More than two-thirds of non-profit organisations struggle to access funders for their respective causes, while 61 per cent of them receive less than a quarter of their funding in an unrestricted manner, according to a report.
Accelerate India Philanthropy, a network of philanthropists, surveyed 65 non-profit organisations of different sizes working across different sectors to understand their scaling roadmap and the key drivers and barriers that they face in the process.
The survey showed that 74 per cent of the non-profits consider "scaling their impact" extremely important.
Despite this, most non-profits struggle to survive, let alone grow or scale their impact.
According to estimates, there are more than three million non-profits in India and more than two-thirds of them operate at suboptimal levels with an annual budget of less than Rs 1 crore.
Within this, philanthropic grants from high-net-worth individuals and ultra-high-net-worth individuals make up less than 20 per cent of total grants for the majority of non-profit organisations.
The AIP report identified four systemic problems that these organisations face in scaling their impact and the role that philanthropists can play in helping them overcome these challenges.
"First, more than 2/3rd of NPOs struggle to access funders for their respective causes. The complexity of the giving landscape in India with a number of different causes each requiring attention, results in philanthropists tending to limit their choice of sectors and partner organisations to their immediate life experiences and recommendations from their network," it said.
This makes it possible for a particular set of well-connected, large non-profit organisations working in particular sectors to have better access to philanthropic funders.
To mitigate this, philanthropists should be open to new ideas and opportunities across different sectors, the report stated.
"This increases the likelihood of different kinds of non-profits, across sizes and sectors, getting access to you, thereby reducing the systemic deprivation of visibility and funding," the report said.
The report also found that 61 per cent of non-profits receive less than a quarter of their funding in an unrestricted manner.
Most funding is restricted and channelled towards financing costs associated with individual programmes.
As a result, critical functions and shared administrative costs essential to run the organisation, such as building robust fundraising processes, financial systems, capacity building and training, are left perpetually starved.
There is also a mismatch between the expectations of funders and non-profits.
Weak communication and poor feedback loops result in funders having unrealistic expectations about the actual cost of running a non-profit. In a bid to meet these unrealistic expectations and secure future funding, they misrepresent their costs by lowering them.
"These further fuels funders' unrealistic expectations about costs, especially overhead, capacity building, and other non-programme costs. At its worst, this can become a vicious cycle, resulting in a phenomenon termed the slow starvation of non-profits," the report stated.
Lastly, 54 per cent of the non-profits find meeting funders' reporting and compliance requirements burdensome.
Moreover, such processes are disproportionately focused on inputs and outputs with little focus on outcomes, creating a perverse incentive for non-profits to prioritise the former.
