The New NGO C-Suite: Unlocking Efficiency, Control and Transparency

by Geoffrey Gursel, Director and Head of Sub-Saharan Africa Treasury & Trade Solutions Sales, and John B. Finnigan, Head of Development Organizations, Corporate and Investment Banking, Citi

A new breed of executives has infiltrated the executive offices and finance departments of humanitarian and social aid organisations in recent years. Fondly referred to as ‘bridgers’, they are managers who have migrated from the world of profit-driven enterprises to the not-for-profit universe of NGOs and similar entities. These managers typically bring with them insights into advanced financial and cash management practices that transcend operating differences between the workplaces they’ve left behind and the ones they’ve joined.

Their motives for shifting vary. Some are driven by situational events such as 9/11 or the fallout of a global financial downturn. Others have chosen to transfer strategic and managerial skills honed during successful careers in the corporate world to social causes that are important to them.

Calls for accountability

Whatever their reasons for change these executives often find that the pressures of meeting earnings and shareholder expectations are replaced by the financial expectations of a new set of stakeholders. These include aid donors who want assurances that their financial contributions are used wisely and responsibly. Whether these donors are government agencies, private corporations, or philanthropic foundations, they typically seek accountability and transparency into how the funds they provide are disbursed, tracked and managed.

In fact, these days it is rare to find an aid donor that is willing to extend no-strings-attached funding. Whether their donations are measured in thousands or millions of dollars, donors expect specific goals and expectations to be met and are willing to delve into the details of how their funds are used both in the field and at headquarters. They want to know that processes and technologies are in place to account for every dollar to minimise financial risks and to optimise benefits to aid recipients.

In response, forward-thinking beneficiary organisations are finding new ways to disburse and manage their funds. Taking cues from their for-profit counterparts, they are replacing cumbersome cash and paper-based payments with electronic transactions, even in the remote under-banked regions of emerging markets. They are adopting more sophisticated foreign exchange practices and embracing advanced electronic banking and reporting systems.

Mobilising field operations

In recent years, mobile phone technologies have had a huge impact on how major humanitarian and development organisations conduct their business, particularly in far-flung corners of the world. Take for instance one international health organisation that leveraged the advanced state of mobile communications networks in Africa to transform activities as diverse as how it tracks and treats malaria to how it manages local cash disbursements.

A specialised mobile phone interface provides health officials in local communities a means of reporting data that is critical to identifying and responding to malaria infections in real time. Field operations use cell phones to quickly transmit information that provides insights into malaria burdens at the local level and drives faster, more targeted interventions.

Much of the organisation’s work is conducted in communities with little or no formal banking services and where, historically, local payments have been cash-based. Today, thanks to the development of mobile payment capabilities in a growing number of developing countries, field workers can receive funds quickly and securely via their mobile phones to meet local administrative and operating needs.

Changing the financial paradigm

Mobile network operators, recognising a chance to change the financial paradigm in countries such as Kenya, have been joining forces with banks and non-bank local agents to create mobile payment services for unbanked and under-banked populations. Kenya, a pioneer in mobile payments, can now lay claim to one of the most sophisticated mobile payment systems in the world as the majority of households in the country use mobile phones for funds transfers.[[[PAGE]]]

In this sub-Saharan country, for-profit and not-for-profit organisations alike are seizing the opportunity to convert local, predominantly small-value payments from cash to ‘mobile wallet’ transactions (‘m-payments’). These m-payments are initiated and tracked via integrated electronic payment and banking services from providers such as Citi, potentially reducing the risks and inconvenience of physically transporting currency, sometimes over long distances, and dealing with paper-based records and reconciliations. Electronic payment processes provide more control over funds and make it easier to get the right amount of currency at the right time to the right locations in Kenya. They also provide the added benefits of real-time visibility into payment transactions, easier reporting, plus streamlined auditing of remote payments and verification of payees.

Bottom line, the switch to mobile payments has the potential to benefit multiple stakeholders. They help organisations optimise their cash flow and cash disbursement processes for local payments, while also providing them — and even their aid donors – with greater visibility and accountability into funds flows. Plus, payees can receive timely secure payments through a familiar, convenient channel that reduces the risk of loss or theft.

Going digital

The truth is that any business, whether it operates for profit or not-for-profit, can improve the use of constrained financial resources and enhance cash flows by replacing time-consuming, outdated manual and paper-intensive activities with more efficient electronic processes and systems.

Among well-run organisations of all types and sizes, electronic banking systems and payment services have become commonplace because of the strategic and operational advantages they spawn. Generally speaking, non-profits have been a little slower than for-profit entities to take on the task of transforming familiar, yet inefficient, ways of doing things. However, ‘bridgers’ within their ranks, industry forums that highlight success stories and best practices and technology-savvy donors can provide needed catalysts for change; so can banking partners.

The tools that are frequently cited for making the leap include cross-border electronic payment systems that streamline the authorisation and transmission of payments to local currency accounts practically anywhere in the world. Such systems can be used to initiate various types of payments including cheques, cross-border ACH and funds transfers such as mobile payments. These systems help rein in transaction processing costs, and can also drive down foreign exchange costs by providing access to competitive FX rates, aggregation of FX purchases, and reduction of FX and counterparty risks. For organisations that make a large number of payments to multiple local agencies and projects around the world, the financial and administrative advantages can add up quickly.

Electronic transaction initiation and information reporting systems have revolutionised how organisations manage their funds. In addition to providing a platform for managing payments, electronic banking platforms can generate more timely and accurate details of cash balances and transactions and typically include the added advantage of aggregating information across multiple accounts and regions.

Technology-based account management also opens up opportunities to create direct links to donors, particularly large donors who serve as programme partners, providing them with real-time reporting and greater transparency into how their funds are being used.

While there is no single solution to the complex cash management challenges that NGOs and non-profits face, learning from the successes of other organisations and working with an experienced banking provider can lead to enhanced stakeholder confidence and free up additional funds for front-line activities.