by L. David Brown, Rajesh Tandon,

Anil Chaudhury, and Sudarshan Synghal

L. David Brown is President of the Institute for Development Research and Professor of Organizational Behavior at Boston University. Rajesh Tandon is the founding Coordinator of the Society for Participatory Research in Asia (PRIA), New Delhi, India. Anil Chaudhury is a Senior Staff member at PRIA, and Sudarshan Synghal works with the Indian Administrative Service and is a doctoral candidate at Boston University in the Interdisciplinary Studies program. This paper was written for The World Bank as part of an effort to understand NGO-government relations.

It is increasingly recognized that nongovernmental development organizations (NGOs) often have a comparative advantage over government agencies for reaching the very poor, providing low cost services, building grassroots organizations, and adapting or creating innovative programs to meet local needs.¹ Agencies concerned with promoting sustainable improvements in the lives of grassroots populations are increasingly interested in how NGO contributions can be strengthened and expanded. Expanding NGO access to financial resources -- from private citizens, public agencies, international donors, and other sources -- is an important issue in this context.

This paper examines experience in India with providing government funds to support such NGOs. We seek to learn about the issues facing NGO-financing institutions (NFIs) and to identify general strategies and tactics for effectively bridging the gaps between government and NGOs. We do not intend for this analysis to be primarily a critique of existing NFIs or proposal for future NFIs.

This analysis is grounded in analyses of archival materials and interviews with officials of several NFIs and with NGO leaders who have benefitted from NFI support. This overview will be a background paper for discussions with government officials, NFI staffs, NGO leaders, and international agency representatives about how government institutions can most effectively work with NGOs. We hope to see new ideas about how future NFIs can be designed out of that discussion.

The next section briefly discusses two perspectives on the development roles of NGOs that imply quite different forms of NFIs. Then we turn to a brief discussion of the history of government support for NGOs in India and the NFIs whose experience provides the basis for this analysis. We then describe some issues experienced by these NFIs. The following section proposes some concepts for understanding and designing NFIs for the future. On the basis of these concepts, we then discuss two conceptions of NFIs for India that are grounded in different perspectives on the development roles of NGOs.

NGOs have undertaken a variety of development activities in India and in other countries. For example, NGOs may undertake programs to provide relief in disaster areas, services such as education and health in remote and impoverished areas, community organizing for local problem-solving and self-reliance, coalition-building and advocacy to press grassroots claims on government services, or support activities such as research, training, and technical assistance to grassroots populations.² Some NGOs undertake several activities, but most specialize in one or two, so it is often convenient to classify them by the type of activity that dominates their work.

Too much emphasis on NGO activities, however, can obscure a more fundamental difference that shapes how governments and donors conceive NGO roles in development -- and by implication the purposes of supporting them. One perspective conceives of NGOs as contributing to development by extending government services. The other perspective sees NGOs as promoting development by catalyzing local innovation and capacity-building. The two perspectives have quite different institutional assumptions, development goals, and criteria for success.

NGOs AS EXTENSIONS OF GOVERNMENT SERVICES

The service-extension perspective dominates most government and international donor support for NGOs. It assumes that the state is the primary architect of development policy and implementation, and that the delivery of services is the critical task for NGOs. This perspective emphasizes the capacities of NGOs to deliver relief in times of disaster, to reach poor and remote populations, and to deliver effective service at relatively low cost. Support for NGOs from this perspective will focus on implementing projects and delivering services. Thus studies of NGO involvement in World Bank projects, for example, indicate that NGOs have been used more in implementing roles than as advisers, organizers, or advocates.³

From this perspective, NFIs should be concerned with the quality of services delivered, coordination and oversight of NGO activities, and promotion of efficiency in delivery. The service extension perspective will hold NGOs accountable to government goals and standards. In the service extension perspective, NGOs in essence become an arm of the state, which remains the primary planner and implementer of development activities. NGO activities that do not advance service goals, such as some forms of organizing or advocacy, will be seen as irrelevant or noxious from this perspective.

