Third Sector Development and Funding

NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.

NB: All your data is kept safe from the public.

Table of Contents

Introduction
Economic significance of third sector
Strategic Issues and implications
Profits by NFP’s
Current Organizational position
Difference
Conclusion
References

Introduction

The social economy is largely driven by the third sector that is also referred to as the voluntary sector or the non-profit sector. According to Uluorta (2009), it is so called third sector because the government or public sector and the private sector are regarded as first and second (p. 76). Another term that is used to describe this sector is the civil society or civil sector.

Though the terms used above mean more or less the same thing, they operate in an industry that is diverse and with a lot of differentiation. Organizations that are classified as non-profit differ slightly from civil organizations in that non-profit organizations operate within a broader mandate and mission. They are most likely run by a church organization and their work is more or less focused on the disadvantaged.

Non-profit organizations also may operate within an agreed framework to provide specialized service to a very specific clientele with the funding of an agency, mostly the government. On the other hand, civil society organizations offer a much broader service than nonprofit organizations. Edwards (2009) says that they mainly focus on the advocacy issues in providing space for effective participation in community life, public discussions and debate and matters to do with the protection of the environment (p. 100).

Civil society is fiercely independent from government and though it receives funding from the authorities, most of the time, its work involves making authorities to be accountable for their actions. Advocacy is normally carried out at individual level and most scholars’ prefer to refer to civil society as schools of democracy. In a nutshell, their work involves promotion of individual rights and freedoms that are from time to time overrun by market forces and the government.

Third sector organizations are increasingly playing an active role in the expanding space of economic liberalism. Before the implications of organizational alignment to either non-profit or civil society are undertaken, it is important to understand the role that these organizations play in the economy.

Economic significance of third sector

Some economists contend that the presence of the non-profit sector is an indication of a health economy. This is because these sectors contribute greatly to significant GDP growth of the countries where they operate in. These organizations focus on some of the critical sectors that are crucial to the growth of the economy. These sectors include education, the environment, education and health.

According to Murgatroyd et al (1984), the work carried out by these organizations has ensured growth of healthy society that is a must for the growth of any economy (p. 50). These organizations are major employers and they provide an important field and outlet for both skilled and non-skilled labor in the economy.

Currently the third sector is on course to be the predominant sector thanks to the growing knowledge class and stagnation of the private sector. A number of countries have their economies significantly dominated by the third sector. According to Osborne (2008), Netherlands for instance has one of the largest third sectors in the whole of Europe.

Non-governmental organizations account for over 8% in GDP in Ireland. Sweden owes its wave of social change and progressive economic development to the growth to the third sector. In Italy, the third sector is increasingly being viewed as the biggest source of employment better than manufacturing, tourism and government. The significance of the third sector is better captured in the US where approximately 10% of the GDP is directly attributed to the third sector (p. 328).

Given the significance the sector hold in the economy, it is therefore correct to say that application of economic liberalism in the third sector will do more good than harm. It is important to note that the core functions of these organizations will remain the same. According to Taylor (2010), the only difference will be the adoption of new approaches to ensure they deliver better quality services to their clients (p. 342). Having worked in a non-profit organization, Dr. Erfan & Bagedo General hospital, I will concentrate more on the non-profit organizations than civil society.

Strategic Issues and implications

According to Werther at al (2001), the role of the organizations will always remain the provision of services or distribution of goods with no intention of making profits (p. 20). Not for profit organizations include Foundations, charitable organizations, cause related organizations religious organizations, associations, social service organizations, health service organizations and sometimes, the public sector.

These organizations account for 5% of all jobs created in the world. Additionally, the number of these jobs created is growing owing to the introduction of economic liberalism to the third sector. Kendall (2003) says that their significance is realized through the provision of goods and services that other for profit institutions cannot or are unwilling to offer (p.168).

The incorporation of economic realism on the non-profit organizations is justified. This has been necessitated by a number of trends that have characterized the sector. These trends are as a direct result of the dynamic global economic climate, and increased and specialized needs of the clientele that these organizations suffer.

Its safe t say that without these adaptations that involve economic rationalism, not for profit organizations will find it difficult to operate in the world today and millions of people will be left worse than they would be with the organizations around. According to Evers (2004), these trends include the increased privatization of services that are traditionally offered by the government (p. 56).

These services touch on the core of not for profit organization’s operations. The sectors include education, the arts, healthcare and social services. Many governments especially in the third world countries rely on the NFP’s for the provision of education services. The other programs run by these organizations focus on a number of issues that governments cannot easily solve even with the availability of funds.

Programs like educating the girl child and elimination female genital mutilation can only be solved through a different approach that few government technocrats can articulate. Another trend that is making NFP organizations adapt economic liberalism policies is the financial pressure. These organizations are not in the market to make any proceeds. They entirely rely on donor like governments to run their operations. Lack of revenue generating has seen many close down dues to financial strain.

Many governments and observers have raised concern over the efficacy of the NFP organizations. They content has their efficacy is not at the optimal level and there are fears it may deteriorate. Additionally, some critics argue that the organizations claim to reach the grassroots where many governments do not may be grossly exaggerated. The allegations of non-performance coupled with financial strain have forced NFP outfits to seek elsewhere for means to stay a float.

