In search of sustainability: Thinking beyond traditional funding approaches

In today’s rapidly changing economic landscape, financial sustainability has emerged as a critical concern for not-for-profit organisations and social enterprises. These entities, driven by missions rather than profits, face unique challenges in securing the resources needed to achieve and sustain their goals. This article explores strategies, case studies and business models that can help not-for-profit organisations and social enterprises achieve financial sustainability, thereby ensuring their long-term impact and stability.

Understanding Financial Sustainability

Financial sustainability refers to the ability of an organisation to maintain financial health over time while continuing to achieve its mission. For organisations operating in the social economy, this means securing reliable and diversified streams of income, managing expenses prudently, and building reserves to weather periods of financial uncertainty.

In the evolving social impact landscape, financial sustainability is not just an operational need; it is a critical enabler of long-term impact. As donor patterns shift and operational costs rise, non-profits and social enterprises must embrace innovative strategies to build resilience and maximize their impact.

Challenges to Financial Sustainability

Not-for-profit organisations and social enterprises often face several challenges that can hinder their financial sustainability:

• Dependence on donations and grants: Many not-for-profits rely heavily on donations and grants, which can be unpredictable and subject to economic fluctuations.
• Limited access to capital: Unlike for-profit businesses, not-for-profits have limited access to equity capital and other financial instruments that can provide funding for growth and innovation.
• Regulatory constraints: Not-for-profits are subject to various regulations that can limit their ability to generate income through commercial activities.
• Competition for funding: With numerous organisations vying for limited funding sources, competition can be fierce, making it difficult to secure adequate resources.

Strategies for Achieving Financial Sustainability

To overcome these challenges, not-for-profit organisations and social enterprises can adopt several strategies to enhance their financial sustainability: This include either diversifying their income streams or by adopting innovative business models:

Diversifying Income Streams

Relying on a single source of income can be risky. Diversifying income streams can provide greater financial stability and reduce vulnerability to economic shocks. This can be achieved through:

• Fundraising initiatives: Developing robust fundraising campaigns that engage individual donors, corporate sponsors, and community partners.
• Grants and contracts: Securing grants from foundations, government agencies, and private sector organisations.
• Investments and endowments: Establishing investment funds and endowments to provide a steady income stream.
• Fee-for-Service models: Organisations can charge fees for services that align with their mission, creating a sustainable income stream.
• Product-based initiatives: Develop and sell products that generate revenue while furthering the organisation’s impact.
• Membership or subscription models: Offer value-driven/ premium/exclusive resources and membership or subscription plans.
• Corporate partnerships and sponsorships: Shared-value initiatives where corporates fund programs that align with their goals and objectives or employer value proposition.
• Asset utilisation: Generate income by leveraging underutilised assets for example, renting out office space or meeting rooms or monetising training facilities during downtime.
• Digital Crowdfunding and E-commerce: Leverage digital platforms to raise funds or sell mission-aligned products and services.

Innovative Business Models

Non-profits and social enterprises can thrive by adopting business models traditionally seen in the private sector. By aligning these models with their mission, they can unlock untapped revenue streams, enhance efficiency, and maximise impact. The section below explore how some of these innovative models can work in the sector:

