10. Cost-Recovery for NGOs

NGOs need to be more professional when they are managing businesses. The idea of cost recovery is critical for this. While operating donor-funded projects, this may not really be of much concern for organizations, but while they are investing financial and human resources into a project so that businesses are operated for the benefits of the community and also for the sustainability of the organizations, the first thing they need to think about is covering the costs incurred by the organizations.

Some of the examples for undertaking profitable business ventures could include microfinance projects where NGOs can directly lend money to the community members and earn profits out of the interest rates charged to them; NGOs can also partner with local banks for raising capital to provide loans to the community members and in return, both banks and NGOs are able to share profits through the interests charged. It is important that the interests fixed are in line with the local situation. It will be highly impractical if the rate of interest is high and the poor community is unable to repay the loans. The other form of business could be community-based tourism if the NGOs and their communities are based in a strategic location. The resources available can be optimized for the sustainability of both the NGO as well as the community. Microenterprises and micro-insurance are other potential forms of business for organizations.

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