WaterAid has generated a 50 per cent increase in income, which is expected to make 2003 its best-ever fundraising year.
The failure of a major grant to come through prompted the charity to review its fundraising.
Following the review, income for 2003 is predicted to reach £15.8 million, compared with £10.7 million in 2002.
"We were expecting statutory funding from the EU, but this fell through," said Andrew Cook, head of marketing at WaterAid. "We were very short of funds for a few months, but our supporters really rallied around and this has helped us to be so successful this year."
The charity has dramatically increased its income from media appeals by building relationships with the press. It raised £1.5 million through appeals with the BBC's Blue Peter and the newspaper The Guardian.
The charity, which campaigns for safe water, sanitation and hygiene education for the world's poorest people, realised that traditional sources of funding are not always reliable in difficult economic times.
"International foundations and grant givers which invest in the stock market have been slowing up," said Cook. "It is difficult to say what the effect of the war in Iraq will be, but we have been successful so far because we have a broad fundraising portfolio."
Since its funding crisis, WaterAid has improved its fundraising methods and investigated new avenues. The fundraising and communication teams have been merged, and in the past year four extra staff have been taken on.
"The merger has allowed us to take a more integrated approach. We have a mature and motivated team who really support the appeals," said Cook.
Maintaining a strong supporter base has provided WaterAid with stability, said Cook. "Historically we have a unique way of fundraising: putting inserts into water bills. We spent a lot of time improving this, and have started to use face-to-face fundraising."