Civil Society Between Financial Sustainability and Mission Integrity
Financing the Future Through Institutional Capital Development
By Luiza Hoxhaj
Executive Director of
CRLDS – Center for European Policy Studies on Regional and Local Development
Civil Society Sustainability in a Changing Funding Landscape
Changes in the international development financing architecture, the reduction or reorientation of traditional aid funding, and the emergence of alternative financing mechanisms are creating both challenges and opportunities for civil society organisations (CSOs).
In this evolving environment, financial sustainability can no longer be understood simply as the ability to secure grants and implement projects. It requires organisational models that combine diversified funding sources, institutional capacity, decision-making autonomy, and accountability to the communities that civil society organisations exist to serve.
Two recent initiatives in 2026 offer valuable perspectives on this discussion.
The “Business Skills for Civil Society” programme, developed by CIVICUS and the Aga Khan Foundation, in which CRLDS participated through its Executive Director, focuses on strengthening entrepreneurial skills, resource diversification, and organisational sustainability within civil society.
Meanwhile, Rachel Wilkinson's article, “Funding the Future, Protecting the Mission,” published by the International Civil Society Centre on 14 October 2026, raises important questions about the relationship between funding sources, organisational independence, accountability, and mission integrity.
Although approaching the issue from different perspectives, both contributions highlight the need to understand financial sustainability as an integral part of broader institutional sustainability.
From Funding Diversification to Institutional Autonomy
Developing entrepreneurial capabilities and identifying alternative revenue streams can strengthen the financial resilience of civil society organisations.
Professional services, applied research, training programmes, strategic partnerships, philanthropy, and social enterprise models may help reduce dependence on project-based funding.
However, diversification alone does not guarantee institutional autonomy.
An organisation's independence depends not only on the number and nature of its funding sources but also on its ability to define its own priorities, maintain professional integrity, and act consistently with its mission.
For this reason, alternative financing models should be accompanied by sound governance arrangements, transparency, conflict-of-interest safeguards, and public accountability mechanisms.
Funding should support an organisation's mission, not determine its identity.
Beyond Project Outputs: Building Institutional Capital
One of the structural limitations of traditional project-based financing is its strong emphasis on the outputs and outcomes of individual projects, while the long-term development of organisational capacities does not always receive equivalent attention.
A project may successfully deliver its planned activities, produce research, provide training, or achieve measurable results without necessarily strengthening the long-term sustainability of the implementing organisation.
This distinction suggests the need to differentiate between project performance and the institutional capital generated through implementation.
In this context, institutional capital can be understood as the accumulated human capabilities, organisational structures, knowledge, methodologies, management systems, collaborative relationships, and public credibility that enable an organisation to fulfil its mission consistently over time.
Institutional capital does not emerge automatically from project implementation. It requires deliberate investment in professional development, knowledge management, organisational governance, and institutional continuity.
An organisation completing a project should therefore be able not only to document the outputs achieved but also to identify the new capacities it has acquired to address future challenges.
The central question becomes not merely what has the project delivered? but also what has the organisation become capable of doing as a result?
Institutional Capital and Public Value in the Territory
For civil society organisations working in regional and local development, institutional impact extends beyond organisational boundaries.
Through research, policy dialogue, technical assistance, and participatory processes, CSOs can contribute to strengthening local institutions, improving cooperation among stakeholders, and developing more inclusive governance mechanisms.
In this way, institutional capital accumulated within an organisation may also contribute to the creation of institutional and social capital across the wider territory.
These two dimensions are interconnected but should be assessed separately.
CRLDS's experience in regional and local development research, together with its cross-sector dialogue platform, the Forum on Regional and Local Economic Development (FoRLED), provides a practical perspective on the importance of continuity, knowledge exchange, and cooperation among public institutions, academia, businesses, and civil society.
In such processes, impact cannot be assessed solely through the number of events organised or participants involved.
It also requires examining whether new capacities, lasting partnerships, improved governance practices, and opportunities for meaningful participation have been created.
