The Role of Non-Profit Organizations in Development: the Experience of the World Bank

In both industrialized and developing countries, there is a growing body of experience, which attests to the positive roles that non-profit organizations (NPOs) play in development. (Clark, 1991) These roles include, in particular: -

• providing goods and services - especially meeting needs which have not hitherto been met by either the State or by the private sector;
  
  
• assisting the government achieve its development objectives - in particular through contributing skills for which NPOs have comparative advantage, such as public information, education and communications campaigns, or providing information about the situations and needs of particularly vulnerable groups;
  
  
• helping citizens to voice their aspirations, concerns and alternatives for consideration by policy makers, thereby giving substance to governments' policies regarding freedoms of association and speech;
  
  
• helping to enhance the accountability and transparency of government and local government programs and of officials.

For such reasons, the World Bank, in common with other development agencies, has become increasingly interested over the past decade in the work of non-profit organizations. The World Bank usually speaks of non-governmental organizations (NGOs) by which it means NPOs and community-based organizations (CBOs) that are (i) entirely or largely independent of government; (ii) not operated for profit; and (iii) exist to serve humanitarian, social or cultural interests, either of their memberships or of society as a whole. (World Bank, 1996)

The proportion of Bank-financed projects, which involve NGOs in one role or another, has increased steeply in recent years. While there were examples of such involvement in the 1970s, collaboration really only began to grow significantly in the 1980s, especially in the social and rural sectors. Most of this engagement was with NGOs from developed countries. By 1990, NGOs were involved in about 12 percent of projects being implemented. Today, NGOs are involved in 38 percent of active projects; and in Fiscal Year (FY) 1999, 54 percent of all approved projects involved NGOs to some degree. The majority of these NGOs are now from developing countries. (World Bank, 1997-9) (These statistics derived from Project Appraisal documents and include staff counts of the number of projects in which there is intention to involve NGOs but which may not always be realized in practice).

While early NGO involvement was mostly oriented to more cost-effective or more poverty-targeted service delivery, and was often a very minor aspect of the project in questions, in more recent years NGO roles have both widened and deepened. This diversification of roles was described first in 1989 in the Bank's Operational Directive on NGOs. (World Bank, 1989) That Directive recognized the potential of NGOs to reach poor communities and remote areas at low cost, identify local needs, promote participation, build on local resources, and introduce new technologies. It also recognized potential weaknesses of NGOs including limited managerial and technical capacities, uncertain sustainability, localized operations, limited replicability and weak accountability. Hence, the Bank regards the judicious involvement of such organizations, properly coordinated with the activities of public agencies, as facilitating pursuit of equitable and sustainable development.

This premise was tested in 1998 by a wide-ranging review by the Bank's Operations Evaluation Department (OED) of the institution's track record regarding operational collaboration with NGOs and CBOs. (World Bank, 1998b) The report broadly underscored the premise, concluding 'experience indicates that strong NGO/CBO involvement significantly contributes to project success, especially to providing benefits and opportunities for participation by the poor and marginalized.' However, OED found that the record is mixed and identified three critical factors: 'A satisfactory outcome appears to depend on a supportive environment for NGOs/CBOs, effective working relationships with NGOs/CBOs, and partner capacities that are both equal to the task and in balance.' The report elaborated on the first factor as follows: - 'A supportive environment for NGO/CBO activity is critical for a satisfactory outcome. This entails support by government leaders and, more important, a willingness by public sector managers in line agencies to work with NGOs/CBOs. A supportive legal framework allows NGOs/CBOs to form and associate freely, to act independently, and to be transparent and accountable. In half the cases assessed by OED, NGOs/CBOs were operating in projects in an environment that was less than fully supportive'

The report also stressed that '..all too often the Bank, borrowers, NGOs/CBOs, and cofinanciers fail to cooperate effectively and realize the opportunities that partnership presents', that 'lack of agreement on objectives and strategies translates into project designs that lack ownership;' and that 'in most of the satisfactory projects assessed by OED, the capacity of the partners to play their mutually supporting parts was both sufficient and balanced.'

