Effect of Funding on Financial Sustainability of Local Nongovernmental Organizations Providing Healthcare Support in Kenya

Abstract

The need for this study arises from the increasing importance of NGOs in the healthcare sector and the imperative to ensure their sustained impact. Financial sustainability is pivotal for these organizations to navigate the complex landscape of healthcare provision effectively. Despite the recognized significance of financial sustainability, there is limited empirical research exploring the specific relationships between funding sources, firm liquidity, financial leverage, and the overall financial sustainability of healthcare NGOs in the Kenyan context. The primary objectives of this study are to examine the effect of funding on the financial sustainability of local healthcare-supporting NGOs in Kenya. Firm liquidity and financial leverage were included as control variables in the study. The study was anchored in resource dependency theory, institutional theory, and stakeholder theory, providing a comprehensive theoretical framework to analyze the multifaceted relationships between the study variables within the non-profit sector. A descriptive research design was employed for this study, utilizing regression analysis to explore the relationships between the dependent variable, financial sustainability, and the independent variables of funding, firm liquidity, and financial leverage. The target population comprised 65 local NGOs providing healthcare support in Kenya, with 49 firms providing complete data sets for the final analysis. The study relied on secondary data collected from the financial reports of the selected NGOs over a 5-year period (2018-2022), leading to 245 observations. Data analysis included descriptive, correlation, and regression analyses to provide a comprehensive understanding of the financial dynamics within the studied NGOs. The findings revealed that funding has a positive and statistically significant coefficient of 0.033 (p = 0.007). Firm liquidity also has a positive and significant coefficient of 0.111 (p = 0.000). However, financial leverage does not show a statistically significant relationship (p = 0.438). The overall model produced an adjusted R square of value of 0.238 which indicates that approximately 23.8% of the variance in financial sustainability can be explained by the three predictors. The study concludes that diversified funding sources and strong liquidity positions are important in ensuring the long-term impact of these organizations. The study recommends that policymakers focus on creating supportive funding environments, and practitioners prioritize strategies that enhance liquidity and secure diverse funding sources. Further research could explore the contextual determinants of financial sustainability, incorporate qualitative perspectives, and adopt longitudinal approaches to capture the dynamic nature of the non-profit sector