The local capacity-building perspective, on the other hand, is concerned with strengthening the abilities of grassroots organizations and institutions for local problem-solving. It assumes that local people's organizations, informal associations, NGOs, unions, cooperatives and other "third sector" agencies are essential complements to the market and the state.⁴ The capacity-building perspective assumes that locally-grounded, values-based associations and organizations are essential to mobilizing and channeling grassroots energies for developmental purposes. Too much emphasis on the market can exacerbate disparities of wealth and power and undermine social institutions that would otherwise help to care for the poor and disadvantaged; too much emphasis on the state can undermine local initiative and independence and erode traditions of self-help.⁵ Evaluations of development projects suggest that strengthening local institutional capacity is one key to sustainability when projects need to be supported and maintained after outside agencies leave.⁶ Analysts from many settings have concluded that institutional pluralism -- characterized by effective state institutions for maintaining public order and organizing national programs, competitive market institutions for producing economic goods and services, and committed voluntary institutions for articulating public values and mobilizing voluntary resources -- is particularly likely to produce sustainable improvements.⁷

From the capacity-building perspective, governments should encourage NGOs to promote local development innovations and organizations that can complement effective state and market institutions. This agenda requires strengthening agencies that are independent from the state and the market. Government support for local capacity-building encourages bottom-up initiatives, local participation and influence, and accountability to grassroots groups and clients. This perspective emphasizes responding to local needs and initiatives, even at some cost in centralized planning and coordination or uniformity across regions. NFIs engaged in local capacity-building need to be somewhat autonomous from the state, at least where state linkages might threaten local capacity-building.

COMPARING THE PERSPECTIVES

Table 1 compares the two perspectives in terms of assumptions, goals, and criteria for success. Many NGO activities are relevant to both perspectives, but their effects will be measured by very different yardsticks. A relief NGO operating in the service extension perspective, for example, might be judged on costs per ton of rice delivered to starving populations. The same organization, operating in the capacity-building perspective, might be assessed by how much its relief work strengthens indigenous institutions for handling future disasters. The delivery of service is an end in the first perspective; it may be a means for building local capacity in the second.

The two perspectives assign different priorities to NGO activities. Thus NGO relief and service activities are central to the service extension perspective, while NGO organizing and advocacy are crucial in the capacity-building perspective. Support in the form of research, training, and technical assistance is relevant to both. We will return to the two perspectives in later discussions, since the definition of NFI missions and strategies grows out of assumptions about the development roles of NGOs.

NGOs have been important actors in the Indian context for decades. In the post-Independence period, Indian voluntary organizations have demonstrated alternative models of education, health care, community development, housing and several other areas of grassroots development.⁸ During the past decade the work of NGOs has been central to raising and bringing into the mainstream of Indian development planning and programming such issues as women, environment, and wasteland development.

Financial support for these NGOs has come from many sources: private citizens, international donors, corporations, government agencies. In this paper we are particularly interested in the experience of the Government of India with supporting NGOs for four decades. We will focus on support through semi-autonomous agencies that are intended to function independently of Central and State governments.

Soon after independence the government recognized that voluntary organizations could provide services to disadvantaged populations. The Central Social Welfare Board, described in Box 1, has been providing support to NGOs for nearly four decades.

In the early 1980s in became clear that NGOs had much to offer many development efforts. The Government of India dramatically increased the resources earmarked for NGOs in the Seventh Five Year Plan. It also created a new agency to strengthen the capacities of NGOs to participate in these programs called the Council for Advancement of People's Action and Rural Technology (CAPART). CAPART is described in Box 2.

At about the same time, the Government established the National Wastelands Development Board (NWDB) as a response to growing problems with ecological deterioration and deforestation. It was expected that the NWDB would make extensive use of NGOs in carrying out its programs, though it was also expected to work closely with Central and State Government agencies concerned with these issues.

These three institutions are all mandated to provide support to NGOs and they are all, in theory, autonomous from their Ministries. Table 2 presents some of the most important similarities and differences.

In this section we will focus on problems encountered by Indian NFIs, since we seek to understand the challenges that face such institutions. This emphasis on problems should not be interpreted to mean that they have not made significant contributions to development, but rather that examining problems can promote learning from experience. Some problems were repeatedly identified by NFI officials and by NGO leaders, and we will briefly describe those recurring problems here. We will use examples from the case studies to illustrate general points, and more detail can be found in the Appendices. This emphasis on the problems of NFIs should not be construed to mean that there are not problems with the NGOs they support. On the contrary, there is considerable evidence that not all NGOs are efficient, effective, dedicated, or honest. But our emphasis here is on the NFIs and their problems.

