Follow the Money
Editor’s Note: Many non-profit organizations are pursuing financial innovation. Their goals are to raise additional, low-cost capital (beyond donations) and to engage new partners so that they can do more good work. We enthusiastically support these efforts and are actively discussing such opportunities with various organizations. This series summarizes key lessons. Catch up with Part 1: First Things First.
Financial engineering can look complicated at first glance. But it’s usually rather straightforward, as long as you know where to look. You just need to follow the money.
Non-profits typically fund themselves through donations — money that can be spent and invested without any requirement to return capital. That’s quite different from the world of financial engineering, which usually involves raising funds from investors or business partners with an expectation not only that the capital will be paid back but that there will also be a return on investment. Sometimes NGOs pay insufficient attention to the cash flow aspect of financial innovation.
Here are three examples from my time at TNC that illustrate how the cash component is often the driver in innovative NGO financing.