Credit Crunch exchange rate hammers even the best charities

Credit Crisis hammers UK overseas aid charity.

In some ways SOS Children is one of the best placed charities to weather an economic downturn:

• Aid charities are "counter cyclical": when times are tough people are more inclined to ask "what must it be like to have absolutely nothing" and help those who really need it.
• When people are watching every penny they are more careful with their donations and are much more likely to think about what charities do with it, which gives helps "actions not words" charities like SOS Children. Income in pounds is still growing
• Low cost internet based charities anyway do not suffer from the high costs of Direct Mailing, where high costs may not be recovered from donations received (gearing).

"In times of calamity people tend to think of people even worse off" remarks CEO Andrew Cates "and donations and sponsorships this year look set in GBP terms to be 25% higher than last year. Our UK costs are lower too but the reason why we are suffering so much is driven by the exchange rate and rising food costs. The pound has lost nearly 40% of its buying power in most places and the global food crisis has pushed food prices up higher still (see as an example previous reports from Kenya, Egypt, Philippines, Kosovo, Haiti, & Bangladesh). Although people are already being a bit more generous our ability to do what matters is under threat. After the food crisis had bitten, in Zambia this August rollermeal (the staple) was £5.76 for a 25 kg bag. In pounds we are now budgeting at £9.14 for the same 25kg back next month. 20p a pound for dried maize flour may not seem much to us but when local family incomes of £1 a day are common it is a real issue.

New Aids Orphan programs on hold

The most worrying effect of the credit crisis is that we are having to delay the start date of some of our Aids Orphan programs in Africa. These programs have a proven track record since 2004 of helping to support Aids Orphans in situ in their old family home using volunteers from the local community. They have been a life line to more than 50,000 children already who will otherwise end up on the streets or muncipal dumps just to fill their stomachs and the prospect of delaying this kind of program brings a lump to your throat. At the same time we have to be prudent and responsible and keep the commitment to the programs we have started, no one will benefit if we are too ambitious in our planning.

The exchange rate movement has been very considerable though. Fortunately unlike some charities which come and go as the situation in countries worsens or improves SOS Children stays in for the long term and raises funds locally when countries improve. Countries like South Africa, India and Pakistan raise more than 80% of the funds the need from people who live around the programs, which reduces exchange rate vulnerability. On the other hand charities who work the other way around and spend a lot of their income on advertising in the UK perversely also have less exchange rate problems.

Child Sponsorship still the best way to help

For people who are considering helping we would still suggest sponsoring children as the best way to help. Two thirds of our income is from other donations from all sorts of people and companies and we are hugely grateful for any form of support but the third of our income from child sponsorship can be used to pay the ongoing running costs in a predictable sustained manner and frees up other funds to start more Aids projects. However any kind of donation would be very welcome indeed.