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Non-governmental organisations (NGOs) are independent organisations that work for social good. Many people set-up or work for NGOs because they want to help people in need or want to address issues within their community or abroad. Many NGOs raise significant amount of money. Although NGOs do good, are they profitable businesses?
NGOs are not profitable businesses. NGO’s must use the funds they raise either to help people or for their operating costs. Owners of NGO’s do not make a profit either but are paid a salary by the NGO or work voluntarily. In many countries there are regulations against NGO’s being profitable businesses.
With that said, let’s breakdown why NGOs are not profitable businesses, and explain more what NGOs do with their funds…
Do NGO’s Make a Profit?
NGO’s do not make a profit. They use the money they raise to help people in need and address causes locally or around the world. There are many different types of NGOs. Each type of NGO has different reasons they are not profitable business, as well as different uses for the funds they raise.
As we said, NGOs are not profitable businesses and this includes the large and famous international NGOs. All the money international NGOs such as Save the Children, Oxfam, World Vision and International Rescue Committee make is used to fund their humanitarian actions. Many countries have laws against NGO’s making a profit and this includes where many of the big NGOs are based.
The large international NGOs can raise millions of dollars; however, they are not profitable businesses. International NGOs raise funds through public donations and corporate partnerships, as well as from institutional donors such as UK Aid or ECHO. None of these funds are used to return a profit for shareholders or the NGO’s owners.
When international NGO’s raise money they use it for two main things. The first, and most important, is for their programmes assisting people in need.
Each international NGO has a core mandate of work that they do and the money they raise is put towards this work. The second thing international NGOs do with money they raise is fund their offices and operations. They do not make a profit from the money they raise.
Local NGOs are smaller organisations usually based in only one country or area. Like international NGO’s, local NGOs are not profitable businesses. They also usually operated in countries that have laws against NGO’s turning a profit. The aim of a local NGO is to assist people in their community and they use the money they raise to help local causes, and not to make a profit.
Many local NGOs are set-up by people from the community who want to help others in their community, and not to make a profit. Some local NGOs are very small, only a few community members working on causes they believe strongly in. Some are large and can have budgets of several hundred thousand dollars.
Regardless of the size or amount of funds, local NGOs are not profitable businesses.
A lot local NGOs form partnerships with international NGOs. This is where international NGOs will fund local organisations whilst also building their capacity and helping them develop. When local NGOs partner with international NGOs’ they do not make a profit. The funds used in these partnerships are under contract to be used for specific humanitarian projects and not for profit for the local NGO.
NGO’s do not turn a profit. However, social enterprises are similar to NGOs and can make a profit. A social enterprise is run like a business, but with the main aim being to benefit people or address a cause. Through selling of goods or services, social enterprises raise money and either reinvest it or use it to assist people in need.
Essentially, a social enterprise is a type of NGO that is also a profitable business.
Unlike NGO’s that raise funds from donations and don’t make a profit, social enterprises sell goods and services on the open market and can turn a profit.
Generally, NGO’s do not sell things but make money through donations by individuals, donors or corporate partnerships. None of the money NGO’s raise is returned to the owners as a profit. Social enterprises aim to help people like NGOs do, but can also make a profit.
Like NGO’s, social enterprises are governed by laws regarding how they can make profits and what they can do with the money they make. However, social enterprises are usually under different laws to NGOs, which means they are allowed to be profitable businesses, unlike NGOs. Not all social enterprises make a profit, and some NGO’s have separate legal entities that they have set-up as social enterprises to allow them to make a profit.
Civil Society Organisations
Civil society organisations cover a wide range of different types of organisations. Civil society organisations, like NGOs, are not profitable businesses. They are set-up by people independent of any government or business to address needs within their communities.
The term Civil Society Organisations is often used in a broader sense and covers more third sector organisations than just NGOs.
There are many causes that civil society organisations work on and many different ways that they raise funds. However, civil society organisations, like NGOs, do not turn a profit and many are in countries that have regulations forbidding them from doing so. Like NGO’s, civil society organisations do not sell goods or services on the open market and, unlike social enterprises, are not profitable businesses.
Civil society organisations use the money they raise to address social issues. Like NGOs, they also use some of their funds to cover expenses such as staff salaries, offices and further fund raising. They do not profitable businesses. Civil society organisations do not have shareholders who receive a profit and the owners of civil society organisations either work voluntarily or a are paid a salary.
NGO Online Courses
If you are looking to work for an NGO, we highly recommend the online course International Humanitarian and Development Careers. We think it provides one of the best overviews of the NGO sector and gives a clear breakdown of the skills needed to get an NGO job. It also provides valuable information on how to successful apply for positions within NGOs. Click the link to be taken to the course’s page.
We also think the online course Introduction to NGO Management is a must for anyone wanting to work for an NGO. It goes over how NGOs operate and introduces students to the unique aspects of the NGO sector they will need to know in order to land a job. Follow the link for more information.
Another online course we highly recommend for those wanting to join the NGO sector is How To Design and Fund International Development NGO Projects. Anyone working for an NGO needs a basic understanding of how NGO projects are set-up, and how to input to funding proposals. This course is a must for those wanting to work for an NGO. Click the link to get more information on the course.
How Do NGO Owners Make Money?
NGO’s do not make a profit. They use the funds they raise either for help people in need or run their operation. With that said, how do the people who set-up, run or own NGOs make money?
NGO owners make money by being paid a salary from the funds raised by the NGO. The NGO’s CEO, director or owner will receive a set salary for the work they do in managing the NGO. This is paid from the NGO’s funds in the same way other staff members who work for the NGO receive a salary.
The salary NGO owners make is set by the NGO’s board. NGOs have a governing board that oversees their work, operation and compliance. NGO board members are volunteers and often people with extensive professional, public or political experience.
The owner, manager, director or CEO of an NGO has their salary set by the board and must justify to them the amount of money they make.
Most countries in the world have strict laws about how NGO owners make money. In almost all country’s NGOs are not allowed to be profitable businesses and the owners of NGOs are not allowed to benefit financially from running an NGO. However, NGO owners, managers and directors can be paid a salary and, depending on the size of the NGO, this can be a significant amount of money.
If you want more information on how to work for an NGO, explore our list of the top NGO online courses here.