Toggle nav Stars Foundation

Stars Foundation invests in organisations and ideas that transform the lives of disadvantaged children and their communities globally.

Read more.

Does a hybrid model = sustainable NGOs?

Posted by: Alessio on 22 Oct 2014
in Blog

A clever collaboration?

While exploring LinkedIn I have discovered a group called 'Innovation for Sustainability'. A group discussion posed a perilous question: does a hybrid model of an NGO combined with a social business change the nature of charity?

In my eyes, generating income is not the problem. NGOs that aim to increase their financial sustainability show appetite for impact and thirst for autonomous decisions. Where there is less reliance on donors, local solutions can flourish. However, there are some serious considerations to take into account when building a hybrid model:

  • all profits must be reinvested into the charitable activities
  • social business activities must benefit the target groups
  • these activities must have a social impact
  • the social enterprise must not be privately owned

On the road to success

Let's looks at two examples of NGOs from the Stars award winners community.

2013 Rising Star Kick4Life (K4L) is a Lesotho-based organisation that fights HIV and AIDS through football. The charity set up a football team that works under a social enterprise model. This comprises a hotel, which provides employment and training opportunities, and the 'No.7' restaurant.

All income is re-invested in Kick 4 Life charitable activities which include health education, life-skills development and literacy. Stars has invested in the social enterprise covering 10% of the hotel's costs and will help K4L to reach 125 vulnerable youth with voluntary HIV testing and counselling in 2014.

2013 WASH Winner from the Asia-Pacific region Gram Vikas is an organisation that provides water and sanitation programmes in Orissa, India. Along with Bithari Disha, a West Bengal-based NGO, Gram Vikas has developed the revolving fund to offer clean, private and accessible water and sanitation facilities to poor families through interest-free loans.

Whilst families wait for the government to reimburse what they have invested in facilities – for some the equivalent of their annual income as a family – Gram Vikas provides support up front that is paid back to the NGO once the government has paid the families.

Stars has invested 1m INR into the revolving fund – a contribution which will initially support 2,000 families – but one that will be re-invested to support additional communities for another 2 years.

Making the change - carefully

These are two great examples of the hybrid model. But evidence shows that hybrid models only work in certain sectors and under limited circumstances. In the WASH sector NGOs have developed successful business models because the community needs to be in control of its own welfare and, in addition, some public institutions support these models which gives them even greater chance of success.

But can non-profits ever truly become self-sufficient using this model, and is it worth the change to the fundamental nature of an NGO? In the wider development context we are still yet to see whether this model is a long-term solution. 

The conclusion? Hybrid models can work, but as an option for generating income and never as a rule, and always secondary to the charity function of an NGO.

Founder of Gram Vikas Joe Madiath spoke at TEDGlobal 2014