NFI officials and NGO leaders agree that NFI formal structure and procedures are often rigid and over-centralized, and so lead to long delays in follow through and sometimes to active harassment of NGOs by officials. NGO applications to NWDB, for example, require approval from state forestry departments, and so subject the NGOs to arbitrary demands from those officials. Applications to CSWB must be approved by State Board members, and so decisions and actions may be delayed and NGOs may be subjected to political interference. Officials at CAPART have insisted that the rule require paying the minimum wage to participants in some programs, even though they do not expect it. This procedure sets inappropriate expectations for future payments, but programs have been canceled when NGOs failed to follow it. Several NGO leaders also reported closing programs or being forced to borrow from moneylenders because of bureaucratic delays in support payments.

Many NFIs fund NGO participation in national development programs that have been designed as a uniform "scheme" for implementation throughout the country. These schemes integrate NGOs into programs that are centrally specified in advance, and so hamstring efforts at adaptation to fit local circumstances. Most programs funded by these NFIs are government schemes (environmental programs for NWDB; rural development programs for CAPART; social welfare programs for CSWB). Resources that can be used flexibly to support NGO innovations or programs driven by local people and problems are severely limited.

Leadership is critical to Indian NFI performance, both in shaping staff activities and in establishing the reputation of the institution. NFIs have very diverse constituencies and stakeholders. Their leaders must deal with the expectations of state and national bureaucrats and politicians as well as NGOs and beneficiary groups. These stakeholders exert conflicting demands on NFI leaders, who are often poorly prepared for work with such multiple worlds. Leaders from the civil service may be unfamiliar with the demands of influencing NGOs; leaders from NGOs may be mystified by the intricacies of the bureaucracy.

Turnover can also undermine NFI leadership effectiveness. When the first Chair of the NWDB was replaced by the Minister of Environment and Forests, many NGOs felt that the bureaucracy had taken over the agency. Some leaders are seen to be more interested in a posting in New Delhi than in the work of their NFIs; others serve out a three-year term and leave just as they begin to become effective. Many NFI leaders described their experience as exceptionally frustrating. Some reported "burning out" from their efforts to get NFIs to operate more effectively, and many suggested that increasing NFI autonomy is crucial to increasing effectiveness.

NFI performance is often shaped by informal organizational cultures: the values, norms, beliefs, and expectations that enable staff to interpret and give meaning to organizational activities. NFI staff and NGO leaders agreed that NFIs are strongly influenced by values, norms, and expectations imported from government departments. When NFI staffs are recruited from the national and state bureaucracies, they bring with them the values and norms of those services. In addition, state and national government control over funds and programs requires that NFIs conform to bureaucratic and political expectations and demands. So NFIs often develop internal cultures more consistent with government agencies than NGOs. For example, bureaucratic and political cultures emphasize hierarchical control, following the rules, "playing it safe" and (in some cases) using positions for financial or political self-aggrandizement. These patterns may encourage NFIs to support bogus, "for-profit" NGOs, rather than voluntary organizations genuinely committed to development.

In theory, NFIs provide ongoing technical support and evaluation to the NGOs they fund, so that they are able to carry out programs effectively. Many NFI staff are unfamiliar with the work being carried out by the NGOs, so visits to monitor and evaluate NGO activities may focus more on accounting issues than on technical assistance and support. Most NFIs have adopted government rules and procedures for accounting and grant disbursements based on British colonial patterns that may be unfamiliar to NGOs. CAPART hired retired government accountants as field staff, and they demonstrated their diligence by identifying accounting irregularities. CSWB reported concern with failures to provide program support on one hand, and with reports of fraudulent NGOs whose programs were all on paper on the other.

In general monitoring and evaluating procedures are highly sensitive to "irregularities" in NGO behavior, especially on financial matters. But those irregularities are defined by government accounting criteria rather than by results in terms of program goals. Many NGO leaders felt that NFI emphasis on accounting and "irregularities" amounted to an assumption that NGOs are "corrupt unless proven otherwise."

