending and impact to report to donors/investors.
It’s fair to say then that maximizing the value of incoming funds and efficiently distributing those funds around the world is often a challenge, made more acute in times of market uncertainty and for payments that involve countries whose currencies are less liquid and more volatile.
For these and other reasons, NGOs can often find transacting in emerging markets to be daunting and non-transparent, particularly in nations where currency transfer is challenging, or in exotic (emerging market) currencies. Attentive treasury management typically includes accounting for FX needs and costs, and taking steps to mitigate the risks from currency volatility.
In addition, many traditional cross-border transactions can incur very expensive exchange rates, multiple transfers, and frustratingly high intermediary fees. There are ways to save on such charges and benefit from improved transfer technologies.
Since NGOs are not typically supported by governments, it’s imperative for them to work with reliable business partners as well as payments providers to reduce the loss of money to often hidden fees, combined with costly exchange rates
Below we will explore ways to maximize funding impact in emerging markets.
NGOs typically receive money from a range of sources, including individual and corporate donors, grants, fundraising campaigns, and project sponsors at multiple levels.
The importance of reporting, tracking, and sending/transferring money securely and efficiently are the key elements in streamlining the lifecycle.
The NGO funding lifecycle
NGOs need to maximize the resources that support their programs and the people on the ground administering the programs. In FX transactions1, various fees and administrative charges from traditional bank transfer methods can reduce the available funds, taking away from meeting an NGO’s mission. The challenge can be compounded in emerging markets with less liquid and typically more volatile currencies, since the organization’s transactions might go through intermediary banks, which may lead to incurring fees each step of the way and extra charges for incoming foreign funds.
According to the online article ‘How NGO Treasury Functions Manage Currency Risk’, NGOs might be exposed to currency volatility around the timing of the grants being pledged, the funds being delivered, and the conversion to local currency payments 2. Writing for the Association for Financial Professionals (AFP) the author John Hintze also notes how [SC1] NGOs face additional roadblocks and complexities in emerging markets.
Further, it is essential for each NGO to report their received and acquired funds, with accompanying information as to how those funds were deployed. Reporting is fundamental to demonstrate the effectiveness of their programs to donors and to maintain non-profit status. The NGOs must also keep their donors in the loop and stay transparent for future funding opportunities.
1Tips for NGOs to Meet Their Foreign Exchange Goals - Humentum2How NGO Treasury Functions Manage Currency Risk (afponline.org)
2How NGO Treasury Functions Manage Currency Risk (afponline.org)