REVENUE SOURCES AND FINANCIAL SUSTAINABILITY OF LOCAL NGOS IN RWANDACASE STUDY: DUHARANIRA AMAJYAMBERE YICYARO (DUHAMIC-ADRI)

Abstract

Background:This research is aimed at investigating the influence of revenue sources on financial sustainability within Rwandas local NGO sector, focusing on DUHaranira AMajyambere yICyaro (DUHAMIC-ADRI) as a case study. This study was guided by three specific objectives, the first one was to assess the effect of diversification of revenue sources on the financial sustainability of DUHAMIC-ADRI. Second was to evaluate the influence of financial management practices on the financial sustainability of DUHAMIC-ADRI. And finally, the third objective was to evaluate the influence of organizational capacity factors on the financial sustainability of DUHAMIC-ADRI. Materials and Methods:A twofold approach was adopted, combining elements of both descriptive and correlation research designs with data collection method combining both quantitative and qualitative data from the sample by use of distribution of questionnaires and conducting interviews. The target population of 68 staff of DUHAMIC-ADRI headquarters and some field officers were the research population and due to small research population, the research employed census sampling technique considering all that the entire population of 68 individuals to be included as respondents in this study. Results: The gathered data revealed significant insights. The research demonstration a positive association (<0.05) between diversifying revenue sources and DUHAMIC-ADRIs financial sustainability, aligning with resource dependence theory. Mean scores for various revenue sources (Grants and Donor Funding: 3.16, Membership Fees and Contributions: 3.38, Fundraising Activities: 3.38, Diversification of revenue sources: 3.44) indicated their significance, and a robust correlation (r = 0.784) reinforced the importance of diverse revenue streams. The research also underscored a strong correlation (<0.05) between effective financial management and financial sustainability, with high mean scores (Strategic plan: 4.03, Budgeting and financial planning: 4.16, Expense control measures: 4.22, Financial reporting practices: 4.28, Regular financial audits: 4.32). this study furthermore revealed the critical role of organizational capacity factors (Board Governance: 4.03, Staff Competency and Skills: 4.28, Infrastructure and Resources: 4.34, Continuous training programs: 4.47, Adequate investment in technology infrastructure: 4.34) in financial sustainability. The correlation analysis in this research solidified the interdependence between revenue sources and financial sustainability (r = 0.784), also on the multiple regression coefficient analysis found that the regression analysis for DUHAMIC-ADRI indicates that only donor funding has a statistically significant positive impact on financial sustainability, with a coefficient of 93.477. In contrast, government grants (coefficient: 86.841), internally generated funds (coefficient: 95.172), and reserves (coefficient: 15.808) did not show significant effects. The t-statistics for these variables were 0.965, 1.697, and 1.812, respectively, with p-values above 5%. This aligns with prior research indicating that Rwandan NGOs heavily depend on donor funding, with percentages of 8.57% of donor funding, 34.22% of government grants, 9.98% of internally generated funds, and 7.96% of reserves. Strategies to enhance donor funding and diversify revenue streams could improve financial sustainability. Basing on these findings the research concluded by highlighting the need for a holistic financial strategy, including revenue diversification, effective financial management, and robust organizational capacity, essential for the long-term viability and success of DUHAMIC-ADRI and potentially applicable to other local NGOs in Rwanda. The research also recommends a diversified revenue generation approach for local NGOs in Rwanda, strategic financial management practices, and internal capacity strengthening. It emphasizes a balanced approach to resource management for long-term success. Conclusion: The study goes on to suggest further research to understand the financial sustainability dynamics of local NGOs in Rwanda. It suggests exploring revenue diversification, financial management practices, organizational capacity factors, integrated financial strategies, and external factors. These insights could help NGOs adapt to dynamic financial landscapes, improve their financial resilience, and navigate a rapidly changing funding environment.