Large charities and NGOs use specialist fundraising software to keep information on large numbers of individual donors. However, if you are a small or medium-size NGO with limited numbers of supporters and contacts, you can still manage these using basic Excel spreadsheets.
In the UK, there is now a legal requirement to ask donors if they are happy for their contact details to be kept and unless they agree, you are not allowed to contact them in any form such as letter, email, or telephone. You are also not allowed to pass on their contact details to any other third party.
Even if this is not the same in the country where your NGO operates, it is good practice to do this because when somebody gives a donation to your cause, they do not always want to have further contact. For those who are happy to be contacted, you can then keep their details and engage with them regularly.
However, the reason it is important to have a database for fundraising purposes is because it enables you to keep in touch with those people to inform them about your projects and also how their donation has been spent. The more you engage with donors and keep them informed of your work and the outcomes of how their donation has changed lives, the more likely will it be for them to continue to support you.
The large agencies use more sophisticated software to filter their fundraising with different messages to different donors and this is why they might spend more money on a specialist system. For example, to save time, they may decide to target a campaign at new supporters who have given in the past year. Rather than go through a huge database to find those donors, some fundraising software will enable you to do this very quickly.
It is still possible to keep detailed records in the form of a database without spending a huge amount, but the important thing is to make sure that you keep it up to date as things change.