Lately there has been an explosion in the development blogosphere and in the media covering international development around the question of directly funding community organisations in developing countries. Traditionally, most development funding and humanitarian aid has gone through “intermediaries,” usually large international NGOs, that then work with small local organisations to implement programs. However, there are reasons to believe that this approach is not always optimal.
Back in September, Chris Blattman published a provocative blog post entitled, “Is this the most effective development program in history”? He describes a 2011 program in which the Nigerian government simply handed out $60 million to 1200 entrepreneurs. As Blattman notes, three years later there are hundreds of new companies employing hundreds of Nigerians. The program was independently evaluated in a rigorous trial that demonstrated its efficacy in creating new jobs and raising the economic prospects of at least a few hundred people. Blattman wonders whether we have all been wasting our time giving money away to the “top echelons” of government rather than funneling it to the middle and the bottom. Of course, this is a somewhat extreme position; the answer to our development woes probably lies somewhere between funneling all the money to the top and funneling all of it to the bottom. Nevertheless, the question we need to ask is whether the consistent failure to provide money directly to the middle and the bottom has worked to everyone’s detriment.
Blattman’s article naturally leads to another question: are funders too focused on giving money to large NGOs? Should they be thinking more locally? In a Guardian article, Jennifer Lentfer eloquently lays out the reasons why the answer to that second question is a resounding “yes.” Three of her central arguments are as follows: community empowerment is central to successful development; larger organisations often have to allocate a lot of grant money to their own operations, compromising the efficiency of grant-making; and local organisations offer more sustainable solutions because they have “staying power” in the communities they serve. Much of what Lentfer argues is absolutely logical, but it still seems unclear whether local grantees actually achieve better results than large organisations. The answer to that question can only be revealed through open sharing of outcomes data by all organisations involved in international development work.
Big funders often give a wide variety of reasons as to why they do not fund Civil Society Organisations (CSOs) directly, including strict anti-terror and anti-money laundering rules and lack of administrative capacity to give smaller grants. However, there seem to be two main issues that create significant barriers for large international donors to give money directly to CSOs. Firstly, many CSOs are so small that their international presence is negligible or non-existent. Thus, international donors often have no way of finding CSOs. Secondly, even if donors do find relevant CSOs, they have very little means to evaluate them. They cannot expect the CSOs to put together a standard grant application for a variety of reasons, including limited capacity, limited funds, and potential language barriers. At the same time, there is no standard database that routinely collects information about outcomes of different development efforts. In these cases, it is virtually impossible for large grant-makers to evaluate whether they would be spending their money wisely, and it is not reasonable to expect them to take a gamble.
I completely agree that the international development funding landscape needs a makeover, but I do not think it is as simple as convincing donors that giving to CSOs in general makes logical sense. We will need a much more robust system that has the capacity to track the progress and performance of CSOs over time and that puts them on the map so donors know how to find them in the first place. Building this kind of system will take some time and will require a major mindset shift for many people working in international development. Yet, I believe that it absolutely must be done to ensure that development dollars are truly having an impact.
Featured image shows a $100 money roll. Photo from Flickr.com.
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