Thinking through the role enterprise and trading can play in international development

Given the pace of change, both domestically and internationally, and the quick succession of crises affecting communities across the world, INGOs are increasingly looking at how they build their resilience and considering the potential to incorporate enterprise income.

The pandemic, followed by the cost-of-living crisis has seen the levels of unpredictability rise and grant funding streams get tighter. Due to the wider macro-economic environment, organisations over-relying on single sources of income are at risk of losing their capacity to withstand shocks and changes in the ecosystem, moreover, they could potentially struggle to seize new opportunities for growth when they come along.

A sustainable and resilient international development sector, and by extension its impact on the frontline, requires INGOs that have long-term resilience and a variety of sources of income. For many organisations, income earned through trading activities, or “enterprise” income, is already part of their mix, alongside perhaps international aid, grants from foundations and donations from the public. Investing in enterprise and diversifying income streams is a vital part of building financial resilience and ensuring that charities and social enterprises can adapt quickly to the rapidly shifting external environment.

Access, the Foundation for Social Investment, has a mission to build resilience in charities and social enterprises. Enterprise development is a key focus because the growth of earned income is essential to charities and social enterprises achieving greater resilience. In 2018 we launched the Enterprise Development Programme (EDP), beginning a pilot year working with two sectors: youth work and homelessness. Since then, we have supported over 300 organisations to progress their trading activity through the EDP programme. We now work across six different sectors, from environment to mental health.

The programme supports charities and social enterprises looking to identify, test, implement or scale trading models, helping them to deliver their mission and become more sustainable. Combining real-world experience and peer learning with training and financial support, organisations can share insights and address common challenges as their enterprise journey progresses. Many are interested in exploring enterprise approaches as a way to achieve this but may lack the resources – time, capacity or specific skill sets – to make those ideas a reality.

Contrary to popular belief, some INGOs do already trade and have been doing so for many years, with the main aim of having more stability and long-term resilience to better work and support local communities on the frontline. Our collaboration with Bond over the last 18 months has been incredibly insightful, growing our understanding of the different enterprise programmes in the countries the INGOs operate in and the trading models beyond developed to support the INGOs’ sustainability.

The top-line findings from the case studies that INGOs, charities and social enterprises should consider:

• Earned income comes without restrictions on how it can be used: this could/should enable INGOs to have more freedom to spend their income as they see fit. It doesn’t come with fixed time scales; it wouldn’t be subject to changes in the funder’s priorities and/or government policy. With INGOs being subject to changes in government priorities and policies, this can ultimately have an important effect on the communities they work with. Having a more diversified income base where trading is present could guarantee their long-term interventions with the local communities they work with.

• Enterprise can be a great way to make new connections: developing trading models can provide INGOs with an opportunity to engage with their local communities to co-design and drive-up support. This could also involve learning with other INGOs, for instance gathering others interested in income diversification and resilience, or those who have already been down the path of incorporating trading into their income mix.

• Enterprise might not work in every model: Enterprise and trading don’t work for everyone and shouldn’t be considered as a silver bullet. Organisations need to have a clear understanding of how the trading activity fits within their overall business model and what the revenue model that sits behind it looks like (primary customer type being sold, income and growth and profitability). As it currently stands, organisations that are thinking about enterprise struggle to find a strong knowledge base around enterprise models across different sectors and their characteristics. This is something we have tried changing across all six EDP sectors.

• The effects of enterprise and trading are not immediate: Changes to an organisation’s business models are not immediate. Trading is a medium to long-term change and shouldn’t be perceived as a quick fix or to be used in a situation of emergency (i.e. organisation is insolvent or about to go down). There are many organisational factors to consider, including the skills already present and those missing, cultural and mindset changes (i.e. trading can be used by charities) as well as staff and governance support.

• Enterprise requires experimenting and can be risky: cases such as Transform Trade show that organisations can explore different options for their model, and that this can take time. his case also showcases there is demand for capacity-building support such as the Enterprise Development Programme.

The work Bond has been doing for the last 18 months is an important first step towards better understanding trading and enterprise in the international development space. If you want to find out more about some of the trading models and if generating income can also support a shift in power to social activists and communities, join them in an exciting session for the launch of case studies from Choose Love, Ripple Effect and Restless Development and to hear how these organisations are already generating income.