This is particularly relevant to territorial development, where sustainable outcomes often emerge over longer periods and depend on the interaction of multiple institutions and stakeholders.
From an Expenditure Logic to an Investment Logic
Recognising institutional capital as a development outcome requires reconsidering how funding costs are classified and evaluated.
Expenditure on professional development, knowledge management, organisational systems, and partnership-building is frequently treated as administrative or supporting expenditure.
Yet when these activities generate lasting capacities, they represent investments in an organisation's future ability to produce public value.
This does not imply that all administrative expenditure should automatically be considered an institutional investment. Such costs must remain subject to appropriate standards of efficiency, proportionality, and accountability.
The distinction lies in recognising that certain organisational costs generate benefits beyond the immediate project cycle.
A financing model that consistently supports project activities while underfunding the capacities required to deliver them risks weakening the very organisations on which it depends.
A more sustainable approach would therefore recognise institutional development as a legitimate and measurable component of development financing.
In practice, this could include multi-year funding arrangements, more realistic coverage of organisational costs, investment in knowledge systems, and evaluation frameworks that consider outcomes beyond the formal completion of a project.
Measuring Impact Beyond the Funding Cycle
A broader understanding of sustainability also requires a broader approach to impact assessment.
Traditional project indicators remain essential for transparency, accountability, and performance monitoring. However, they can be complemented by indicators that capture institutional development and the continuity of results.
Such indicators may include:
- The development and retention of professional competencies.
- The institutionalisation of methodologies and organisational practices.
- The preservation and reuse of knowledge and research outputs.
- The durability and effectiveness of partnerships.
- The ability to mobilise resources independently.
- The capacity of communities and local institutions to continue initiatives beyond external project support.
Assessing these dimensions requires a combination of quantitative and qualitative methods, as well as evaluation approaches that recognise the time needed for institutional and systemic change.
The objective is not to replace project performance measurement but to complement it with an additional dimension: measuring the capacity created to generate future results.
A successful project delivers results. A sustainable development investment also builds the capacity to generate further results in the future.
Towards a More Sustainable Civil Society Model
The changing funding environment requires adaptation from both civil society organisations and funding institutions.
CSOs need to strengthen their ability to diversify resources, undertake strategic planning, manage knowledge, and consolidate their institutional capacities.
Funding institutions, in turn, can contribute to long-term sustainability by supporting organisational development, introducing more flexible financing arrangements, and recognising the role of local actors in defining priorities and evaluating outcomes.
Within this framework, localisation should not be limited to transferring funding or implementation responsibilities to local organisations.
It should also involve meaningful participation in agenda-setting, intervention design, decision-making, and impact assessment.
Otherwise, the location of implementation may change without a corresponding redistribution of decision-making power.
For Albania, this discussion also connects to the broader challenge of strengthening institutional continuity, preserving accumulated knowledge, and building upon previous achievements rather than repeatedly starting new processes.
A sustainable civil society sector is not simply one that succeeds in securing new funding opportunities. It is one that transforms experience into institutional capacity, individual projects into continuous development processes, and temporary outputs into lasting public value.
Conclusion: Financing the Future While Strengthening the Mission
The debate on the future of civil society financing must extend beyond the question of how additional resources can be mobilised.
It must also address the type of organisations, institutional capacities, and public value that these resources are intended to develop.
Financial sustainability, institutional autonomy, and public accountability should be understood as complementary dimensions of a coherent development model.
From this perspective, funding is not an end in itself. It is an instrument for developing and sustaining the capacities required to serve the public interest.
The challenge is not only to finance the future of civil society, but to ensure that the way we finance it strengthens its mission, independence, and capacity to generate lasting change.
References and Context
- Wilkinson, Rachel (2026). Funding the Future, Protecting the Mission. International Civil Society Centre, 14 October 2026.
- CIVICUS & Aga Khan Foundation (2026). Business Skills for Civil Society. Capacity-building programme focused on entrepreneurial skills and organisational sustainability.
- CRLDS. Institutional experience in regional and local development research, policy dialogue, and cross-sector cooperation through FoRLED.