4 Small Nonprofit Challenges that Donors should understand (a Central America lense)

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Over and over again whilst working in collaboration with different nonprofits in Latin America, the same 4 small nonprofit challenges presented themselves. It is therefore essential that Donors understand them if they want to be responsible and committed to making long term sustainable change in the region.

Supporting small nonprofits in Central America has many benefits including higher comparative impact due to lower overhead and running costs and higher local community involvement and sustainability prospects. Nevertheless, before doing so, take into account the following challenges before taking the plunge!

Small Nonprofit Challenge 1: Visibility

With over 1.5 million nonprofits in the US and 10 million worldwide, it’s no surprise that those with the loudest voices and biggest budgets get noticed first. Furthermore, donors are bombarded more than ever in history with advertising. For example a city dweller 30 years ago saw 2,000 ads a day, compared with 5,000 today. This means that gaining donor attention is even more problematic for small nonprofits with already stretched resources. For Central American small nonprofits, the geographic and cultural distance on top of other challenges make their visibility even smaller.

A little girl at one of our Education nonprofits wearing traditional dress

Advice for donors:

Do your research before deciding on where to direct your giving. Don’t go with the shiniest looking nonprofit (even if your best friend recommends it). First, analyse your values and identify which themes are important to you (eg Health, Education, Human Rights etc). Then research online or hire a consultant specialist to make recommendations based on these factors amongst others such as length and level of involvement etc.

Small Nonprofit Challenge 2. Nonprofit Lack of Donor Understanding

Another School nonprofit. Here is Harriette getting to know the kids. This girl was telling her about her pets!

For small nonprofits run by locals who are trying to attract foreign donors, it is usually very difficult to attract them due to a lack of knowledge regarding donor values and drivers. For example, during Pionero’s evaluation process, a few nonprofits were uncomfortable when asked about financials. One of the reasons for this is because there isn’t a very transparent or strict accountability system for nonprofits in comparison to more developed countries.

This lack of knowledge on the nonprofit side regarding foreign donor expectations means that they don’t appreciate the importance of transparency measures such as publishing annual reports or having a semi-professional website. As a result, these nonprofits are likely dismissed by foreign donors.

Advice for donors:

If you want to support a local non-profit in a developing country, make sure you do your homework beforehand. You need to understand that your expectations may be different to what the nonprofit thinks they are. So ensure that from the start you clearly communicate your expectations.

You will need to ensure that the nonprofit is transparent and competent at reporting it’s expenses. It is worth collaborating with these organizations as they are community led and thus have more local buy in. However, you must be patient and understanding of the nonprofit context too.

Small Nonprofit Challenge 3: Low Trust and High Corruption

A general lack of trust in Central American communities is extremely high due to historical, political and cultural factors. Public institutions are rife with corruption. This means that even services designed to protect citizens such as the police cannot be trusted.

This hugely stifles nonprofit progress and growth. For example, “an idea arose to create a database to control and track drug cartels, but the lack of trust among officials rendered it inoperable because they could not find people to run the program.” This is another factor that translates into a low level of transparency and visibility regarding nonprofit income, for fear of extortion.

Advice for donors:

Bear this important culturally ingrained factor in mind when dealing with central American nonprofits. Corruption within public bodies is one of the reasons why so many nonprofits exist in the first place. Therefore, when dealing with public bodies, have your eyes wide open regarding the reality that they may let you and/the nonprofit down.

Small Nonprofit Challenge 4: Covering Operating Costs and low unrestricted funding sources

Operations are large, essential costs that all nonprofits need help with.

48% of the nonprofits that Pionero Philanthropy represents said that staffing costs are what they most need funding for.

This simple fact, typically puts off naive donors who prefer to see where their money goes. Examples of this include towards material items such as books, computers etc

Nevertheless, as Kevin Starr for the Stanford Social Innovation Review says;

“Unrestricted money makes an organization work smoothly, enables innovation, and provides fuel for growth. It unlocks potential and allows people to get down to business”.  

Kevin Starr for the Stanford Social Innovation Review
A microfinance nonprofit helped this lady with the set up and initial operating costs to start a garment making business.

Advice for donors:

Seriously consider having your donation cover running costs of the nonprofit. Put another way, when buying a cake, you don’t pay just for the eggs whilst another customer pays for the flour. See this article for further elaboration on this point. There is no problem asking for an expenses and progress report regarding how your donation is being put to use. However, an element of trust needs to exist when donating to operating costs. If you have any doubts regarding how your donation is being spent, you have 2 options. Either you rethink your nonprofit choice, or you employ a third party on the ground to verify the organization’s operations.

If you keep these 4 factors in mind, there should be no surprises (well, fewer). Even though giving locally or nationally may be easier, a mere 0.6% of US Foundation Giving goes to Central America.

What does this mean? Well, a lot of impact can be made with informed Donors who are dedicated to long term change.

So, are you up for the challenge?

Contact us today for a free consultation and get started on your Philanthropy Journey in Central America!