This study examines the financial sustainability challenges and opportunities faced by local NGOs, particularly of those registered as Ethiopian Resident Charities by the law. These NGOs constitute nearly 70% of the total Civil Society Sector in Ethiopia. This research enhances the evidence basis and there by enable managers and leaders of the study organizations as well as their stakeholders make informed policy and operational decisions to address the problem. Based on literatures reviewed, a conceptual framework inclusive of endogenous and exogenous factors has been developed. The study has examined the prevailing situation in lieu of these factors through a descriptive and analytical design. The sampling was drawn from list of Ethiopian Resident Charities (ERCs) having a head office in Addis. A structured questionnaire was used to collect both quantitative and qualitative data from the managers and leaders of the study organizations. Additionally, qualitative information has been gathered from key informants and data from the mixed methods (38 organizations and 5 key informants) has been analysed to inform the research inquiry.
The findings show that ERCs are facing a myriad of financial sustainability challenges. Majority of their current funding comes from donors, and yet it is inadequate to support their mission. The future prospect of funding is decreasing and difficult to predict for the most. The lack of information on call for proposals, weak coordination or partnership and limited staff capacity are the major constraints in going for foreign sources, while the undeveloped culture of volunteerism, bureaucracy, distorted image of the public about NGO’s contribution were among the significant constraints for local fund raising and marketing. The limited understanding and practice on strategic fund raising and marketing, the lack of strong governance and accountability mechanism are the major internal challenges that limits the capacity of ERCs in local and foreign fund raising. The major recommendations is for ERCs is to be driven as an institution committed to address internal capaciy limitations. This calls for instilling a strategic management process to adapt to the changing environment. Donors on the other hand have to improve transparency in funding decisions and also consider the need for increased commitment to the capacity building support in the priority areas highlighted by ERCs. Both ERCs and their networks, as well as other pertinent stakeholders should aggressively work towards improvising relationships and foster a positive image of ERCs. As such the likelihood of both foreign and local resources mobilization will be enhanced, and hence the financial sustainability of ERCs be improved.