WHAT REALLY IS A “NON-PROFIT” ORGANISATION?

In a capitalist society, where greed is fuel and exploitation is power, the need for a body that focuses solely on human growth and development emerged. When the world saw atrocities like world wars, various revolutions, and crippling economies, the concept of non-profit organisations, which were independent and not at the mercy of government, which would focus on bridging the gap between the rich and the poor, the educated and the uneducated, the privileged and the exploited, was felt more than ever. NGOs or non-governmental organisations are welfare-driven units that are run through volunteers and workers that focus on a fixed cause and get funded through private and/or other forms of funding.

How do NGOs make money?

Each NGO has a different goal and a unique setup. The sources of funds are mostly private, but some NGOs are quasi-governmental and work independently but are somewhat supported by the government. Apart from donations, NGOs that manage to get international attention also receive funds from international organisations like the UN. In fact, the term, “non-profit organisation” was first coined in 1945, during the formation of the United Nations to distinguish private and intergovernmental organisations.

In India, an NGO can register itself with the government as either a trust, a society, or a Section 8 company, differing on the basis of motives and the administration of their funds. Section 25 in the Companies Act 1956 states that a company registered, in order to satisfy central government and would only be exempted from taxes if, “the association is about to be formed as a limited company for promoting commerce, art, science, religion, charity or any other useful object, and prohibit the payment of any dividend to its members”, that is, such associations work and use the profits solely for their objectives and do not provide any dividends to the members associated.

India also makes it mandatory for NGOs to apply for PAN (Permanent Accountant Number) to keep a check on their accountability and exempt them from Income Tax and other such taxes which are not applicable.

Not only in India, but African countries like Ethiopia, Rwanda, Tanzania and Uganda also have a strict multi-level registration process for NGOs to register themselves as legitimate and to allow them to receive foreign funds. In western countries like the USA and Wales, there exist online portals where one can verify the legibility of an NGO before making a donation.

Where Does the Money Go?

To understand the accountability of NGOs, it is vital that first, we understand their framework. If we see private companies, with stakeholders who invest to gain returns, their money invested is giving them back dividends because it is for individual profit. On the other hand, NGOs are not driven by profit and require monetary aid to achieve their social goals. Here, the stakeholders are the investors/donors who do not receive monetary returns but instead the value and satisfaction of contributing to the growth and well-being of society. NGOs usually try to maintain transparency towards their donors by keeping them updated with how their funds are being used. A lot of organisations send newsletters every few weeks or months, both in order to maintain transparency and in order to build trust and long-term relationships. Lately, NGOs are trying to give something back in return to appreciate their donors. In short, the donator is not just donating money, but ‘buying’ something for them. The Wildlife SOS which works for the protection and conservation of wild animals sells animal-printed merchandise to collect funds and keeps the donators/buyers updated on their social media platforms. Various rural NGOs sell handmade materials to raise money for the upliftment of the underprivileged. Apart from the donors, NGOs have to maintain their accountability to the government in the form of annual reports, monthly reports, audit rounds, or whenever the government asks for it.

Set up your own NGO, just for you!

Sounds selfish, doesn’t it? As hard to believe, it works and people do donate. All you need is the power of social media. In the fast-paced development of digital payments, one can set up an account on online funding portals like GoFundMe, CrowdFunder, Milaap (Indian website), and ask people to fund you. During lockdown, individuals raised money for cancer, house fires, expensive operations, and even for their education, to move out of their house or buy something new. These portals helped people who were in dire need to collect funds quickly and efficiently, where the money would be directed into their bank account.

Especially during the difficult time of lockdown, where the world only seemed to be active online , people found ways to tackle their financial difficulties by asking for help from strangers on the internet. This concept of crowd-funding did not only help individuals in need, but also businesses trying to establish a new brand. Businesses pitched their ideas in public and received crowdfunding in millions. Pebble watches earned USD 1 million within 28 hours within 28 hours on the crowdfunding portal Kickstarter, and had a contribution of upto USD 10 million in the following week.

But what makes people donate through online means, where transparency is a bit shaky?

Stories. If the cause is supported by a story, be it a student wanting to clear off their educational loans, or a teenager wanting to pay for their birthday party, a good story will pool in funds. People managed to raise funds for absurd reasons, ranging from, ‘to save their relationship’, to pay for their hair colour and tattoo, or just being blunt and accepting that they are broke and need some money. Harvard Business Review said that “companies need a ‘social media mindset’ to make crowdfunding work, especially because the process introduces a human element to the process of raising capital”. The lemon stand charity revolutionised being forward on the internet and telling captivating stories because some stranger (or strangers) on the internet will be touched by your situation and will donate whatever they can to help out a buddy.

In a world of cutthroat competition for opportunities and money, being selfish has been normalised. The capitalist mindset encourages ‘individuality’ and self-interest over everything else. It propagates the idea of, ‘lookout for you first, the world will take care of itself’, which we cannot term as right or wrong, but something which is not letting humanity grow as a whole. Since the primitive ages, we have only been able to grow and discover our potential when we work as a unit. Brotherhood, community spirit, giving, and sharing are what humanity stands for and these are the very values that will determine its growth and any deviation from these will only result in a downfall. NGOs are working as a bridge to close the vast economic and social disparities among the people, something that the world desperately needs in this age.