Why do development charities in the UK close, and how does this impact the sector? Ailbhe Treacy's MSc dissertation aimed to answer these crucial questions by examining UK development NGO closures between 2016 and 2021. The findings reveal that smaller and younger NGOs are particularly vulnerable to closure due to changes in the donor landscape and a lack of diversified funding.
Who is at Risk?
By analysing 898 UK development NGOs, Treacy's research found that those with lower expenditures are disproportionately affected. Newer NGOs, especially those established between 2005 and 2015, are more likely to close. Regional disparities also play a role, with London and the South-East being underrepresented in closures, benefiting from proximity to influential elites and government officials.
Why Do NGOs Close?
Out of 41 NGOs that closed, 21 shared their reasons publicly. Two-thirds cited financial difficulties, often due to losing a single funding source. Many NGOs that relied on public donations faced issues with costly fundraising methods, such as direct mailings, leading to financial mismanagement. Government-funded NGOs were heavily impacted by Brexit and changes to DFID funding priorities.
Success Amidst Challenges
Despite focusing on closures, Treacy's research uncovered success stories of mergers and acquisitions (M&A). Four NGOs that pursued M&A proactively saw positive outcomes, including better delivery, improved quality, and increased donor attractiveness. For instance, Street Child Africa’s merger with Chance for Childhood resulted in lower overheads and higher charitable spending.
Achieving Mission Success
Interestingly, some NGOs closed voluntarily after successfully achieving their missions. Two organisations focused on water, sanitation, and hygiene found that clear aims and a cooperative approach allowed them to fulfil their objectives and close on a high note.
Looking Ahead
As COVID-19 and cuts to UK foreign aid continue to strain NGO finances, understanding closures is more important than ever. Former Oxfam International head of strategy, Barney Tallack, highlighted three options for northern INGOs: transform, die well, or die badly. By identifying at-risk NGOs and learning from closure narratives, we can guide these organisations toward transformation.
Key Takeaways for SIDCN Members
Diversify Funding: Relying on a single source of funding increases the risk of closure. Diversify to ensure stability.
Collaborate for Success: Consider mergers or partnerships to strengthen your impact and financial health if at risk.
Learn and Adapt: Study the reasons behind NGO closures to identify risks and implement proactive measures.
Celebrate Achievements: If your mission is accomplished, closing on a high note can be a success in itself.
SIDCN is here to support each other. Let’s learn from these insights to strengthen our network and continue making a positive impact.
Article Compiled by Marlene K Kinyua, SIDCN Amplify Trustee.