This is a Q&A from the Collective Action Helpdesk, a free advice service on Collective Action to fight corruption and promote fair business. Find out more and see other questions.

What are the best funding models for a Collective Action initiative?

Many Collective Action initiatives are kick-started by donor funding, but this is not a viable option for the long term. A combination of options will give you the most resilience, and may include some donor funding, membership fees or “pay as you go” models, and fees for extra services. If trust is present, and the Collective Action has clear deliverables that the stakeholders consider relevant and attainable, finding a sustainable funding model is something you can work on together with those stakeholders. It will always be easier if your initiative has strong incentives for members to join and stay engaged, and can demonstrate results.

Question

I work at a CSO and am involved in a Collective Action initiative that gets compliance officers in larger companies involved in capacity building workshops for smaller suppliers. The two-year grant we received to kick-start the programme will come to an end in six months and we are not sure how to continue funding the work. What are our options?

Answer

Finding a sustainable funding model for an anti-corruption Collective Action initiative is a common challenge. Ideally, this is something to consider right at the start, when developing the initiative and its “business plan”, to avoid the issue of time running out.

Donor funding

Your current model of reliance on donor funding is a common one, but challenging in the long time.

First of all, this is because it requires a lot of time and effort to apply for grants and submit reports, which might distract from the initiative’s main aims. Second, grants tend to be for specific projects and activities, limiting your flexibility to adapt if the situation changes.

Nevertheless, it may be a good idea to explore options for continued donor funding in future funding rounds, or to seek other grants that might supplement your finances in the short and long term.

Pay as you go

Small initiatives with a limited number of members often have a “pay as a you go” model. The idea is that all members cover their own costs of participation while they are engaged in the initiative, and contribute a small amount to the cost of the facilitators.

This is the case for the Metals Technology Industry initiative (MTI), for example, which the Basel Institute facilitates and which counts only four members. The outputs from the MTI group have been largely inward-looking to date, in that they involve improving the members’ internal programmes. For other Collective Action initiatives that have objectives that will require training third parties, consultations or developing tools, etc., the costs may be much higher than funding the facilitator.

Experience indicates that demonstrating the value of the initiative, to both the larger and smaller companies, may encourage them to contribute towards the costs of continuing even after the donor funding runs out.

Membership fee options

Some Collective Action initiatives have experimented with membership fees. This is feasible for initiatives with very strong, business-relevant incentives to join and stay engaged. The Maritime Anti-Corruption Network is one initiative that operates successful with a membership fee at the core of its funding model.

This model requires significant administrative effort, including establishment of an organisation that can accept and process membership fees and compliance with all applicable regulations.

Membership fee structures may have to be carefully thought out, for example if members have different resources. Expecting an SME to pay the same as a multinational company may not be fair. Government partners may also have restrictions on payments for “membership” of associations and initiatives.

More fundamentally, membership fees may raise expectations on the part of members that they need to constantly “get something for their money”. This takes the discussion back to what the initiative will provide and over what time period.

The Thai CAC has adopted a variation on the membership fee model: it requires members to undergo certification, and charges a small fee for the certification process rather than the membership per se.

Fees for extra services

To avoid charging a set membership fee, some initiatives offer free membership but charge small amounts for additional benefits or services.

For example, it is free to apply to join the Nigerian Corporate Governance Rating System, but additional fees are charged for advisory and training services, or for premium options like taking the certification test on the company premises.

Project-specific funding

Some Collective Action tools have specific funding models.

For example, Integrity Pacts are often funded by bidding companies paying a contribution towards the cost of an independent monitor. Other funding models exist; see our dedicated Integrity Pacts resource page on funding.

Funding for the High Level Reporting Mechanism could come from various sources. As Colombia's former Secretary of Transparency Gabriel Cifuentes recommends, however, the mechanism's independence is better served if it is funded by the budget allocated to the procurement or tender process, rather than directly by public money.

Saving money

In addition to considering how to raise funds, it is also worth examining how your initiative can save money. For example, are there economies of scale you could leverage? Would one of the members be able to provide free space to hold meetings and workshops?

Co-developing the best funding model for you

There is no “best” funding model for an initiative – it very much depends on context and membership, and may change over time as the initiative evolves. It is likely that a combination of the above options will help you to develop a feasible and sustainable funding model.

Don’t be afraid to discuss funding issues and options openly and early on with members or other stakeholders. They will appreciate your transparency and the opportunity to engage in developing a sustainable funding model that they can buy into.

More inspiration on developing a sustainable initiative, including through a workable funding model, arose at our peer-learning workshop on Sustaining: Ensuring an initiative is set up to survive and thrive.