Finally, there has been an avalanche of corporate social responsibility initiatives from he corporate world. These initiatives are marketing gimmicks by companies that claim to give back to he community. These corporate bodies have availed funds and are also involved in activities that traditionally have fallen in the NFP’s portfolio. To compete with such financial power, NFP’s have resulted to business related activities to generate income to supplement the donor driven budgets.

Profits by NFP’s

Non-profits organizations in the liberal economic environment are allowed to generate revenues and profits. Gunn (2004) says that these profits are generated from various businesses that these organizations have ventured into (p.69). For instance, World vision has a microfinance subsidiary that provides employment to thousands and generates revenue and profits for the organization.

The law governing NFP’s engagement in business is however very strict. NFP’s are strictly prohibited in distributing their profits among the directors or staff. The profits that are made from their business undertakings are use to further the mission of the organization. NFP’s generating their own revenues has brought about numerous advantages that have arguably made the sector better.

There is reduced dependence on donations and dues for their operations. NFP’s can now freely operate in their specific areas of specialization without being held at “ransom” by donors who more often than not impose stringent requirements on the organizations.

Revenue collection has also ensures minimum domination to the organizations by the very people that they are meant to serve. The small donations that that NFP’s get are sometimes got from people who are in need themselves. Though there may be some level of participation of this recipient group, its greatly minimized hence equality so to say is ensured.

Reduced influence and meddling by interested parties is another merit that NFP’s have derived from their venture to business. Many people who donate to charity organizations have vested interested especially for politics. Independence on such people’s donations has eased the burden of manipulation of the NFP’s.

Current Organizational position

The hospital situated in Saudi Arabia caters for patients of all age groups. It falls under the not for profit organizations sector. Though much of the funding is provided for by the Saudi government, the institution has done some limited venture into business to sustain its technological and research services.

These programs come in hand especially on the backdrop of fluctuating oil prices that bring uncertainty to national budgets hence breed budget cuts in healthcare (Conforth 2003, p 13). The healthcare sector in the Saudi Arabia and the world at large is more or less the same as that of Saudi Arabia. Every government in the world has its national healthcare centers where people access medical services at a subsidized rate.

At the same time, the economic liberalism that has characterized the market economy has led to the growth of private healthcare providers who charge higher fees than the national facilities. Because national hospitals fall under the category of government funded NFP’s, they are not supposed to be profit oriented. However, some governments have introduced cost-sharing measures in the hospitals that are geared towards supplementing government funding and also to generate extra income for the improvement of the facilities.

Difference

The argument for the adoption of economic liberalism in the third sector as presented above is meant to endorse the approach as beneficial and necessary in the management of NFP’s in the 21^st century. Cornforth (2005) says that given the economic significance of these entities, it will be a mistake to run then them based on old thinking and old management principles and practices that no longer serve the purpose they were meant to (p. 70).

What is needed are strict laws that govern the business that NFP’s engage in. these laws will need to be clear on where these funds will be invested, and how they will be distributed. This will ensure transparency and benefits will trickle down to the grass roots more easily.

Conclusion

Increased austerity measures have significantly reduced the funding of NFP organizations and the third sector in general. Because NFP’s are big players in both the macro and micro economic environment, it is only better if they are left to purse those goals while at the same time maintaining their core missions. That way, they will be able to boost the economy though job creation and innovation that will help them boost their revenues.

Many governments have delegated provision of some services to these organizations. It is therefore safe to say that these organizations will in the long run act like shadow government especially on their abilities to reach the grassroots. Though most of the positions presented in this paper enter on NFP, they are applicable on the civil society as well.

The only undoing for the civil society is the lack of clear grassroots goals that are available to NFP’s. It is a lot harder for civil society to engage in big business to raise funds in order to help communities enjoy broader freedoms and advantages. However, they can with a clear framework be involved in income generating activities that will not only supplement their income but also help in expanding their goals beyond just democratic space expansion.

References

Conforth, C. (2003) The governance of public and non-profit organizations: what do boards do? New YorK: Routledge.

Edwards, M. (2009) Civil society. Cambridge: Polity Press.

Evers et al. (2004) The third sector in Europe. Cheltenham: Edward Elgar Publishing.

Gunn, C. E. (2004) Third-sector development: making up for the market. New York: Routledge

Kendall, J. (2003) The voluntary sector: comparative perspectives in the UK. New York: Routledge.

Murgatroyd et al. (1984) The third sector economy: an appraisal of community business ventures in the North East and their role in local economic regeneration. London: Macmillan.

Osborne, S. (2008) The third sector in Europe: prospects and challenges. New York: Routledege.

Taylor, R. (2010) Third Sector Research. Gauteng: University of Witwatersrand.

Uluorta, M. H. (2009) The social economy: working alternatives in a globalizing era. London: Routledge.

Werther et al. (2001) Third sector management: the art of managing nonprofit organizations. Washington DC: Georgetown University Press.

Click Here To Order Now!