Posts Tagged ‘for-profit’

Becoming A For-profit Organization Is No Cup Of Tea

Friday, August 13th, 2010

Transforming a nonprofit into a for-profit company is a tricky and lengthy process that many organizations are willing to undertake.

  • The majority of micro loans dispensed around the world come from for-profit microfinance institutions. However, it is rarely known that many of these organizations began as nonprofit NGO’s.
  • Transforming a nonprofit into a for-profit organization is a long process and involves attracting investors, obtaining regulatory approval and getting a financial institution license.
  • Many organizations struggle to achieve for-profit status while maintaining their social mission – it is difficult to keep the founder, investors and stakeholders equally satisfied.

Facts & Figures

  • SKS Microfinance was funded by three rounds of venture capital and grew from nonprofit to have 4.7 billion borrowers in 2009.
  • SKS just raised another $358 million in an IPO.

Best Quote

Grameen Bank reaches 7 million clients and that’s amazing. On the other hand, it took Professor Yunus [Grameen Bank's founder] 35 years to do that… Can you imagine how many generations it will take to reach 150 million poor households in India if we took that approach? We have to scale more rapidly, and only commercial capital will meet our huge funding requirements. – Vikram Akula, Founder, SKS.

Why do some nonprofits have a for-profit arm?

Monday, August 10th, 2009

Frequently (especially in tough economies), nonprofits struggle to meet their costs on grants and donations alone. When these organizations consider their options for a financially sustainable future, they sometimes choose to create a for-profit arm – though the goal of the for-profit business is generally just to finance the nonprofit’s mission and activities when its members can’t do so by other means.

Like any other organization, nonprofits need money to accomplish their goals, or even just to pay employees and keep the lights on, and there isn’t any way around that. So if they can run a business that doesn’t conflict with their mission or ideals, how is that so much different from throwing fundraising parties or soliciting donations? But having a for-profit arm doesn’t turn a nonprofit into a full-scale business. Why? The difference is that, in a regular company, the goal is to make money for the owners of the business. The more money the company makes, the richer its owners (and stockholders) get and, by extension, the more they’re willing to pay their employees. But even if a nonprofit has a for-profit arm, the extra money generated goes toward the nonprofit’s mission, not in its CEO’s wallet.