Giving Compass' Take:

• Although direct cash donations are useful, the need for nonprofit organizations to help disseminate money and services is still necessary and relevant. 

• How can we strengthen nonprofit capacity so that organizations are able to get the work done that is needed to help individuals in need?

• Read about how nonprofit leaders can be better at risk management. 

A recent article in The Atlantic highlighted a growing trend in economic aid of giving money directly to the needy, often without strings attached. It’s being fueled in part by the spread of smartphones, which make it a breeze to offer a few dollars to someone almost anywhere in the world – not just a person passed on the street.

Researchers have found that in several developing countries, such as Zimbabwe, direct cash donations were more cost-effective than in-kind transfers of food and other aid at improving economic outcomes. But we shouldn’t be too quick to dismiss the value and effectiveness of nonprofits that provide aid in forms other than cash, which is why their number and the volume of donations to them continue to grow.

 

To learn more about the efficiency of nonprofits, Elizabeth Johnson, an undergraduate research assistant, and I spent this past summer interviewing several nonprofit organizations in the greater Cincinnati area.

First, nonprofits can be more adept than individual donors at identifying populations in need and at establishing contact with groups that are “hidden” or inaccessible. This may include drug users, the homeless, children failing in school or members of stigmatized groups.

Economies of scale and scope are achieved by nonprofits when they provide services beyond what any individual could do alone. Nonprofits are able to consolidate overhead costs across a larger volume of goods and services, allowing them to access goods and services at prices much lower than an individual would pay.

Once those in need receive money or benefits, nonprofits are able to employ their resources to ensure that money is being spent in the way it was intended.

Read the full article about why nonprofits are necessary by Michael Jones at Bizcatalyst360