15 February 2011 | Adam Leach
Charities are making major savings by purchasing foreign currencies more effectively.
A report, co-authored by Stamp Out Poverty and the Charity Finance Directors' Group, found NGOs could save millions every year.
The study featured case studies from the British Council, Water Aid and Build Africa. In the case of Oxfam, it said that by handling all the transactions in the UK, the charity could make efficiency savings of 5 per cent per transaction – equivalent to £1.5 million a year. Previously, it distributed funds to its foreign branches by sending pounds sterling, US dollars or euros to be exchanged into local currency.
Oxfam is already trialling a scheme that enables it to make savings from transactions by centralising currency purchasing in the UK.
Paul Clough, head of international finance for Oxfam, said its requirements differed from the private sector because it tended to work in countries with “more complex issues around foreign exchange procurement”. In other respects, he said, the way it approached the issue and the support it got from banks and currency providers is similar to other organisations.
Build Africa, a smaller charity which helps educate young people in Uganda and Kenya, changed how it bought currency when it realised it was spending more on transactions than concrete to build schools.
As a result of better information from specialist currency traders, the charity, which has an annual income of £2.5 million, has saved up to 5 per cent of its total spend. This amounts to £140,000 a year.
Build Africa’s director of resources, Adrian Stockman, said that while to some currency trading is a ‘mysterious art’, from a procurement angle it’s just about following basic rules: “Talk to a number of suppliers, compare prices and develop relationships.”
Nana Boakye-Adjei, a researcher for Stamp Out Poverty, said: “Inviting companies to tender allows charities to get access to vital knowledge on these issues.”
Sir Stuart Etherington, chief executive of the National Council of Voluntary Organisations, said: “There are clear savings to be made in seeking the most attractive rates when purchasing currencies and improving procurement practices.”
He noted that “while this will be of most relevance to charities with significant overseas activities”, all charities should take a proactive approach to managing resources.