When talking about organizations working in the field of development, many terms get thrown around. Many people use the words NGO, non-profit, charity and social enterprise almost interchangeably as if they all meant the same thing. But do they? Of course not. In this article, we will point out the differences of all these four terms to make sure you use them correctly in the future.
An NGO is a Non-Governmental-Organization. That basically means that the organization works independently of the government. Many times, NGOs work and advocate for people and try to bridge a gap between these groups and the government itself.
A non-profit is an entity that is not making any money with its endeavors but benefiting the people it works with. Any money that the non-profit makes needs to be invested within the organization again, i.e. for infrastructure or capacity building. The founders of a non-profit cannot benefit directly financially from it.
A charity is an organization that is strictly working for a group of beneficiaries and in most countries enjoys certain tax benefits. When a charity does not adhere to the rules (i.e. by making a profit and not declaring it accordingly), they can lose the status of charity quickly. For individual donors, the status of charity is important because only then will they get a tax exemption in case of a donation.
A social enterprise is an organization that tries to further the development of a community by using commercial tactics. They do not rely on outside donations for their cause but let their product “do the work”.
So what kind of organization are you running? Many times, an NGO that is correctly registered is also a charity and receives the connected tax benefits. A non-profit and a social enterprise are not necessarily the same though. When talking about your organization, make sure that you use the right terms that really apply to you.
Eva is based in Germany and has worked for nearly a decade with NGOs on the grassroots level in Nepal in the field of capacity development and promotion of sustainable agricultural practices. Before that, she worked in South America and Europe with different organizations. She holds a Ph.D. in geography and her field of research was sustainability and inclusion in development projects.
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This must be from a European perspective. This is not the same in the US.
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