The Value of Overhead from Public Donations

Earlier today, I booked my ticket back to Bangladesh. It’s just for a month and it’s just for one or two small projects. But, the familiar butterflies-in-the-stomach feeling has returned as a million worries come into play.

I don’t have enough money to rent my own place, so where will I stay? Will I have enough money to pay for internet and stay connected with you guys? What about if I get sick? How will I pay for unexpected costs?

It’s times like this that I want to play Devil’s Advocate a bit and explain why some of the biggest and best charities in the world take their overhead and administration costs from donations from the public.

The first reason is that it adds a sense of stability. That is, if a certain amount of donations are regularly coming in, you can use a small portion of that to issue salaries to people. A consistent salary means it’s easier to pay recurring expenses like rent, food, internet, water, utilities, recreation, and health insurance.

The second reason is that it adds a sense of balance. It costs money to do charity work. If overhead comes from a percentage of the donations people give to help the poor, than it’s just a matter of making sure the percentage you take is enough to cover the cost associated with each donation.

Finally, it adds a sense of scalability. If a charity gets popular enough that they get double the donations, they may have double the work to do. But, thankfully, they can now afford to have double the staff. Of course not everything needs to scale linearly, but doing things this way makes it easy to grow.

If this works so well, why have I spent so much time rambling about charity overhead? This is because charities have to compete. And I don’t mean competing for your donations. What I mean is they have to compete for the trust and respect of those they want to help.

In a country like Bangladesh, it’s not about Save the Children vs. UNICEF. Rather, it’s about Western charities having to compete with everything else. There are village loan sharks, the military’s charity programs, personal initiatives by local Bangladeshis, and even development by extremist groups.

What I’ve seen is that Western charities sometimes lose this competition in trust and respect even if they may be providing the best paths out of poverty. At least in Bangladesh, that’s partly because some of these alternative forms of development don’t take a cut from public donations for overhead.

While I’m all for more “donor education”, I’m not convinced the solution to this problem is “recipient education”. I can’t just hand villagers a Charity Navigator rating and show how small a slice of the pie charities take from donations. That’s how we in the West measure trust. It’s not a universal metric.

As someone who is now starting the cycle of calling friends and family to see where I can stay for free while in Bangladesh, I definitely see the value in the kind of (relative) stability someone working for a charity can have. But, if I figure this out, maybe this is something we can all benefit from.

8 Responses to “The Value of Overhead from Public Donations”


  1. 1 Erica

    Hey Sean,

    I find everything you do extremely interesting and inspirational – it’s projects like yours that make me want to figure out a way to use the internet for good as a part of my job once I graduate from college. But you also make me realize how extraordinarily complicated it is to do good. On the one hand, the work you do makes me want to do charity work as well, get involved, etc. On the other hand, it makes me worried that if I did try to do something good, I would do it /wrong/ and ultimately cause more harm than good.

    I also really appreciate the way you separate overhead costs from actual donations that go straight to helping people. I’ll probably donate a few bucks to overhead next time I’m able to. Because you present every aspect of what you do so thoughtfully, I now trust you with my money more than I do most not-for-profits.

    Best wishes!
    Erica

  2. 2 Arafat

    Overheads are a necessary evil… if a small percentage of the donations help delivering aid to relevant community it’s justifiable.

    keep up the good work… stay safe

  3. 3 Anonymous

    I’ve talked to several changemakers working internationally who insist that charities and other organizations do compete for donations, to the point of skewing their goals to more successfully please donors than to aid those in need.
    With that in mind I’m curious – when you wrote “This is because charities have to compete. And I don’t mean competing for your donations,” were you saying you believe that organizations don’t ever compete for donations, was that an angle you were taking while playing Devil’s Advocate, or were you just trying to differentiate the situation of being on the ground in Bangladesh?

  4. 4 Shawn Ahmed

    Hey – great comment/point. There DEFINITELY is competition between charities for donations. The level of competition and how much it skews a charity’s priorities varies by a charity’s internal culture and values though. But this is a competition that all charities are aware of. What I’m referring to in that phrase is that there is ANOTHER competition that many charities AREN’T aware of.

    Many charities are aware of perception problems of NGOs in the countries they operate in. But many charities may not realize there is a parallel form of helping the poor (and that has successfully pulled millions out of poverty) that exists parallel to formal aid and development. This form of “indigenous aid and development” can be rooted in culture, tradition, and religion and may pre-date the NGO model by centuries.

    It is this model, and the local preferences for it, that sometimes undermine NGO efforts. It’s a competitor to their model and many don’t even realize that. What I’d like to see isn’t one form superseding the other – but rather a blending. NGOs can learn from local ways. Or, at the very least, NGOs should respect traditional forms of aid and development even if they don’t embrace it. Diversity breeds strength.

  5. 5 Cassie Lopez

    The mere fact that it’s for a good caused I don’t think there should be any problem. For as long as your intention are pure and you do it for the benefit of those people whom you wanted to help then it’s okay in my opinion. When doing charity works you are intended to do what you think is right so two thumbs up still.

    Cassie Lopez
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