DONOR FUNDING FLEXIBILITY AND FINANCIAL PERFORMANCE OF NON-GOVERNMENTAL ORGANIZATIONS IN NAIROBI, KENYA
Abstract
Purpose of the Study: This study examined the effect of donor funding flexibility on the financial performance of Non-Governmental Organizations (NGOs) in Nairobi, Kenya.
Problem Statement: Although donor funding remains the primary source of financing for many NGOs, funding conditions may influence how resources are allocated and utilized. Limited empirical evidence exists on the effect of donor funding flexibility on the financial performance of NGOs, particularly in terms of funds utilization efficiency among NGOs in Nairobi.
Methodology: The study adopted a descriptive research design targeting NGOs registered with the Non-Governmental Organizations Co-ordination Board and operating in Nairobi. Primary data was collected from executive managers, finance managers, accountants, and program managers using structured questionnaires, while secondary data was obtained from NGO Board reports. Data was analyzed using descriptive statistics, Pearson correlation, and simple linear regression analysis.
Results of the Study: The findings revealed a positive and significant relationship between donor funding flexibility and financial performance (r = 0.740, p < 0.01). Regression results further established that funding flexibility has a positive and statistically significant effect on financial performance (β = 0.483, p < 0.001). The results indicate that NGOs operating under flexible donor funding arrangements are more likely to allocate resources efficiently, respond to changing operational needs, and achieve higher levels of funds utilization efficiency.
Conclusion and Policy Recommendation: The study concludes that donor funding flexibility is an important determinant of financial performance among NGOs. The study recommends that donor agencies adopt more flexible funding arrangements that provide NGOs with greater discretion in resource allocation while maintaining appropriate accountability mechanisms. NGOs should also strengthen internal financial management systems to ensure effective utilization of donor resources.
Keywords: Donor, Funding Flexibility, Financial, Performance, Non-Governmental, Organizations
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