Safeguarding Charities from the Recession I The Guardian31.08.2012

The Guardian writes about the importance of social enterprises in ensuring charities are not struck by the recession and, in particular, AfID's achievement in winning the Santander Social Enterprise of the Year

When money is tight, charities can be the first to suffer. We're in the middle of a global recession, and both government overseas aid and individual donations are shrinking.

Individual donations in America fell by 14% at the start of the recession, and in 2011 overseas aid from Europe fell for the first time in fourteen years, with Greece slashing its foreign aid budget by 39.3% and Spain cutting its overseas aid spending by 32.7%.

This loss of income affects all charitable organisations, from large international NGOs to tiny orphanages, rural schools and slum-based health centres. At the grassroots level a 10% drop in income can mean 10% fewer hospital beds or 10% fewer scholarships for street children or even their closure. Meanwhile, the current economic climate means that international NGOs and individual donors want greater accountability and transparency from the small community based organisations (CBOs) they fund in the developing world.

When resources are scarce, a large NGO is reluctant to hand over funds that can't be accurately and systematically accounted for. Hope and Faith Babies Home in Uganda, Africa, is an orphanage with a dairy farm attached, and was founded by Sister Mokisha. The organisation was doing great work caring for orphans, but local staff were not fully trained in financial reporting or financial planning, which meant a number of donors were unwilling to provide funds. As a result, Hope and Faith Babies Home faced closure, which would have been devastating for the local community.

They asked for help from Accounting for International Development (AfiD), a social enterprise which brings together voluntary finance professionals with grassroots charities that need their skills. As a result of that help, local staff learned financial reporting and planning skills, which helped the orphanage become viable long term. Being able to produce financial reports made the organisation more attractive to donors – as the funds could be tracked and accounted for – and being able to make detailed financial plans helped secure the organisation's future, bringing stability to the local community.

This kind of support and coaching has benefitted small CBOs across the developing world: "AfiD's volunteers provided Angkor Hospital for Children with much needed training and organisational development in accounting. This has increased our trustworthiness with several donors and partners which in turn is helping us provide more and better services to the children in need." Dr William Housworth, executive director, Angkor Hospital for Children, Cambodia The support focuses on empowering local people to help themselves, rather than creating aid-dependency.

The promotion of economic sustainability, self-sufficiency and business skills is something that social enterprises are ideally suited to, as unlike charities, they themselves are self-sufficient.

Social enterprises which can generate long term revenue for themselves can pass on their experience of combining a social goal with financial self-sufficiency. This is why social enterprises can, and should, lead the way in protecting overseas charities from the recession and help them avoid aid-dependency.

Neil Jennings is founder of Accounting for International Development Accounting for International Development (AfID) is a social enterprise providing charities and their NGO partners overseas with a specialist pro-bono volunteer accountant programme. AfID volunteer assignments in Africa, Asia and South America form an on-going strategy to build the financial management capacity and long-term sustainability of organisations that are unable to access vital professional services and training. AfID is now supporting over 140 charities and non-profit organisations in 26 countries.

AfID won the Santander Social Enterprise Exchange Award for growing social enterprises and was awarded £5000 to expand its volunteer programme and support more grassroots organisations across the world.

Content provided by Santander.