Further evidence that NGO involvement can strengthen project performance is provided by analysis of statistics from the Bank's Annual Review of Portfolio Performance (ARPP) for projects with and without NGO involvement for those sectors where NGO involvement is most established (e.g. health, education, rural development). In FY 1996 and 1997, projects with NGO involvement were significantly less at risk of poor performance than those without NGOs. (World Bank, 1998a)

Though early involvement of NGOs in Bank-financed operations concentrated on their roles in social service delivery, subsequent work has stressed the important contribution of NGOs to issues relating to indigenous peoples, resettlement, poverty reduction, and gender. (Shihata, 1995)

The Non-Profit sector - a macro view

The non-profit sector has mushroomed over the past two decades: it now is a key actor in development assistance. The programs of international NGOs doubled in real size between 1975 and 1985; by 1993 they represented 14 percent of all development assistance, or $8.5 billion per annum. NGOs are deriving an increasing proportion of their total funding from official development assistance (ODA); ODA provided 1.5 percent of international NGO income in 1970 and 30 percent in 1993. Including food aid, OECD donors now channel about 5 percent of their ODA through NGOs; and at least one country, the United States, so channels 11 percent of its ODA. These developments are reflected in rapid growth in the sector in borrowing countries: for example, there are an estimated 18,000 registered NGOs in the Philippines and 3,000 in Brazil; in India, registered NGOs handle $520 million per year, or 25 percent of all external aid. (World Bank, 1996)

The non-profit sector has also grown to occupy a significant proportion of the landscape in industrialized countries. A recent study by Johns Hopkins University (Salamon and Anheier, 1998) reveals that the non profit sector (including government contributions, fees and voluntary donations of funds and time) is estimated at a staggering $1,311 billion in just the 5 largest economies (the G5) for 1995. For comparison, this is approximately the same as the publicly guaranteed debt burden of all developing countries, the same as the GDP of the 50 low-income countries (including China and India), or the same as the GDP of the UK. Of the $1.3 trillion, about 26% represent private giving, mostly of time. In this 22 country-study, the non-profit sector averaged 4.7% of GDP (more than the agriculture or defense sectors) and employed 7.1% of the non-agricultural workforce (4.9% excluding volunteers). Employment growth in this sector has grown at 4% per annum in the 90s in a group of OECD countries (four times faster than overall employment growth in these countries). Another survey shows that 40% of Americans belong to at least one small group that meets regularly, and that nearly 20% of the British population engages in some form of voluntary work, half of whom on a weekly basis. (Wuthrow, 1994) The Johns Hopkins study concludes, 'the existence of a vibrant non-profit sector is increasingly being viewed not as a luxury, but as a necessity, for peoples throughout the world. Such institutions can give expression to citizen concerns, hold governments accountable, promote community, address unmet needs, and generally improve the quality of life'.

This enhanced collaboration (involving, as it does, the government in question) has enabled the Bank to identify important NGO contributions to development beyond their capacity to deliver services. Some NGOs have important specialist knowledge, for example regarding environmental issues. Some NGOs work in close partnership with poor communities and are able both to help foster participatory development approaches and to identify priority concerns of poor people. Other NGOs help strengthen civil society through informing and educating the public, for example concerning their legal rights or entitlements to services or by helping attune government policies and practices to the needs of poor citizens. This diversity has led to expanded forms of cooperation between the Bank and NGOs including government-Bank-NGO collaboration in projects. (Malena, 1995) It has also contributed to the Bank's policies regarding information disclosure and public consultation. (Shihata, 1995) For example, in the preparation of Environmental Assessments (required for all projects which potentially have a major environmental impact), the Bank requires 'meaningful consultation between borrowers and affected groups and local NGOs,' based on timely public disclosure of relevant information. (World Bank, 1991)

