Many social innovation funders aspire to be "catalytic" in their grantmaking, supporting social enterprises to unlock future revenue streams that will allow them to be financially sustainable at scale, without an ongoing dependence on philanthropy. In a challenging fundraising environment, the imperative for nonprofits to diversify their revenues has become even more urgent than ever. However, the dominant narratives about sustainable financing at scale can leave nonprofits questioning many of their foundational decisions.
Physicians for Human Rights (PHR) is a global nonprofit organization active in Kenya and the DRC, among other countries. It built a simple but powerful software tool, MediCapt, that helps frontline health workers document cases of sexual violence with rigor, ensuring survivors have stronger evidence in court. The theory of change was clear—better documentation would increase the likelihood of prosecution, deter future crimes, and bring survivors closer to justice.
The solution has been widely lauded and has proven its ability to improve data quality. But when PHR sought to take it to scale, the business model problem emerged with brutal clarity. Expecting survivors to pay was ethically indefensible. Health workers and clinics were overstretched and unwilling to take on new costs. Governments, juggling countless priorities, often treated gender-based violence as too sensitive or politically fraught—particularly in fragile and conflict settings. The solution fell between two ministries, health and justice, neither eager nor equipped to take ownership. And yet donors pressed: find a way to “wean off philanthropy” and secure a new payer at scale.
While PHR is working hard to navigate these challenges, their situation is not unique. Another nonprofit developed an electronic medical record (EMR) for low-income primary care settings. Their donors pushed them to establish an earned revenue stream. They knew that health facilities and health workers could not pay, so their idea was to scale by partnering with other NGOs through sub-contracts. Too soon, it became all too clear that other NGOs rarely have predictable money to pay either. Worse, governments—who held the keys to long-term adoption—demanded endless customization and implementation support, consuming the nonprofit’s bandwidth without offering funding in return. Saying no risked alienating ministries and abandoning health workers already using the tool. Saying yes meant mission drift, exhausted staff, and unfunded obligations.
A third group experimented with “co-funding” alongside government: donors covered software and training, while ministries promised to fund salaries and equipment. On paper, this looked like “transitioning to government ownership,” the holy grail many donors prize. In reality, without full control over implementation (and in particular the ability to replace under-performing staff), the nonprofit’s carefully honed model broke down. Quality declined and impact data faltered. Ironically, the very donors who encouraged government adoption began to question continued funding because outcomes were slipping.
These are not failures of vision or execution. They are symptoms of a structural bind that mission-first organizations face. They are caught in what might be called the nonprofit scaling trap: told that reliance on grants is unsustainable over the long term, urged to find a revenue model or encouraged to hand over ownership to governments—while the very nature of their work makes those pathways deeply fraught.
Over the past decade, landmark articles and frameworks within the social innovation literature have explored the topic of nonprofit scaling. Go Big or Go… Oh, Just Go Big taught us to ask who will ultimately pay. Why Proven Solutions Struggle to Scale Up explored gaps in financing, talent and ecosystem coordination. What’s Your Endgame? posited different pathways to ‘scale’ through replication by others, government adoption or market mechanisms. The underlying ideas remain sound: scale matters, and philanthropy alone cannot sustain most interventions. But as I’ve worked with nonprofits across Africa, particularly in health and adjacent sectors, I’ve seen the disconnect between this theory and their lived reality.
Today’s nonprofits operate in a more challenging environment than ever before. Reductions in foreign aid mean that organizations are competing for the same pool of philanthropic funds, while governments in low-resource settings have even less fiscal space than usual. Nonprofits are scrambling to diversify revenue away from philanthropy, but the options are limited to three paths: i) earned revenues through a market-linked business model; ii) government adoption or contracts; or iii) sub-contracts from other nonprofits.
Each of these pathways is constrained—by low ability to pay, fiscal crises, and the fragility of peer organizations—leaving nonprofits with few viable alternatives.
Seven recurring barriers stand out:
Together, these barriers lock nonprofits into a cycle: pressured to “transition” from catalytic grant funding towards long-term government financing or earned revenue, but without viable options to do so.
What makes this especially pernicious is the varied messaging from donors. On one hand, funders frequently ask nonprofits how they are planning for long-term sustainability. On the other, those same funders hold expectations that keep organizations dependent and fragile.
Take the push for government adoption or procurement. For funders, this is the ultimate proof of sustainability. Yet governments in many low- and middle-income countries face fiscal crises, arrears in supplier payments, and heavy donor dependency themselves. Procurement processes are opaque, timelines long, and payment cycles erratic. Ministries often demand co-creation and customization—reasonable from their perspective—but punishing for lean nonprofits with scarce staff, especially after they have spent years honing and proving their model to be responsive to their early innovation funders.
The result is a cruel irony: the very pathway touted as “the endgame” often drains capacity, dilutes quality, and jeopardizes impact. Non-profits get trapped instead in “perpetual fundraising,” which was explicitly flagged as the deadliest non-endgame. The theory makes sense, but in practice, the structural conditions for an endgame simply don’t exist for many non-profits.
Many nonprofits remain trapped between idealized pathways and practical constraints. They are asked to solve market failures, but told to act like businesses. They are asked to serve the most vulnerable, but told to become self-sustaining. They are asked to hand solutions to government, but without patient subsidy to bridge the political and fiscal realities of public systems.
If donors want NGOs to earn revenue, they must accept hard trade-offs between impact and commercial returns. To generate income, nonprofits will need to prioritize audiences with ability to pay—often not the most vulnerable. Only after establishing a revenue base might they create cross-subsidies to serve those who cannot pay. This shift can take years, require significant investment, and may involve a departure from the original mission. Pushing for revenue without acknowledging these realities risks setting nonprofits up for failure—or forcing them into compromises that erode their impact.
If we want proven solutions to scale, we must move beyond slogans about “sustainability” and reckon with the structural barriers nonprofits face. That means funders accepting that some public goods will always require subsidy. It means creating capital vehicles designed to invest in the growth of nonprofits, not just startups. It means questioning the requirement to place all intellectual property in the public domain and considering a conversation about access pricing instead.
Nonprofits exist because some needs are too urgent, too unprofitable, or too politically sensitive for markets and governments to meet. Yet in the rush to declare philanthropy unsustainable, we’ve forgotten why these organizations emerged in the first place. We act as if they are broken when they cannot scale through market mechanisms or government procurement—but this is precisely the gap they were created to fill. Something has to give: either we accept that certain solutions will always require subsidy, or we risk losing the very innovations designed for those who need them most.
Dr. Joanne Peter oversees Jhpiego’s Worldwide Innovation Support Hub (WISH), an accelerator program that harnesses Jhpiego’s know-how and networks to support local innovators to scale their solutions within public health systems. Since 2022 – in partnership with The Trinity Challenge, Grand Challenges Canada, and HealthTech Hub Africa - WISH has worked with over 100 innovators across Africa, Asia and Latin America as they tackle health challenges in global health security and antimicrobial resistance, maternal and newborn health, community health and primary health care, digital health, and more.
