When considering resource mobilization for the development sector one automatically recalls the telethons and other fundraising activities done by charities to raise millions of dollars; quite similar to the ones that are going on for the Haiti earthquake relief operations.
However resource mobilization in the 3rd world is quite a different matter. It is fundamentally handicapped due to the following reasons. Most International organizations and Local civil society organizations operate in the 3rd world as project implementers. Therefore their articles of association / constitutions do not provide for resource mobilization (self generated / self raised funds) domestically.
Due to above, currently most governments / states (in Asia) do not recognize them as registered charities that qualify for fund raising which is tax exempt. The local civil society organizations may at present have not for profit status but this is far from being tax exempt. They are only allowed to receive funds from donors who already have funds or who have access to funds. Generally these funds when received in the implementing country are exempted from income tax. In fact, in most cases the local legislations which facilitate the registration of these entities for legal purposes themselves disallow any kind of activity which earns an income for the organization.
So, in order for an organization (NGO) to be legally able to engage in resource mobilization they have to:
- Ensure that the articles of association / constitutions that they operate under provides for such activities.
- Get the government to recognize them as charity (this is generally done by conforming to already existing legislation or you would need an act of parliament or for parliament to pass new legislation to facilitate this).
- Once you are registered as a charity that qualify for fund raising which is tax free you can look at the spectrum of resource mobilization activities which are at your disposal.
Fund raising activities in general falls in to the following broad categories.
- Cause / Issue based (HIV/AIDS, TB, Child Labour, etc.).
- Event based (Tsunami, War, Earthquake, etc.).
- Faith based donations to religiously affiliated organizations
- Bi-lateral funds.
- Multi-lateral funds
There is however another resource mobilization strategy which is “Income Generation Projects” which is: a civil society organization can engage in commercial activities such as training, providing a chargeable service, renting of assets, producing of some products etc. to generate a profit. This profit is then used for development activities.
If a civil society organization wants to use this strategy they need to ensure that the articles of association / constitutions as well as the legislation / act of parliament clearly addresses’ this activity. Otherwise an organization may become liable for income tax and other trade related taxes. This risk may jeopardize the sustainability of the organization; therefore careful consideration must be given to the legal landscape before engaging in such activities.
Most Asian governments acknowledge the contribution made by civil society organizations towards their development activities. Using this equity, civil society organizations in general will have to lobby the Governments in terms of changing the laws and statutes that facilitate domestic resource mobilization. They will have to coordinate with businesses who engage in CSR activities to enhance their campaign to ask the tax authorities to classify their CSR budgets as tax exempt. A coordinated and concerted effort by both parties can have a significant impact on the changes of law.