The NFIs must identify effective NGOs to carry out their programs, whatever those programs may be. All the NFIs report that finding good NGOs is difficult, in part because they do not have the needed organizational and human resources. The identification task for CSWB is typically undertaken by members of State Welfare Boards, many of them political appointees not interested in local development. They may identify NGOs by political clout or willingness to pay for recommendations, rather than capacity to carry out the program. CAPART and NWDB have offices in Delhi and little ongoing contact in the field. They also have difficulty identifying effective local NGOs on an ongoing basis. It is not surprising that program performance is disappointing when appropriate NGOs cannot be found.

In other cases, NGOs with appropriate capacities have been alienated by bad past experiences. NFI leaders want to work more with NGOs known to be effective. But leaders from some of those NGOs described experiences of delay and harassment by NFIs as an explanation for why they sought support elsewhere. In still other cases, outright capture of NFI decision-making resulted in misallocations of resources. Sometimes politicians gained control of resources through influence over State Boards; sometimes NFI staff extorted payments from NGOs before accepting their applications; sometimes bogus NGOs acquired funds to carry out programs that existed largely on paper. In these cases inability to identify good NGOs, to support their activities, and then to hold them realistically accountable subverted NFI goals.

We do not think there is "one best way" to organize NFIs. The array of goals to be served and contexts in which programs must be carried out is very large. However, attention to a few key factors is important to cope with the issues that have plagued many NFIs in India. In this section, we suggest four such factors and offer options for working with them: (1) NFI missions and strategies that clearly describe their purposes and ways to achieve them, (2) leadership that fits those missions and strategies, (3) organizations that match mission and strategy requirements, and (4) relations with stakeholders that support carrying out those missions and strategies. We will consider each concept briefly before outlining some options for action on each with respect to NFIs.

NFI missions describe their basic purposes or reasons for existence; NFI strategies are concepts that guide action to carry out those missions.⁹ Implicit or explicit perspectives on the roles of NGOs in development underpin NFI missions and strategies. CSWB, for example, was created to extend services to disadvantaged

populations, and the strategy of funding NGO services to poor women extended several government programs to previously neglected groups.

Choices of NFI leadership send critical messages to internal and external stakeholders.¹⁰ Commitment and interest in the NFI's mission, skills and qualifications relevant to that mission, and credibility with key stakeholders are all important. The initial leaders of CAPART and NWDB, for example, had credibility with NGOs and so received cooperation and support that was less easily available to their successors.

The organization of NFIs can vary in appropriateness to their missions and strategies. NFIs are organized through the definition of core tasks and programs, the design of formal structures and systems, the evolution of informal cultures and expectations, and the recruitment and development of human resources.¹¹ When NGO leaders complain about rigid program schemes and bureaucratic rules, they suggest that NFI organizational mechanisms do not fit their missions and goals.

Finally, stakeholder relations reflect the patterns of information flow, resource exchange, and mutual influence between the NFIs and key actors such as government agencies, politicians, NGOs, and grassroots groups.¹² Mobilizing stakeholders to support NFI missions and strategies may be critically important to their success. New mechanisms for accountability and control may be required if politicians can capture CSWB resources for a bogus NGO or forest service bureaucrats can veto NWDB support for a competent NGO, and so subvert the NFI's ability to carry out its mission.

The performance of an NFI is shaped by the interaction of these factors -- missions and strategies, leadership, organizing mechanisms, and stakeholder relations -- as indicated in Figure 2. Clarifying NFI missions and strategy can help define appropriate leadership, needed organization, and desired relations with important stakeholders. Since these elements interact, it is difficult to define any of them without considering their interactions with each other.

Clarifying NFI missions and strategies is an important first step. These missions and strategies rest on general perspectives about the development roles of NGOs, such as: (1) NGOs as extenders of government services, and (2) NGOs as builders of local capacities. These two perspectives imply fundamentally different NFI missions and strategies, and those differences have often been ignored in choices of leadership, organization, and stakeholder relations.

If the NFI mission is to support NGOs to extend government services, they should act as a hierarchical link between government agencies and NGOs that carry out their programs at the grassroots. Their strategies can emphasize utilizing NGO comparative advantages, such as their capacity to work with poor people, their ability to deliver services at low cost, and their willingness to serve isolated communities that are not served by government agencies.

