What is a Non-Governmental Organization (NGO)?

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Definition:

An NGO is a nonprofit organization separate from the government that engages in and raises awareness for humanitarian, environmental, or societal causes.

🤔 Understanding NGOs

A non-governmental organization (NGO) is a group of individuals who come together for a specific non-commercial, societal, or humanitarian purpose. Some NGOs focus on a particular cause, while others have a broader mission. NGOs are independent of the government, though some receive government funding, in addition to the money they receive from other funding mechanisms. While some NGOs exist on a local level, others exist internationally and have budgets of millions of dollars. NGOs in some countries work closely with the government and help to communicate citizen concerns either to the government in question or to the international community.

Example

One example of a non-governmental organization is Greenpeace, which is an international environmental group that works to advocate for environmental causes. The organization was founded by two activists living in Canada, but it now has offices in 55 countries across the world, thousands of volunteers, and a coordinating body in Amsterdam. Greenpeace receives almost all of its money from donations, and it doesn’t accept money from governments, corporations, or political parties.

Takeaway

A non-governmental organization is like a river...

Rivers move water between bodies of water, such as lakes, seas, and oceans. They take the water from one body and move it to another. That’s kind of how NGOs work. They take resources and donations from individuals and divert them to pressing social, humanitarian, and environmental causes.

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How do NGOs work?

The term non-governmental organization (NGO) dates back to 1945, when the United Nations officially recognized NGOs in Article 71 of its founding charter. NGO is a broad term that includes many different types of organizations that are independent of the government.

There are two primary types of NGOs: operational NGOs and advocacy NGOs. Operational NGOs are those that focus on designing and implementing development projects. An example of this type of NGO would be Construction for Change, which builds infrastructure for other nonprofit organizations. Advocacy NGOs focus on particular causes. For example, the organization Human Rights Watch raises awareness about and action against human rights abuses.

NGOs can exist in any size. Some run as small community groups, while others operate on an international level and have operating budgets of millions (or even billions) of dollars.

NGOs also differ significantly in the way they do business. Some NGOs act primarily as lobbyists, pushing for policy changes at various levels of government. For example, the American Civil Liberties Union works to lobby for the individual and equal rights for everyone. Since some NGOs raise considerable amounts of revenue and exist on a large scale, they may have sway with policymakers.

Other NGOs take more of a boots on the ground approach. An example of an NGO that operates in this way is Pencils of Promise. The NGO’s mission is to expand access to education around the globe. They do this primarily by raising money to build schools and providing education in countries where literacy rates are low.

What do NGOs do?

In general, the purpose of NGOs is to further the goals of the members and donors. Often NGOs come about as a result of a single person or small group of people who come together because they have a similar passion.

Usually, the goals of these organizations exist for the public good. They help to raise money and raise awareness about causes that are near and dear to them, whether those causes are humanitarian, cultural, or environmental.

Many NGOs have a focus on humanitarian efforts. In the United States, the United Way exists to help ensure education, income, and health for individuals. They offer services within individual communities to help improve lives.

On an international scale, organizations such as Amnesty International help to ensure human rights across the globe. They act as a watchdog to ensure governments are treating their citizens well and call out entities that commit human rights violations.

Other organizations place their focus not on humans but on the environment. The Nature Conservancy, for example, has the mission of conserving our planet’s land and water. They do research and take action on strategies to fight climate change.

Some NGOs also act as government watchdogs. They monitor the activities of particular governments and call out corruption and unethical behavior that they find.

For example, suppose a country with a reputation for being nondemocratic was holding a national election. A watchdog NGO might oversee the election and call out instances they witness of election tampering or voter intimidation.

NGOs might also act as watchdogs for corporations. They might inform the public or the government when a company is acting in a way they find to be either illegal or unethical.

If an environmental watchdog NGO finds a company breaking regulations set forth by the Environmental Protection Agency (EPA), they might alert the EPA and publicly call out the company for its actions.

How are NGOs funded?

Many NGOs are large organizations that operate on an international scale. As such, they have significant operating budgets and have to raise money to continue their work.

