Inter-American Foundation's model offers lessons for localization

International donors that are committed to putting local organizations in control of their own communities’ development may find the key to that elusive goal in the nimble model of the Inter-American Foundation, which has been making small-dollar grants to local groups in Latin America and the Caribbean for 50 years. Many grantees consider IAF — a U.S. foreign assistance agency with $121.1 million invested in fiscal year 2021 — the gold standard for development lending because it allows community groups to submit their own proposals, receive manageable dollar amounts, and build organizational capacity to ensure their sustainability. Larger bilateral donors can award contracts for hundreds of millions — or even billions — of dollars. But with an average grant amount of just $310,000, according to Daniel Friedman, managing director for external and government affairs at IAF, and sometimes as little as just $25,000, IAF can deliver the type of support that bigger donors, such as the U.S. Agency for International Development — which has an annual budget exceeding $20 billion — simply cannot. IAF program managers often come from the countries where they work, develop personal relationships with grantees, and provide technical assistance on topics such as monitoring and evaluation. IAF’s model could offer lessons for USAID as the agency — which mainly funds local organizations as subcontractors under larger awards to international NGOs or for-profits — renews its pledges to localize development efforts and provide community groups with more say in program design. The Association for the Sustainable Development of Youth, a Guatemalan organization known by the Spanish acronym ADESJU, has received multiple grants from IAF for its programs supporting economic opportunity and civic engagement for Indigenous young people in the country’s western highlands. “The Inter-American Foundation allows funds to go directly to the beneficiaries,” said ADESJU Director Daniel Mérida. “The difference with IAF is the funds are more accessible. They bet on the people that work here who are supporting and undertaking these initiatives to meet the actual needs of the community. They respect us a lot. You can propose what you want to do, but they don’t make decisions for us. This is a very important part.” Mérida said contexts across his country vary greatly, such that local-level knowledge is required to ensure projects are meeting the needs of each community. IAF’s model allows organizations like his to propose what will be most effective in each area, he said. IAF, which was created by Congress in 1969, typically funds projects in four-year cycles. Unlike many other donors, IAF doesn’t issue requests for proposals around specific projects or to meet defined foreign policy objectives. Instead, the organization has an open call for proposals year-round, and potential grantees can submit their ideas without having to conform to predetermined criteria. “Projects are community-designed, community-owned, and community-led. It’s this idea that communities know best what their challenges are, they know best what the solutions to those problems are, and they are usually the best suited to actually then put those ideas into motion and execute them,” Friedman told Devex. The agency’s grant-making is highly competitive: Friedman said IAF funds fewer than 10% of proposals. Projects are funded in six areas: civic engagement, leadership, and education; enterprise development and job skills; human rights and inclusion; natural resource management; alternatives to migration; and sustainable agriculture and food security. Advantages of a community-led model In fiscal 2020, Congress appropriated $37.5 million for IAF. It also gets money from private donations and transfers from other U.S. government agencies, such as USAID. Organizations it funds must be community-based, utilize a formal structure that includes a board of directors, and cannot be a government entity. Project ideas are evaluated by IAF representatives, who work with grantees to fine-tune selected proposals. The final product typically doesn’t stray substantively from what an organization originally submitted, Friedman said. That differs from the typical model in which donors design projects themselves, often with little say from the communities where projects are implemented. In each country, IAF has project managers who speak the local language — including Indigenous ones — and routinely meet with grantees to answer questions and check on progress. With their larger portfolios, USAID and similar donors don’t have the staff capacity to visit projects as frequently or provide such personalized support. Mérida said it’s extremely useful to have project staffers who speak Spanish and understand the local context. “The difference with IAF is the funds are more accessible. They bet on the people that work here who are …undertaking these initiatives to meet the actual needs of the community.” --— Daniel Mérida, director, ADESJU “It’s a strength that the majority of the people with the foundation are from the countries [where they