The mission of extending government services is clearly visible in the initial mandate of CSWB, which was founded at a time when the government was widely seen as

the primary actor in development. CSWB's early strategies and programs emphasized extending services to women, children and other disadvantaged populations through NGOs.

If NGOs are conceived as catalysts for fostering local capacity and innovations, NFIs can be autonomous bridges for two-way exchanges of ideas, information and resources between NGOs and grassroots groups on the one hand and government agencies, international donors, and other resource providers on the other. The strategies of such NFIs can utilize the comparative advantages of NGOs for innovation, for organizing local self-help groups, and for empowering grassroots participation in development. This mission emphasizes strengthening local organizations, enabling mutual influence, and catalyzing joint learning among diverse parties.¹³ It requires that relatively autonomous NFIs act as information clearinghouses and encouragers of innovation rather than as supervisors and controllers of service delivery.¹⁴

In the Indian context, the missions of new NFIs has been influenced by the growing emphasis on local capacity-building. The missions of CAPART and NWDB reflect more concern with building capacity and catalyzing grassroots participation in development. Even new CSWB programs emphasize local capacity-building as well as service delivery. In spite of changing mission statements, however, the activities of all three NFIs devote more resources to extending government services than to building local capacity (See Table 2).

A case can be made for NFIs with missions rooted in either perspective. When NFIs of either type are not clear about their missions and strategies, however, they can become confused about the leadership, organization and stakeholder relations required. Articulating clear missions and strategies is a critical first step to improving NFI performance.

Leadership was widely recognized by many respondents as a critical factor in the performance and reputations of NFIs in India. Key characteristics include leader interests in and commitment to NFI missions, their skills for carrying out NFI strategies, and their credibility with key stakeholders.

The effectiveness of NFI leaders depends first on their personal interests and commitments. Leaders must commit substantial energy to coping with the diverse demands of NFI leadership positions. Even individuals highly committed to NFI missions reported that the position was extremely demanding. Leader interests and commitments should also be consistent with the underlying perspective of the NFI: A civil servant committed to extending government services, for example, is probably a poor choice to head an NFI intended to promote local initiatives and capacity-building, especially if its activities might compete with the interests of government agencies.

Second, leaders of NFIs need appropriate skills and qualifications. Skills in administering large-scale service programs and in coordinating with other government bureaucracies is important for NFIs that extend government services. Skills in fostering two-way communications and mutual influence, catalyzing new ideas and programs, and joint learning is essential for NFIs that are bridges for capacity-building. Skills for dealing with bureaucracies are important for most NFIs, but will be essential for those that are not relatively autonomous.

Third, NFI leaders need to have credibility with important stakeholders like government agencies or NGOs. Lack of experience and credibility with NGOs could undermine efforts to work well with them; lack of experience and credibility with government agencies could undercut NFI capability to mobilize government support. When widely-respected leaders of Indian NFIs were replaced by civil servants who were unknown or suspect to NGOs, those changes significantly undermined NFI ability to carry out their programs.

NFIs are highly visible agencies, and choices of NFI leaders carries symbolic weight with many stakeholders. Leaders have both internal and external impacts, so decisions about their commitments, skills and reputations have strategic consequences that can advance or retard their missions.

NFIs can be organized in ways that fit their missions and strategies by appropriate combinations of programs and tasks, formal structures and systems, informal arrangements, and human resources. When there are mismatches among these organizational elements, performance often suffers. Table 3 presents a menu of options for altering organizational elements. The table is incomplete, of course. It is intended to illustrate rather than to exhaust the possibilities, and any of the options will have to be adapted to the specific circumstances to which it is intended to apply.

For some Indian NFIs there is confusion about the fit between mission and program: Some NFIs have capacity-building missions but service-extension programs. Confusion about the nature of the mission and the roles of NGOs may have contributed to difficulties in defining and organizing critical tasks. Many NFIs reported difficulty in identifying and supporting appropriate NGOs. Clarifying missions and strategies can simplify the definition of critical programs and tasks. NFIs committed to being hierarchical links will need to identify NGOs that deliver relevant services and invest resources to strengthen NGO capacities for that kind of service. NFIs committed to promoting local innovation and capacity building, in contrast, will need to identify NGOs and strengthen their abilities to develop innovations, organize and encourage local organizations, and disseminate new ideas. These tasks require quite different structures, cultures, and human resources.