Diversified revenue streams and the financial sustainability of non-governmental organizations in Kenya

Abstract

For NGOs to sustain their operations and preserve their influence, achieving financial sustainability is vital. Diversifying an organization's income streams is essential, especially in light of the reduction in donor financing. The purpose of this study was to ascertain how revenue diversification affects non-governmental organizations' (NGOs') long-term financial sustainability in Kenya. In particular, it looked at how grants, fee-based services, interest income from revolving funds, and income generating activities affected Kenyan NGOs' ability to be financially sustainable. The study was guided by three important theories: Resource-Based View, Institutional Theory, and Resource Dependency Theory. A descriptive study design was used, with 249 Nairobi County-based NGOs as the target population. 154 NGOs that were committed to reducing poverty were chosen through the use of a purposive sampling technique and simple random sampling. The main method of gathering data was a survey of one hundred fifty-four managers from these NGOs using questionnaires. The data that had been evaluated was displayed using both inferential and descriptive statistics. The results showed that grants, fee-based services, interest from revolving funds, and income generating activities all had an impact on NGOs' ability to remain financially sustainable. The findings showed a correlation between increased financial sustainability and an increase in any of these revenue streams, including, grants, and fee-based services. On the other hand, a rise in these sources of income, income generating activities and interest income decreased financial viability. Therefore, there was a better likelihood that NGOs with a variety of income streams would continue to be financially stable. The study came to the conclusion that every revenue source it looked at was important in figuring out financial viability. The report suggested that NGOs should focus on building and maintaining strong, diverse relationships with a wide range of donors. It also recommended NGOs should invest in building their capacity to deliver high-quality, competitive services that meet the needs of their target audience. Thirdly, NGOs should invest in ongoing monitoring of loan performance and provide continuous support to beneficiaries throughout the loan period Lastly, before initiating or expanding these projects, NGOs should conduct thorough feasibility studies and market analyses.