Based on its own experience, the Bank strongly advises governments to involve NGOs in the preparation of National Environment Action Plans and in designing poverty reduction programs. For this reason the Bank further 'encourages governments to be responsive to NGOs that request information or raise questions about Bank-supported activities'. (World Bank, 1989)

Involvement of NGOs in Bank-supported activities is also a primary way of achieving participatory development, which has been proven by experience to help attain the Bank's goals of economic and social development. Participation is the term used by the Bank to describe the process by which stakeholders in development - the Bank, the borrower, and those who are directly or indirectly affected by a development project - influence and share control over development initiatives, and the decisions and resources that affect them. (World Bank, 1994a, 1994b)

In order for the Bank and governments to be able to work effectively with NGOs in a given country, and to benefit fully from the contributions they can potentially make to successful development, it is important that NGOs be freely established and operate without undue constraints; that they be independent of the government; and be transparent and accountable. Only if such conditions are met will the NGO sector reflect the full range of relevant viewpoints and expertise pertinent to a wide variety of development projects. Similarly, NGOs need to have both the full ranges of powers, privileges, and immunities enjoyed by other juridical persons in the society. When NGOs are transparent and have well-developed mechanisms for accountability (to their beneficiaries as well as to their funders), the integrity of each NGO and of the sector itself is ensured. There is then a greater likelihood that the NGOs represent accurately the views of the poor.

The Bank also advocates to member governments that they use participatory approaches in the selection, design, implementation, and evaluation of development programs, on the grounds that this enhances development effectiveness. (World Bank, 1995) On certain matters, such as the preparation of Environmental Assessments, the Bank requires consultation with local communities and local NGOs. 'Such participation and consultation, to be useful at all, require a reasonable measure of free expression and assembly' and hence it would be legitimate for the Bank in extreme cases to deny loans relating to these matters where such freedoms are not afforded. (World Bank, 1992)

The Bank's recognition that a strong voluntary sector makes an important contribution to equitable and sustainable development is reflected in its work on 'good governance.' This work also recognizes that the voluntary sector (including NGOs and other elements of civil society) is much stronger in some countries than in others, for many reasons. 'A powerful factor clearly is government hostility or encouragement.... government policies determine the enabling environment for NGOs and the roles that they assume.' (World Bank, 1992) These policies include rights regarding freedom of speech or association, regulatory policies, fiscal policies, funding and partnership relations, and policies regarding consultations with the public and with NGOs. (Clark, 1993) Some governments welcome certain NGO activities (particularly poverty reduction) but not others - including functions, which may be auxiliary to favored activities, such as related advocacy. 'Some governments are suspicious of NGOs precisely because of their advocacy for the poor.' (World Bank, 1994b) The Bank advises governments, however, to welcome a wide role for NGOs and to allow and foster 'a strong civil society participating in public affairs,' (World Bank, 1995) because of the capacity of civil society organizations to mediate between individuals and the State, to inform public debate, to perform social functions, and to hold governments accountable.

Because of the growing conviction that a healthy NGO sector makes a strong contribution to development, the Bank has initiated various studies of national NGO sectors. This work has frequently identified the imprecision, restrictiveness, arbitrariness, or unpredictable application of laws relating to NGOs as major problems hampering the development of the sector and preventing individual NGOs from achieving their potential. On the other hand, where NGO laws are lax or non-existent, it is easy for unscrupulous individuals to take advantage and to bring the sector as a whole into disrepute.

These studies have led the Bank to be convinced of the utility of a handbook on good practices regarding NGO laws. They have also yielded a body of evidence relevant to such a task. Hence, in 1995, the Bank commissioned a specialist NGO - the International Center for Not-for-Profit Law (ICNL) - to embark on a major study of existing practice, to distill from this important principles for legislation, and to offer lessons of good practice - recognizing that the characteristics of the NGO sector and society vary from country to country, as does the capacity of governments to implement detailed legislation. The resulting Handbook is still in draft form. (World Bank/ICNL, 1997)

Conclusion

The Bank has expanded its work with the non-profit sector because it has found that operational partnership and genuine dialogue makes good business sense. Hence the Bank's approach to working with this sector is built around three objectives: strengthening operational collaboration; improving dialogue on development policy; and improving the effectiveness of NPOs in developing countries, especially by fostering a policy environment that enables NPOs to play a more active role in development.

