Responding to funding scarcity: governance challenges in Swedish and South African development partnerships

Purpose: In the context of the general funding scarcity in the nonprofit sector, this paper aims to inquire into the governance challenges facing nonprofit aid organizations in a donor–recipient partner relationship. In particular, the authors focus on the challenges of commercial diversification as the espoused alternative to aid-funding. Design/methodology/approach: A qualitative design was deployed to collect and analyze data collected from interviews conducted in three case organizations in an aid development partnership. Findings: The various responses at the organizational level are presented as well as analyses of the inter-organizational aspects. All organizations have responded strategically to reductions in funding from state/government and other aid sources by attempting to diversify commercially yet at the same time maintain dependency on aid-funding. This entailed tensions between the logics of the market and mission. These tensions are manifest not only within the organizations but also in the relations between them. Originality/value: Analyses of the twin-track strategies have highlighted that maintaining aid dependency and resource diversification have different and conflicting relational prerequisites and require diverse and conflicting internal capabilities. The paper develops a conceptual framework for capturing the governance challenges of this strategic dilemma and concludes that the choices of pursuing continued aid-funding and seeking new commercial opportunities are invariably mutually exclusive.