FACTORS INFLUENCING FINANCIAL SUSTAINABILITY OF NONGOVERNMENTAL ORGANIZATIONS: A SURVEY OF NGOs IN NAKURU COUNTY

Abstract

Financial sustainability is the ability of NGOs to develop a diverse resources base so that it could continue its institutional structure and production of benefits for intended client population after the cessation of donor financial support. In Kenya, the number of NGOs has been increasing yearly most of them depending on foreign donations. The declining state of foreign funding coupled with the Miscellaneous Amendment Bill of 2013 that sought to cap the amount of foreign funding to NGOs at 15% of their budget. This legislation further imposes a strain to an already constraining situation, hence, leading to a situation whereby the demand exceeds the supply of foreign funding. This research therefore sought to find out the factors influencing financial sustainability of NGOs. This was achieved through determining whether diversifying sources of funds, competence of personnel managing the NGOs projects and preparing strategic financial plans influenced the financial sustainability of NGOs. The study was premised on the Resource Based View. Descriptive survey research design was used targeting 249 registered and active NGOs in the area. A sample size of 154 obtained using simple random sampling was used and data collected using questionnaires. The data was analyzed using both descriptive and inferential statistics with the aid of Statistical Package for Social Sciences (SPSS) version 21.0. The findings revealed that the diversifying sources of funds have a significant effect on financial sustainability (r = 0.787, α = 0.05). Competence levels of the staff was also found to have a significant influence on the financial sustainability of the NGOs (r = 0.478, α = 0.05). Strategic financial planning was also critical to the financial sustainability of the NGOs as indicated by the significant relationship existing between the two variables (r = 0.435, α = 0.05). H01 was accepted while H02 and H03 were rejected. Multiple regression results revealed that all the independent variables combined accounted for 29% change in the financial sustainability of the NGOs. The results also indicated that competence levels of the NGOs personnel in charge of the projects was the most important factor (β = 0.453; p = 0.000). The study recommended that NGOs staff should be frequently trained to ensure continued competence level and staff participation and proper communication of strategic plans should be highly encouraged. A study involving a different population should be conducted