In addition to improvements which collaboration with NGOs and community-based organizations can bring to Bank-financed projects, the Bank's policies and strategies have often been improved as a result of listening to NGOs and other voices of civil society.

The Bank's President, James Wolfensohn, issued a paper in 1999 introducing his proposals for a 'Comprehensive Development Framework' which stressed the importance of partnerships between governments, local governments, donors, the private sector and civil society. (Wolfensohn, 1999) In this personal message, Mr. Wolfensohn wrote:

'In all its forms, civil society is probably the largest single factor in development, if not in its monetary contribution, then certainly in it's human contribution and its experience and its history. ... Depending on local political circumstances, civil society has a greater or lesser voice, but our experience is that by engaging civil society in projects and programs, better results are achieved both with design and implementation and usually greater effectiveness, including more local ownership. I think we all recognize more and more that local ownership is the key to successful project effectiveness.'

The Bank's learning experience regarding civil society has not always been easy, but the benefits of engagement are well worth the costs. Hence the Bank encourages its member governments to provide an enabling environment for, listen to and seek partnerships with the non-profit sector particularly in the pursuit of sustainable and equitable development.

References

Clark, J (1991) Democratizing Development: the Role of Voluntary Organizations. Kumarian Press, West Hartford, CT, USA

Clark, J (1993) The State and the Voluntary Sector. World Bank, USA

Malena, C (1995) Working with NGOs: a Practical Guide to Operational Collaboration between the World Bank and NGOs. World Bank, USA

Salamon, L and H. Anheier (1998) The Emerging Sector Revisited: a summary. Institute of Policy Studies, Johns Hopkins University, Baltimore, MD, USA

Shihata, I (1995) The World Bank in a Changing World, Vol. II, Chapter 6: 'The World Bank and NGOs'. World Bank, USA

Wolfensohn, J (1999, January 1st) AProposal for a New World Bank Development Strategy and a Postscript on International Financial Architecture. World Bank, USA

World Bank (1989), Operational Directive 14.70: Involving NGOs in Bank-supported Activities. World Bank, USA

World Bank (1991), Operational Directive 4.01: Environmental. World Bank, USA

World Bank (1992), Governance and Development. World Bank, USA

World Bank (1994a), Final Report of the Participatory Development Learning Group. World Bank, USA

World Bank (1994b), Governance: the World Bank's Experience. World Bank, USA

World Bank (1995), Prohibition of Political Activities in the Bank's Work: Legal Opinion of the Bank's General Counsel to the Board of Executive Directors. World Bank, USA

World Bank (1996),NGOs and the Bank: incorporating FY1995 Progress Report on Cooperation between the World Bank and NGOs. NGO Unit, World Bank, USA

World Bank (1997), Handbook of Good Practices for Laws Relating to NGOs: Discussion Draft. NGO Unit, World Bank, USA

World Bank (1997-9), Annual Progress Reports on Cooperation between the World Bank and NGOs. NGO Unit, World Bank, USA

World Bank (1998a), The Bank's Relations with NGOs: Issues and Directions (paper discussed by the Board of Executive Directors). World Bank, USA

World Bank (1998b), NGOs in Bank-supported Projects: and Operations Evaluation Department Review. World Bank, USA

Wuthrow, R ((1994) Sharing the Journey. New York, USA

• Legal Dimensions of the Enabling Environment for Civic Engagement(Synopsis; A Progress Report To Civil Society Constituents; and Advisory Group List), by Jeff Thindwa, World Bank, proceedings from a Seminar, The Hague, Netherlands, October, 2000 (19 Kb PDF)
  
  
• Practice-Research Engagement and Civil Society in a Globalizing World, Edited by L. David Brown, CIVICUS & Hauser Center