Although foreign support has never been a major factor in the total income of the Hungarian non-profit sector compared to other CEE countries, Western funding has played a significant role in the development of the sector. Support for basic sector infrastructure, promotion of NGO good practice, and support for advocacy NGOs have been particularly valuable. Where Western funders failed, however, was in underestimating the time it would take to change the culture sufficiently to make these changes sustainable.
 
In essence, what worked was the ability to multiply the effect of their funding – both through the grantmaking and support organizations and through introducing a more effective and professional mode of NGO operation.

An infrastructure for the voluntary sector

Practically all major NGO grantmaking organizations and support centres (ie information and training centres) have been set up and maintained with serious Western input. A number of these belong in the 1 per cent of NGOs dependent on foreign funds (see box) and are now facing the challenge of withdrawal of such funds. Although some donors are making continuous efforts to make this transition easier (eg through matching fund schemes), this will remain a difficult situation until the indigenous market of users and donors is sufficiently developed to be able to finance its own infrastructure.

Promoting NGO transparency and professionalism

Western government and private foundation donors played an especially important role in promoting transparency and accountability among NGOs. These donors have consistently required a high level of accountability and set up serious systems to ensure it. By forcing NGOs to think through their strategy, analyse their internal resources, set clear goals and establish indicators of success, they have contributed greatly to enhanced NGO management.

Supporting advocacy-type NGOs

While much Western funding in the past ten years went to NGOs providing social and other services, that was mostly complementary to government funding of these organizations. The real significance of foreign support has been in financing the types of activity for which it has been difficult to raise funds indigenously: rights of women, Roma and other minorities, and people with AIDS, as well as citizen rights, civic education, investigative journalism, etc. Such funding has contributed greatly to the development of a modern democracy.

However, this is also a field where Western donors missed the chance of a real breakthrough: the ability of Hungarian advocacy NGOs to educate people and put real pressure on government is still much less today than is needed.

Promoting corporate philanthrophy

In the mid-1990s, a number of foreign donor programmes began to address the issue of corporate responsibility in Hungary, assuming that the newly developed economy had strengthened enough to undertake support of NGOs. Although the programmes themselves were successful (financing awards like the ‘Corporate Donor of the Year’ award, publishing a directory of corporate giving, kickstarting employee volunteering in certain companies), changing the culture of corporate giving in Hungary within a few years proved too big a challenge.

Encouraging innovation in the NGO sector

Much Western funding focused on introducing innovations such as the Telecottages (introducing IT in small villages), self-financing mechanisms for NGOs, various methods of community development, community schools, community foundations, etc. The problem with these experiments, as with corporate philanthropy, was failing to make them really sustainable owing through failing to allow the time needed for cultural change and indigenizing’ of the approach.

Challenges

The challenge for foreign funders who remain active in Hungary at the turn of the millennium is to find the right balance in funding NGOs that are dependent on them – neither overfunding activities or organizations that should become gradually supported by indigenous resources nor cutting off funding before indigenous support has built up. At the same time they should not continue to assume that transferring technical know-how alone will succeed in changing basic cultural patterns of giving, volunteering or self-reliance (as opposed to relying on the government) within a short time.

Foreign funding of Hungary’s non-profit sector
Over the past ten years foreign funding to Hungarian NGOs has averaged around 8 per cent of total income. The latest available figure, 5.7 per cent in 1997 (US$65.2 million), shows a definite decrease from previous years.

3.5 per cent of all Hungarian NGOs – around 1,700 organizations — received foreign funding in 1997, but only 1 per cent were actually dependent on it (meaning that over two-thirds of their income came from that source).

Nilda Bullain is Director of the Civil Society Development Foundation Hungary. She can be contacted via email at nilda.ctf@mail.mgx.hu