work.] It’s a great advantage,” Mérida said. “We’ve seen some USAID projects with a lot of money — for example, $600,000 [or] $700,000 over five years — but in the end, they’re unsustainable because they leave and they don’t leave structures in place” to continue the work, he added. In some cases, USAID has provided funding to IAF for joint projects, such as one to build resilience against disasters in the Caribbean. Former IAF President Paloma Adams-Allen joined USAID as a deputy administrator in October. USAID did not accommodate an interview request from Devex to discuss its collaboration with IAF by press time. Ensuring local buy-in A central aspect of IAF’s model is a requirement that grantees provide their own contributions to a project, whether they be financial or in-kind, such as materials donated by a community. For example, ADESJU received an extension on a project in 2020 that included additional IAF funding but that also required it to mobilize an additional $66,649 of its own resources. Friedman said that average IAF projects mobilize approximately $1.30 from communities for every $1 the agency provides from U.S. taxpayers. This helps ensure that the organizations it supports have the financial resources to continue a project beyond the IAF funding cycle. “[It’s] finding that sweet spot between ensuring appropriate accountability and responsibility, and also working to develop capacity and not be overly burdensome administratively,” Friedman said, adding that the focus of all IAF projects is sustainability. This can mean different things depending on the organization, he said. Sustainability for some could mean “preparing them to receive potentially larger grants from … another U.S. foreign assistance agency or from a different source,” or it may mean “enabling them to continue their work without any type of foreign assistance or support.” Eighty-two percent of IAF grantees have never worked with a U.S. government funder before. Friedman said organizations often hear about IAF organically, although it uses social media and in-country events to reach new audiences. Organizations can receive support from IAF through multiple project cycles, but new proposals must build on previous growth and ensure continued sustainability. One cacao cooperative in Bolivia originally received support as it was formally becoming a producer organization, Friedman said, and then again to begin producing chocolate. A third grant provided support to expand into international exports. “You can actually now buy their product at Whole Foods,” Friedman said. Positive reviews The Center for Effective Philanthropy, which conducts donor perception surveys on behalf of community foundations, has ranked IAF in the top 5% of funders it analyzed. According to IAF, a 2020 survey garnered responses from 86% of the agency’s grantees, and it is CEP’s highest-rated group in terms of transparency and openness to ideas. IAF has also been the top-ranked funder in CEP’s dataset for the past three evaluations of grantee selection processes, and grantees gave high marks to its approach to monitoring. Raquel Gomes, managing director at IAF’s Office of Learning and Impact, said the agency wanted to know why the surveyed grantees spoke so highly of its evaluation framework. “Communities know best what their challenges are, they know best what the solutions to those problems are, and they are usually the best suited to … execute them.” --— Daniel Friedman, managing director for external and government affairs, IAF “What we realized is that grantees really appreciate two things: our auditing, and our monitoring and evaluation. That’s kind of a paradox; generally grantees don’t like either of those,” said Gomes, who previously worked at USAID. “It's the learning associated with our auditing, the learning associated with our monitoring and evaluation. … The auditors teach them what it means to have financial management systems in place.” Angela Rodrigues, project coordinator at Colombian organization Corporación Taller de Promoción Popular y Desarrollo Alternativo, or Prodesal, said the administrative requirements make working directly with USAID too difficult for organizations the size of hers. Instead, they would work as subcontractors on projects typically run by large international NGOs. But working with IAF has allowed Prodesal to improve its internal capacity around reporting requirements, she said. “It lets us strengthen our work and identify [a project’s] achievements,” Rodrigues said. “Their monitoring is focused on learning. … It’s not common to find this in [international] cooperation.” IAF often sees its grantees go on to receive money from other funders, Friedman said. “That is one form of success and sustainability that we can see. It’s certainly not the exclusive one,” Friedman said. “If a project has gone really well, it’s not just the results that have been achieved but it’s the trajectory that the organization is on — that with the resources that they are generating, with the model that they have proven, with the work that they have undertaken, that they are able to continue doing that work well beyond the life of IAF funding.”