Dialogue  January-March, 2011, Volume 12 No. 3

Some Governance Issues in the NGO sector

Amiya Sharma

All over the world today, there is clamour for information, whereas there is still a ‘black hole’ in most of the areas of concern, nowhere more apparent than in the NGO sector. Here, there is no entry barrier and any seven persons seem to be able to form an NGO. Since the activities of the NGOs were of not much consequence, or at least it seemed so to the eyes of the registering officers, they have not been very strict about formation of NGOs. There were reasons too.

Earlier, the NGOs were led by people of ‘Gandhian’ nature. In those days these NGO persons were there for non monetary considerations; they lived in Ashram-like conditions. Quite a few of them were bachelors – at least that seemed to be the case. They did not have to pilfer money for personal use unlike many NGO persons doing today. They did not want to be in the limelight and do things to win awards. In those days the activities under Corporate Social Responsibility had not become very mature and even the foreign funding agencies were not spending money through NGOs. The demand and supply were both equal although at a low level. 

Things changed; the supply of funds started increasing and the demand for good organizations too increased. NGO training institutes and even management institutes imparting knowledge regarding the sector were started by some entrepreneurial persons. This was also the time of an increasing unemployment, for educated as well as uneducated. The NGO sector did contribute partly to the cause of disguised unemployment as in the agricultural sector. Unlike the earlier years, NGO persons became a good representative sample of the Indian population and its character. Good, bad, honest, dishonest were all there. 

   Around this time another major activity – that of Micro Finance (MF), took off, following its success in Bangladesh. MF was initially seen as a social service – to lift the poor borrowers above the poverty level. In response to the high interest rate for the beneficiaries, in the beginning the MFI/ NGOs used to explain that the cost of operation is very high and thus the lending rates to the poor borrowers had to be high. However, soon the market was flooded with foreign capital and other market players. Given the tacit support of some financial institutions in India, the MFI leaders changed their stance and started saying the MF has to be done on a commercial basis and there should not be any cap on interest rates. This did result in the poor remaining where they were – if not as badly as in many cases as in A.P. and other MF heavens. Meanwhile there was corruption in terms of idealism. Personnel joining this movement in various garbs - easier being the NGO mode, started flooding in. In order to keep the profits to themselves, husbands, wives, sons, daughters everybody became the decision makers in the NGOs – leaving the society aside. As a result the distinction between NGOs and commercial business units became blurred. Some FIs did prefer a well knit MF without bothering about the governance issues.

Now for some North Eastern Region experience: RGVN has been assisting NGOs/ CBOs for the last twenty years. The idea is to assist these organizations in on-lending for small livelihood projects in their catchment areas.  Under RGVN NGOSP on an average Rs. 2 lakhs per organization is sanctioned along with about 5%-10% as non-returnable grant. While doing this, particularly in the Eastern & NE region, it has been a big challenge to separate the honest ones in the pack. It is true that the dishonest ones are always quick to put up proposals and that too in a professional format. However only by visiting and interacting with the NGO persons and others in their localities can one come to know something about them. Sometimes, the repayment pattern was used as a measuring rod. But it is known fully well that some not so honest ones could always repay on time to stay away from trouble & scrutiny.

It was also true that some seemingly honest leaders had to become dishonest under pressure of repayment obligations. How many times can the lender face the field officers of the funding organizations? Most of the time, it is not the fault of the NGOs. There is not much fund for the NGOs in the NER. One is of the view that even to have a good record of repayment the NGOs have to have back up funds since there are so many things that go wrong or cause delays. All over India, NGOs have to move towards govt funds and then there is a ‘backwash’. Govt. functioning affects or rather corrupts the organizations which cannot withstand the pressure. For example, it is now common knowledge that to get projects sanctioned through Govt. departments in Delhi, NGOs should pay up about 10% of the amount – that too upfront. However, NGOs stay away from this and some others become “dishonest”.

One interesting case of an NGO in Bodoland may be noted. It had borrowed from one financial organization in the region and diverted the funds to pay as a bribe in Delhi. However, sadly enough, while the NGO became a defaulter with this financial organization, the Delhi based organization wanted to verify the credibility of the NGO after the bribe was already paid. Now, the financial organization gave a report that the NGO had defaulted – with the result that the sanction never took place. The NGO leader had to leave his village since he had promised a lot to the people and had also taken money to pay the bribe. The poor fellow is still loitering away in Guwahati. It is rather interesting that this same person had come to RGVN on behalf of some middleman to offer a project of Rs 100 crore! In any case one has come to know of three more organizations which are facing such problems and there must be many more. It was more of a case of middlemen taking advantage of the good work of the NGO and luring them towards large sums. They are also told not to discuss these things with others and by the time one finds out about such suicidal actions – it is already too late. The lesson learnt: in this sector, there are a large number of players, each trying to earn something for himself. In a country with so much corruption it is difficult to stay uncorrupted.

There is now a market for NGOs that are three years old – one can purchase an NGO! People are trying to corner them to be able to apply for grants which are already lined up through some politicians or their cronies. The MPLAD or MLALAD funds are partly responsible for creating such a mess. One needs a three-year old NGO to siphon off funds from such schemes. Some Chartered Accountants are also responsible for assisting the NGOs to make up whatever balance sheet  they required. Someone had reported that there is one NGO holding 2 balance sheets to be submitted according to the suitability of the project and the funder. Many reputed organizations and funding organizations have visited these NGOs – but nobody seemed to have noticed such a major fraud.

Well, things happen and such things happen in any sector and in any region. More discussion, information exchange and public awareness will help to make a dent. It is good that there are many reports on the sector now. Even some of the state governments are taking up the challenge. Meanwhile let the powers that be do something about more than 500 billion dollars in black money. Others will automatically fall in line.


Dialogue (A quarterly journal of Astha Bharati)

                                               Astha Bharati