Budget austerity does not bode well for anyone, and in the case of midsized international nongovernmental organizations like Merlin, it was a sign of bad times to come. The U.K.-based NGO – which heavily relied on a small pool of donors that got even smaller as traditional donors slashed their budgets – is now merging with Save the Children.
But Merlin was not the first and only casualty in an increasingly competitive market for iNGO, many of whom are compelled to rethink the way they do business.
One Devex reader shared his own experience working in that environment.
“The squeezing of the ‘middle’ sized NGO started a number of years ago,” Timothy Bainbridge wrote in a comment via Facebook. “It’s just that many NGO boards and management teams have failed to recognize it.”
Bainbridge recounted his experience working as a member of the management team with a midsized NGO that had to be taken into liquidation.
“The lack of a strong brand in a competitive fundraising environment meant it was very difficult to raise unrestricted funds,” he said. “This coupled with the need to use funds to support the implementation of donor funded contracts with very low overheads resulted in depletion of reserves and insolvency.”
Funding for large-scale humanitarian crises over the years might have helped keep “broad mission NGOs” stay afloat, but it does not hide the fact that the current development financing structure is shifting.
What Merlin and Save the Children did was, therefore, a good move, according to Bainbridge.
“The merger between Merlin and Save the Children UK shows a business maturity not often seen in NGOs, by taking the decision to merge whilst there is still value to be gained for all stakeholders involved,” he said.
On top of the economic crunch, iNGOs face increasing competition from private contractors and local organizations, prompting them to use unrestricted funds to subsidize operations. The result of this is not “survival of the fittest” but survival of whichever iNGO has the best fundraising and marketing departments.
“Is this the parameter we want to drive international development in the 21st century?” Bainbridge asked.
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