For many NGOs, it’s not just about the money they need to further their cause. They also have obligations to fulfill, such as salaries, health insurance, and retirement accounts for their employees, as well as operational expenses such as rent, utilities, and transportation.

First, NGOs raise money through donations. These organizations rely heavily on cash donated from individuals, corporations, and foundations. For example, the Bill & Melinda Gates Foundation gives funds in the form of grants to NGOs all around the world for many different causes, including vaccine development, education, and agricultural development.

Another way NGOs might get funding is from local, national, or international governments. For example, Habitat for Humanity is an organization that helps to build homes for families in need. The organization receives some government funding, though they only accept government funding that comes without strings that would violate the organization’s principles.

Many NGOs also participate in revenue-generating activities. Rather than merely asking for donations, an NGO might sell a product to put the profits toward their charitable expenses.

One example of an NGO that raises money in this way is the World Wildlife Fund (WWF). The WWF has a shop on their website of products you can purchase to help support their causes. Many of those products exist as a partnership with a particular company or environmental cause.

NGOs might also raise funds by investing money and using the return from those investments for their operating expenses. This strategy is one that large NGOs would be more likely to use. One example of a way an NGO might do this is through an endowment.

With an endowment, the organization puts money into a fund that they invest in the stock market. Often, the organization will use only the interest they earn on their investment to put toward expenses for the organization.

One example of an NGO that has an endowment fund is Doctors Without Borders. Some of their endowment funds exist as restricted funds, meaning the principal must stay in the account, and they can only withdraw and use the earnings. The other funds are unrestricted, meaning the organization has more leeway as to how they use the money.

What is the difference between an NGO and a nonprofit?

Though many people use the terms NGO and nonprofit organization interchangeably, that’s not necessarily the case.

The term NGO doesn’t have a precise meaning within the United States, though many organizations here might fall into the category of NGO.

As defined by the United Nations, an NGO is a “not-for-profit, voluntary citizen’s group that is organized on a local, national, or international level to address issues in support of the public good.”

NGOs are usually driven by particular values or causes and exist separately from the government. They’re often prominent in international affairs, and according to the World Bank, more than 15% of foreign aid funnels through NGOs.

Nonprofit organizations are those that exist for a purpose other than generating profit. In the United States, the term nonprofit organization actually has a legal meaning behind it. Organizations may register as nonprofit organizations with the Internal Revenue Service (IRS) and therefore be exempt from specific taxes.

There are many different types of organizations under the IRS definition of nonprofits. They are broken down in the Internal Revenue Code based on their purpose and organizational structure. Most nonprofit organizations are charitable groups such as religious organizations, private foundations, or public charities like the Red Cross.

The definition is far broader, though. Other categories of nonprofit organizations can include credit unions, insurance companies, employee pensions, and political organizations.

There’s a lot of crossover between the two types of organizations, and undoubtedly many (though not all) of the nonprofit organizations operating in the United States fit the definition of an NGO.

However, plenty of both domestic and international NGOs may not fit the United States definition of nonprofit if they don’t fit the IRS designation.

What are the types of NGOs?

Because there are so many different strategies and structures for non-governmental organizations, they generally fall into several different categories.

  • BINGO refers to business-friendly international NGOs such as Amnesty International
  • ENGO refers to environmental NGOs, such as the Sierra Club
  • GONGO refers to government-sponsored NGOs. This type of NGO is less common in the United States — An example from another country would be the China Foundation for Poverty Alleviation. These organizations are sponsored by, but not operated by, the government. This type of NGO receives criticism as being not truly independent and a way for governments to undermine democracy.
  • INGO refers to international NGOs, such as Greenpeace
  • QUANGO refers to quasi-autonomous NGOs, such as the National Center for Missing and Exploited Children
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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Robinhood Financial LLC (member SIPC), is a registered broker dealer. Robinhood Securities, LLC (member SIPC), provides brokerage clearing services. Robinhood Crypto, LLC provides crypto currency trading. All are subsidiaries of Robinhood Markets, Inc. (‘Robinhood’).

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