The economic & financial impact of stop-work orders on non-profit organisations
A stop-work order is when the government or a donor tells an organisation to pause its activities, usually because of funding cuts, policy changes or other administrative reasons. This affects contracts, services and projects, especially for non-profit organisations (NPOs) that depend on donor funding.
On 17 January 2025, the US Agency for International Development (USAID) issued a stop-work order for several aid programmes in Namibia. This stopped key healthcare and education services and caused over 700 job losses. The problem is not just in Namibia – USAID funding freezes have affected nearly 400 contracts worldwide, leading to job cuts and suspensions of important development projects.
Looking at these disruptions through the lens of economics and development finance shows the severe consequences for NPOs and the economy as a whole.
Economic impact of stop-work orders
1. More unemployment and economic decline
When NPOs stop working, people lose jobs. Many NPOs provide employment in developing countries. If they close, workers lose their income, which reduces household spending and slows down economic growth. Research by Amunkete (2020) shows that job losses in the non-profit sector create economic instability.
2. Financial struggles for NPOs
Many NPOs rely on continuous funding from donors. If funding stops, they struggle to survive. Some contracts require ongoing services, so any pause may lead to cancelled agreements, pushing NPOs into financial crisis. Studies (Smith & Cooper, 2021) show that depending on one funding source is risky, especially in places where alternative funding is hard to find.
3. Fewer social services and development challenges
NPOs provide crucial services in healthcare, education and poverty reduction. A stop-work order means fewer services for people who need them most. This impacts literacy rates, maternal health and food security, setting back social progress.
Solutions for NPO resilience
To survive these challenges, NPOs need strong financial strategies. Development finance institutions (DFIs) and investors can help by providing alternative funding methods.
1. Diversifying income sources
NPOs should not rely on a single donor. They can mix grants, low-interest loans and investments to spread financial risk. This approach, called blended finance, strengthens financial stability.
2. Partnering with businesses
NPOs can work with private companies through Corporate Social Responsibility (CSR) initiatives. Countries like the UK and Canada have successfully used this model to sustain non-profits (Kumar & Patel, 2020).
3. Government support and policies
Governments can provide tax relief, emergency funds and policies that support NPOs. In wealthier countries, social safety nets help protect jobs during economic shocks. Namibia and other developing nations could adapt similar policies.
Innovative ways to ensure financial stability
Apart from traditional funding, NPOs can try new economic models:
1. Social Impact Bonds (SIBs)
With SIBs, investors fund social projects and get returns if the project meets set goals. Countries like Australia and Germany use SIBs to keep healthcare and education running.
2. Crowdfunding and decentralised finance (DeFi)
Digital platforms allow direct fundraising from donors worldwide. This reduces reliance on big institutional grants and makes NPOs more financially independent.
Conclusion
Stop-work orders can cause serious economic problems, affecting jobs, finances and social services. To survive, NPOs need flexible funding, risk management plans and diverse income sources. New financial models like social impact bonds and decentralised finance offer hope for the future.
Most importantly, governments, DFIs, businesses and NPOs must work together to keep crucial services running, even during funding crises. A united effort is key to making sure NPOs remain strong and continue their important work in Namibia and beyond.
*Lovisa Ndaendelao Shifidi is an economist and development finance analyst.
Disclaimer: The views expressed in this article are my own
On 17 January 2025, the US Agency for International Development (USAID) issued a stop-work order for several aid programmes in Namibia. This stopped key healthcare and education services and caused over 700 job losses. The problem is not just in Namibia – USAID funding freezes have affected nearly 400 contracts worldwide, leading to job cuts and suspensions of important development projects.
Looking at these disruptions through the lens of economics and development finance shows the severe consequences for NPOs and the economy as a whole.
Economic impact of stop-work orders
1. More unemployment and economic decline
When NPOs stop working, people lose jobs. Many NPOs provide employment in developing countries. If they close, workers lose their income, which reduces household spending and slows down economic growth. Research by Amunkete (2020) shows that job losses in the non-profit sector create economic instability.
2. Financial struggles for NPOs
Many NPOs rely on continuous funding from donors. If funding stops, they struggle to survive. Some contracts require ongoing services, so any pause may lead to cancelled agreements, pushing NPOs into financial crisis. Studies (Smith & Cooper, 2021) show that depending on one funding source is risky, especially in places where alternative funding is hard to find.
3. Fewer social services and development challenges
NPOs provide crucial services in healthcare, education and poverty reduction. A stop-work order means fewer services for people who need them most. This impacts literacy rates, maternal health and food security, setting back social progress.
Solutions for NPO resilience
To survive these challenges, NPOs need strong financial strategies. Development finance institutions (DFIs) and investors can help by providing alternative funding methods.
1. Diversifying income sources
NPOs should not rely on a single donor. They can mix grants, low-interest loans and investments to spread financial risk. This approach, called blended finance, strengthens financial stability.
2. Partnering with businesses
NPOs can work with private companies through Corporate Social Responsibility (CSR) initiatives. Countries like the UK and Canada have successfully used this model to sustain non-profits (Kumar & Patel, 2020).
3. Government support and policies
Governments can provide tax relief, emergency funds and policies that support NPOs. In wealthier countries, social safety nets help protect jobs during economic shocks. Namibia and other developing nations could adapt similar policies.
Innovative ways to ensure financial stability
Apart from traditional funding, NPOs can try new economic models:
1. Social Impact Bonds (SIBs)
With SIBs, investors fund social projects and get returns if the project meets set goals. Countries like Australia and Germany use SIBs to keep healthcare and education running.
2. Crowdfunding and decentralised finance (DeFi)
Digital platforms allow direct fundraising from donors worldwide. This reduces reliance on big institutional grants and makes NPOs more financially independent.
Conclusion
Stop-work orders can cause serious economic problems, affecting jobs, finances and social services. To survive, NPOs need flexible funding, risk management plans and diverse income sources. New financial models like social impact bonds and decentralised finance offer hope for the future.
Most importantly, governments, DFIs, businesses and NPOs must work together to keep crucial services running, even during funding crises. A united effort is key to making sure NPOs remain strong and continue their important work in Namibia and beyond.
*Lovisa Ndaendelao Shifidi is an economist and development finance analyst.
Disclaimer: The views expressed in this article are my own
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