• Freemium Model: Case Study: RLabs (South Africa): RLabs offers free basic training in technology and entrepreneurship to youth and charges for advanced courses and consulting services, creating a sustainable income stream while empowering the community.
• Subscription Model: Case Study: Lumkani (South Africa): Lumkani provides low-cost fire detection systems in informal settlements with a subscription-based alert service, enhancing community safety and generating recurring revenue.
• Marketplace Model: Case Study: Kasha (Rwanda): Kasha is an e-commerce platform that sells women’s health products, connecting suppliers with consumers and ensuring access to essential items while earning a commission on sales.
• Aggregator Model: Case Study: M-Farm (Kenya): M-Farm aggregates market price information and connects farmers directly to buyers, improving transparency and farmers’ incomes through a centralised platform.
• Pay-As-You-Go Model: Case Study: M-KOPA Solar (Kenya): M-KOPA provides solar home systems to off-grid households on a pay-as-you-go basis, making renewable energy affordable and accessible while ensuring steady revenue.
• Technology Platform Model: Case Study: hearX Group (South Africa): hearX Group uses smartphone technology to offer affordable hearing tests and devices, expanding access to hearing healthcare across Africa.
• Licensing Model: Case Study: Honey Care Africa (Kenya): Honey Care Africa partners with smallholder farmers, providing them with beekeeping equipment and training. The farmers produce honey, which Honey Care buys, processes, and sells under its brand, sharing profits with the farmers.
• Open-Source Model: Case Study: Open Data Durban (South Africa): Open Data Durban develops open-source data tools to promote transparency and civic engagement, offering customisation and support services to sustain operations.
• Razorblade Model: Case Study: Dot Learn (Ghana): Dot Learn offers affordable online education with low data usage videos, charging minimal fees for course access while providing free basic content.
• Franchise Model: Case Study: SPARK Schools (South Africa): SPARK Schools operates a network of affordable private schools through a franchising model, expanding access to quality education while maintaining financial sustainability.
• Ad-Based Model: Case Study: Jamii Forums (Tanzania): Jamii Forums is an online platform for social discourse funded through advertising revenue, supporting free expression and community engagement.
• Microfinancing Model: Case Study: SEF (Small Enterprise Foundation) (South Africa): SEF provides microloans to women in rural areas to start or expand small businesses, fostering economic development and self-sufficiency.
• Peer-to-Peer Model: Case Study: Village Capital (Africa): Village Capital uses a peer-selected investment model to support early-stage entrepreneurs, promoting peer-to-peer learning and funding.
• Crowdsourcing Model: Case Study: Ushahidi (Kenya): Ushahidi is a crowdsourcing platform developed to map reports of violence in Kenya, now used globally for various crisis mapping and data collection purposes.
• Virtual Goods Model: Case Study: Leti Arts (Ghana/Kenya): Leti Arts creates digital comics and games based on African history and folklore, monetising virtual goods to promote culture and education.
• White-Label Model: Case Study: Vula Mobile (South Africa): Vula Mobile offers a medical referral app that can be customised and branded for different healthcare organisations, improving specialist access in remote areas.
• Space-as-a-Service Model: Case Study: Inyathelo (South Africa): Inyathelo provides co-working spaces, learning and event venues, offering flexible workspace solutions to entrepreneurs and organisations, generating revenue through memberships and rentals.
• Last-Mile Distribution Model: Case Study: Copia Global (Kenya): Copia Global uses technology to provide e-commerce solutions to rural consumers, ensuring delivery of goods to underserved areas through a vast agent network.
• Affiliate Model: Case Study: Travelstart (South Africa): Travelstart partners with various service providers, earning commissions on travel bookings made through its platform, facilitating travel planning across Africa.
• Shared Revenue Model: Case Study: Sozo Foundation (South Africa): By combining its entrepreneurship and social enterprise support models, the Sozo Foundation provides startup capital as well as advanced skills training, apprenticeship, internship opportunities. Its construction and maintenance programs not only provide work, work experience and jobs, but also supports entrepreneurs with access to markets. In addition, its roastery and mobile coffee shop, property rental and management initiatives allows for multiple revenue streams that is shared with program participants.
• Affiliation Networks: Case Studies: Ashoka Africa and African Circular Economy Network (ACEN):
  • Ashoka Africa: A global network of social entrepreneurs, Ashoka Africa supports changemakers by fostering collaboration and innovation. Ashoka’s affiliated fellows pay no membership fees, but the model generates funding through grants, partnerships, and consulting services offered to the network’s stakeholders. 
  • African Circular Economy Network (ACEN): This organisation builds a network of businesses and nonprofits working on circular economy principles. Membership fees help fund training, networking events, and advocacy work. In both these case studies income is derived from membership or subscription fees, hosting events, conferences, or summits for members and external participants and leveraging the network for joint ventures, fundraising, and sponsorships.
• Technical Assistance, Training, or Consulting: Case Study: Grassroots Soccer (South Africa): This organisation offers training to organisations to implement its proven soccer-based health and education programs, earning income from licensing and training fees, contracting consulting services to public, private and nonprofit sectors and partnering with donors to scale technical support while covering costs.
• Knowledge Dissemination: Case Studies: African Leadership Academy (ALA) and SouthSouthNorth (SSN): Monetising expertise through publishing research, selling toolkits, creating online courses, or running webinars. Knowledge-based services can create additional income while sharing valuable insights. 
• Packaging and Licensing: Case Studies: Barefoot College (Tanzania & Kenya), Ubongo Tanzania: Developing proprietary tools, programs, or curricula and licensing them to other organisations or businesses. This model allows scaling without needing extensive infrastructure investments. Barefoot College (Tanzania & Kenya): Packages its solar electrification training programs and licenses them to governments and NGOs. Ubongo (Tanzania): Africa’s leading creator of edutainment content licenses its children’s programs to broadcasters and NGOs, generating revenue while expanding its reach.
• Partnerships and Alliances: Case Study: M-Pesa Foundation (Kenya): The M-Pesa Foundation partners with various organisations to deliver social impact projects, pooling resources and shared expertise. Revenue is generated through co-funding agreements, delivering fee-based services in joint ventures and attracting sponsorship for large-scale initiatives.

Key Takeaways

To remain impactful and relevant, non-profits and social enterprises must rethink traditional operating models, funding approaches, innovate to create diversified and new revenue streams, as well as collaborate across sectors. The path to financial sustainability is not easy, but it’s achievable with a mission-driven, strategic approach.

By considering, adopting and adapting these models, non-profits and social enterprises can unlock financial resilience, expand their reach, and amplify their social impact.

Conclusion

This article is a follow-up to one of our previous articles titled: What the social economy needs now ─ and it’s not just funding

Reana Rossouw – Next Generation Consultants: Next Generation Consultants is a management consultancy that works at the intersection of the impact, social and solidarity economies. Next Generation’s services include research and development, strategic advisory as well as impact management and measurement.