Donors, here's how local NGOs want you to fund

Six years ago at the World Humanitarian Summit in Istanbul, some of the world’s largest humanitarian funders pledged to provide 25% of funding to locally led organizations — a goal that was recently echoed by Samantha Power, the head of the U.S. Agency for International Development. But USAID and signatories to this “Grand Bargain” have a long way to go. A 2020 target under the Grand Bargain was missed, and USAID funding for locally led organizations actually went down in the previous fiscal year. Leaders of African NGOs are skeptical. “We face serious challenges with fundraising and convincing funders that we’re able to do the work and deliver,” said Dixon Chibanda, director of Friendship Bench, a mental health-focused NGO based in Zimbabwe, which was backed earlier this year by philanthropist MacKenzie Scott. “We’re not getting the kind of funding that will help us grow to scale in a big way. There is some good funding, but it’s not been sufficient.” A report published in March by Humentum described the current funding environment for local NGOs as a “starvation cycle,” where restrictive funding practices mean local organizations cannot build capacity to apply for bigger grants. So what needs to change? How can donors fund in a way that supports — rather than strangles — locally led organizations? Funding at the right scale Funding for locally led organizations needs to be at the right scale to be effective. At the moment, many grants are either too large or too small. Atti Worku, co-CEO of the African Visionary Fund, a grant-giver set up to offer effective funding to locally led African nonprofits, says there is a “missing middle” problem. At present, large international donors fund at an immense scale. USAID, for example, recently tendered a $4.1 billion contract — and even its smallest grants and contracts are seen as prohibitively large by local organizations. That partly explains why, when grant funding is awarded in-country, it is often won by very large NGOs and companies that are more likely to be led by expatriates than locals or which may be connected to international organizations. Other funding goes to parastatal organizations. Meanwhile, funding aimed at local organizations is very small scale. Chibanda said that to keep his organization going, he has had to find many small grants, all of which have taken significant leadership time to find, bid for, and report on. The sweet spot, Worku said, is often in the hundreds of thousands. “The average budget size in our portfolio is $500,000 a year,” she said. “Most don’t break $1 million.” She said that direct funding to local organizations is important because while more grants do make their way to locally led organizations via international NGOs, those organizations often retain much of the funding. “This is a pervasive issue,” Chibanda said. “I’ve often collaborated with northern institutions where they take a huge chunk as overhead.” Unrestricted funding When local organizations receive money from funders, it is usually restricted to a particular project, rather than money that can be used as the organization wants. “If you know what to do better than me, come over here and do it yourself. … People say ‘we want you to do it, but we are going to tell you how it will be done.’ No thank you.” --— Linda Kamau, managing director, AkiraChix Restrictions can exist for good reasons — to ensure the money reaches a particular group of individuals, for example, or to prevent waste and fraud. But the Humentum report found that restricted funds frequently did not cover the whole cost of the project, particularly overhead costs. This may force NGOs to dip into unrestricted funds to subsidize donors, or it may mean they simply do not carry out essential work such as safeguarding because they cannot afford to. Dissatisfaction with restricted funding is not limited to locally led organizations. Nonprofits in the United Kingdom and the United States identify many of the same issues. But the problem is worse for NGOs based in low- and middle-income countries. In the U.S. and Europe, many development organizations fundraise heavily from the public, whose giving is usually unrestricted and can be used to subsidize institutional donors. This option is not as readily available in the global south. Reliable and flexible funding Hilary Pennington, vice president for program at the Ford Foundation, emphasized the importance of long-term funding — an idea central to the foundation’s billion-dollar BUILD fund, which launched a second round last year. “With the BUILD program we’re making multiyear commitments, and those commitments are general support,” Pennington said. “We’re saying, ‘Use this for the work you do.’ We choose organizations that are aligned with our strategy. We see them as key partners.” Linda Kamau, managing director of AkiraChix, a Kenyan NGO that aims to increase the number of skilled women in technology, said that as well as being long term, good funding must be flexible. Funders too frequently ask for a plan at the start of the program, and expect NGOs to deliver exactly what they promise. But this removes the ability to adapt to unexpected obstacles or to pursue new opportunities as they arise. “We’re in a fast moving environment. … If there is no flexibility you can’t innovate,” she said. “We will look back and say ‘We achieved nothing because we were constrained by our budget.’” Worse, she says, funders might not even ask for a plan, instead instructing locally led organizations how to deliver. “If you know what to do better than me, come over here and do it yourself,” she said. “People say ‘we want you to do it, but we are going to tell you how it will be done.’ No thank you.” Another bugbear is funding for capacity building, which is seen as necessary but poorly directed. Too often, Worku said, funders insist that local leaders sit through capacity building training as a condition of receiving money, but no one asks what kind of capacity needs to be built. “There’s an imperative for funders to learn the language of African visionaries, rather than African visionaries having to learn the language of funders.” --— Atti Worku, co-CEO, African Visionary Fund The result, she said, is that CEOs have to take valuable time to listen to expensive training that they don’t need. Meanwhile, actual skills gaps go unaddressed. For example, Vinit Rishi, the director of administration at the Oak Foundation, which helped to fund the Humentum research, said one finding was that many “grantee organizations don’t have a methodology and don’t have the skills to measure the estimated costs [of a project]” and may also feel unable to ask for overhead costs to be covered. As a result, they may not be asking for enough money. Funders need to make sure they work with them on those issues. Better processes Application processes are seen as another major barrier for local NGOs. Kamau said that most application processes are time-consuming and difficult, and that bidding for USAID funds in particular can require a whole team of specialists. “The process of bidding is very bureaucratic,” she said. “I spend a lot of my time managing a grant. If you spend all your time making USAID happy, that’s not right. The people you should be making happy are the people on the program.” AVF has spent a lot of time making its application processes streamlined, said Katie Bunten-Wamaru, the fund’s other co-CEO. For the most part, applications are solicited, rather than being open for all. “We don’t ask the people we fund to supply anything that they don’t already have,” she said. “We read the existing financial statements and reports. They are already producing so much information that we don’t need anything they haven’t already created.” The same goes for reporting requirements, which use up a lot of local NGOs’ time. “We have 10 different funders,” Chibanda said. “All of them want a report quarterly. That takes a lot of my time — just reporting to everyone who gives me money. It’s a Catch-22.” With many philanthropic funders, local NGOs struggle to gain access. “We’re based on the African continent. The spaces we can get into are more limited,” Kamau said. “Look at the Skoll World Forum, for example. That’s a prestigious conference. If you’re in that space you can pitch yourself and your organization and get really good leads. But it costs an arm and a leg.” Culture Finally, while most of the changes identified are structural, NGOs and funders both said that those changes need to be underpinned by cultural change. Part of the problem, Chibanda said, is that funders still suffer from institutional racism. “People have stereotypical images of what happens when you send a whole lot of money to Africa, and that mindset is still very strong in northern funding institutions. … Race does play a strong part, and there are historical legacies,” he said. Pennington spoke about “trust-based philanthropy,” which involves donors relying more on the expertise of local nonprofit leaders. Meanwhile, Worku said funders need to develop the ability to scrutinize themselves. “Funders don’t have the diversity and the ability to look into their own processes and see where the gaps and the biases are,” she said. “That kind of introspection and ability to look within is difficult to do. “We think it’s important for funders to challenge [themselves] on what they think good work looks like. There’s an imperative for funders to learn the language of African visionaries, rather than African visionaries having to learn the language of funders.”