Can philanthropy fill the aid gap? 5 reality checks

As bilateral aid budgets tighten, many in the development community are looking to private philanthropy as an alternative source of funding. But can foundations realistically step in to replace shrinking government aid? During a recent Devex Pro Funding briefing, Devex Editors David Ainsworth and Raquel Alcega examined the data behind philanthropic giving and what it actually means for organizations seeking funding. The discussion made one thing clear: Philanthropy is growing, but it cannot replace bilateral aid. And organizations hoping to tap into it need a very different business development strategy. Here are five key takeaways: 1. Philanthropic giving is up, but it remains a drop in the bucket The headline numbers from the newly released Top 10 Foundations Funding Development report show a sector on the rise. In 2023, the 32 largest private providers spent $12.5 billion on development, an 8% increase from the previous year, according to data from the Organisation for Economic Co-operation and Development. However, the reality check is that this funding covers a tiny fraction compared to the $200 billion or more that comes from official development assistance, or ODA. While foundations such as Wellcome more than doubled their development spending to $887.7 million in 2023, and the Gates Foundation remains the undisputed heavyweight at $5.47 billion that year, they cannot realistically bridge the multibillion-dollar gap left by a donor like USAID. 2. High concentration and low accessibility Philanthropic funding for development is growing faster than the world economy, but it remains a heavily concentrated "minority sport" driven by a handful of billionaires. The Gates Foundation single-handedly accounts for nearly 50% of giving among the top 10 foundations. This concentration of wealth extends to recipients. Top foundations tend to award massive grants to a very small, familiar club of organizations. Breaking into this network is notoriously difficult for new NGOs, as most large foundations, including Gates, Mastercard, and the Buffett foundations, do not accept unsolicited proposals or open calls, relying instead on closed networks and dedicated teams to find partners. Breaking in cold is rare. Partner pathways are more realistic, mapping existing grantees is essential, and long-term cultivation, not emergency proposals, is key. 3. The shift toward collaborative and trust-based giving Identifying and verifying effective local grantees is an expensive, high-friction process for foundations with small staffs. To bypass this, there is a distinct rise in collaborative, pooled funds. Donors, prominently including MacKenzie Scott, are channeling money into intermediary funds that delegate decision-making to frontline experts. This mirrors a broader push toward trust-based giving, where donors provide long-term, unrestricted core funding to organizations. Covering overhead costs has historically been a struggle, leaving many NGOs trapped in a "starvation cycle." While initiatives such as the Ford Foundation’s BUILD program — which is now over — have championed covering core costs, the practice is still far from universal, with some major donors including the European Union notoriously restricting overhead funding. 4. The elephant in the room: The 95% endowment A critical, yet underdiscussed, issue in development philanthropy is the management of foundation endowments. Typically, foundations disburse about 5% of their funds annually as grants, keeping the remaining 95% invested in the stock market. There is growing pressure on foundations to ensure these massive investments do not contradict their philanthropic missions. "If you're not focused on what your endowment is doing, then your endowment is probably doing a lot of harm," Ainsworth said, explaining that health or climate foundations might inadvertently enrich the very industries causing the problems their 5% grantmaking tries to solve. 5. Localization remains slow While the sector is discussing the localization agenda, progress on the ground is sluggish. The majority of the largest grants from the top 10 foundations still flow to organizations headquartered in the United States and Western Europe. Donors continue to rely on the comfort, familiarity, and geographic proximity of traditional power centers, maintaining a persistent "trust gap" between global north foundations and global south implementers. The business development takeaway Unlike bilateral donors, most large foundations do not rely on open calls or competitive tenders. Instead, they work through networks, trusted partners, and long-standing relationships. That means successful engagement often starts with mapping existing grantees, understanding a foundation’s strategy, and identifying entry points through partnerships or intermediaries. Alignment with a foundation’s priorities matters far more than opportunistic pitching. Organizations also need to think beyond grants, exploring roles in collaborative funds, technical assistance, or blended finance structures. In short, philanthropy is unlikely to replace shrinking bilateral aid. But for organizations willing to adapt their approach, it can become an important piece of a broader funding diversification strategy. Other useful resources mentioned in the briefing: - Devex report: Top grantees of the world’s leading philanthropies - WINGS Philanthropy Transformation Initiative - Devex report: Asia’s largest foundations — an insider guide to unlocking funding - Devex funding coverage Want more briefings like this? Let us know — and stay tuned for upcoming live conversations here.