The financial determinants of growth in Maltese voluntary organisations

Abstract

PURPOSE: Since there are conflicting arguments within the literature, the first objective of this dissertation is to establish the optimal measures of financial growth available to Maltese voluntary organisations. The second objective is to assess if and how financial drivers of growth are being applied across the voluntary sector. This needs to be studied to gain a deeper insight into the financial structure of voluntary organisations. The final aim is to gauge the extent of the effect that these growth drivers have on organisation growth, thereby quantifying the magnitude and the effect of each determinant reliably. DESIGN: Twelve semi-structured interviews with executive officers of Category 3 voluntary organisations were held. In parallel, a regression analysis was computed on the financial statements of a sample of 141 voluntary organisations on a span of three years. The dependent variable was revenue, as a proxy for growth, while the regression predictors were the determinants of growth. FINDINGS: The most widely used indicator for growth is the number of people assisted. Furthermore, voluntary organisations in Malta tend to concentrate their revenue on one source, generally keep a significant amount of equity and their expenses are proportional to income. Finally, revenue diversification is the best determinant to organisational growth, followed by commercialisation and project expenditure. Equity balance has a neutral effect on growth, while administrative expenditure and being donative is counter productive to organisational growth. CONCLUSIONS: This study concludes that voluntary organisations in Malta need to diversify their revenue sources more, which can be better achieved if they venture into commercialisation. Administrative expenses should be curbed, and unnecessary equity balance would be better utilised if spent on capital projects. VALUE: Hopefully, this study contributes to the amelioration of the Maltese voluntary sector’s aggregate financial structure. Financial measures proposed in this study are aimed to enhance growth of these organisations.