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

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

Supporting small nonprofits in Latin 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!

Challenge 1: Visibility

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

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

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 marketing 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 Latin American small nonprofits, the geographic and cultural distance on top of other challenges make their visibility even smaller.

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.

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!

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 the evaluation process when my Philanthropy Consultancy vets nonprofits in Guatemala, a few nonprofits were surprised and uncomfortable when we 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 to be passed over by potential foreign major donors.

Advice for donors:

If you want to work with a small locally run non-profit located 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 from the start that you communicate your expectations clearly. You will need to ensure that the nonprofit is transparent and competent at reporting it’s expenses and how they use your donation. It is worth the effort collaborating with small foreign nonprofits as they are more likely to make a more community led and sustainable impact but you must also be patient and understanding of the nonprofit context too.

Challenge 3: Low Trust and High Corruption

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

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 latin American nonprofits. Corruption within public bodies is one of the reasons why so many nonprofits exist in the first place so when involving yourself with public bodies, go in with your eyes wide open regarding the sad reality that they may let you and/the nonprofit down.

Challenge 4: Covering Operating Costs and low unrestricted funding sources

A microfinance nonprofit helped this lady with the set up and initial operating costs to start a garment making business.

A microfinance nonprofit helped this lady with the set up and initial operating costs to start a garment making business.

Operations are large, essential costs that all nonprofits need help with and 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 such as towards material items rather than into unrestricted funds which can be used at the nonprofit’s discretion. 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”.  

Advice for donors:

Seriously consider having your donation cover essential running costs of the nonprofit. Think of it this way, when buying a cake, you wouldn’t stipulate that you pay only towards the eggs and sugar and another customer will have to pay for the electricity and staff salary. 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 also needs to exist when donating to operating costs. If you have any doubts regarding how your donation is being spent, rethink your nonprofit choice or employ a third party consultant on the ground to impartially verify that everything is going to plan.

If you keep these 4 factors in mind, there should be no surprises (well, fewer), if you choose to direct your Philanthropy towards the Latin America region. Even though giving locally or nationally may be an easier, more convenient option, the Latin America region only receives 6.3% of US Foundation Giving with a mere 0.6% going to Central America.

What does this mean? Well, there is a lot of impact to be made if Major Donors are informed and dedicated to long term change.

So, are you up for the challenge?  

Contact us today for a free consultation to get you started on your Philanthropy Journey in Latin America!