ICOPA Seminar with Marc Jegers (Vrije Universiteit Brussel)

The funding ‘portfolio’ of non-profit organisations: crowding out/in interfering with diversifying risk.

Since its introduction in the non-profit finance literature by Kingma (NVSQ, 1993), financial portfolio ideas have become popular when studying non-profit organisations' funding choices. This popularity however is based on an erroneously assumed similarity between a financial portfolio approach and non-profit funding. Different arguments for this will be discussed, including the presence of crowding out/in effects between non-profit funding sources, to the literature of which, ironically in a way, Kingma also added fundamental insights (JPE, 1989).

A novel model of non-profit organisations' funding decisions integrating the following non-profit idiosyncrasies will be presented: non-profit performance, non-proportional returns of funding expenses, crowding effects.

It turns out that 'optimal' non-profit funding policies not always correspond to the ones traditional portfolio theory would advocate.

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