The 'grand bargain' could mean big changes to development funding

During the World Humanitarian Summit in Istanbul last week, donors announced the “grand bargain,” a series of reforms that will change the way emergency funding is done.

The bargain includes more than 51 commitments to make funding for emergency aid more efficient and effective. It is designed to have a fundamental impact on the way development funding is carried out to make it more efficient, transparent, and empowering to local stakeholders. The agreement also substantially changes the role of cash and donations in development aid.

Now that the summit has ended, with more than 30 major development and funding organizations signing the grand bargain, the question is: what next? How do we go about making these deep and fundamental changes across a vast and highly complex ecosystem of organizations, funders, and beneficiaries? How do we make sure that the grand bargain becomes more than a set of well-intentioned but ultimately empty promises? And, how do we make these changes without adding even more instability to an already unsteady situation?

One key topic of conversation during the summit revolved around the inequality in funding for humanitarian aid: in broad terms, most money goes to a few multinational key players while the local nonprofits taking on most of the risk by working on the front lines of conflict are often left grasping at straws. The grand bargain calls for not only more collaboration, data sharing, and resource sharing between these large-scale and micro-NGO’s, but also more direct support to these on-the-ground entities from funders.

There has been a long-time trend toward bucking the so-called top-down development strategies that result in culturally biased and oftentimes ineffective development programs. Grass-roots solutions that empower local communities and rely on existing social structures — rather than trying to replace them — are far more effective and sustainable. And while major aid organizations such as the United Nations and Save the Children have done a remarkable job pursuing such grass-roots solutions through partnerships and skills transfer to key local stakeholders, this is the first time we have seen a widespread, active resolution among funders to do the same. This could make all the difference.

We must, however, ask ourselves how this funding inequality emerged in the first place, so that we can be sure we don’t naturally fall back into it. Most grant-making organizations have a highly sophisticated application program requiring NGO’s to submit a well-developed theory of change, proof of concept, proof that they have solid leadership, and myriad other items all designed to prove to the funding agency that the NGO in question has the capacity for success. In many cases, this also requires a successful track record. And this means that many micro-NGO’s who are just getting on their feet actually never get that foot in the door.

A lot of work is being done to help connect social entrepreneurs to advisors, directors, and seed funding, but the simple fact remains that finding financial support all boils down to trust. Donors must trust in the organization, its mission, and its leadership. And when we’re talking about quickly moving billions of dollars in aid, that trust must be well-established. Organizations such as the Red Cross and Save the Children inspire that kind of trust through their longevity, brand recognition, and measured impact, which may be one reason why they are able to receive such vast amounts of funding every year.

The question, then, is how will funders and these small-scale, largely unpolished NGO’s build that trust in a short enough time period to immediately begin offering aid to those who need it? When working in conflict zones there is the added danger that funding will inadvertently go to the very organizations that have caused the refugee crisis in the first place. This scenario, while surely a small percentage of all cases, will most definitely leave a sour taste in funders’ mouths and might even result in less financial support overall.

How do we create a comprehensive screening process on a massive scale, and who will be in charge of carrying it out? And how do we do this all today?

One short-term solution may be to continue the current pattern of disbursing funds to these large-scale organizations, but ensuring that they are kept in a private fund specifically marked for disbursement to these micro NGO’s. These so-called big fish development organizations have expertise, a history of work, and connections with local populations and NGO’s that constitute a trust-based relationship. They have screening mechanisms in place. They have a history — or at the very least a narrative history — of supporting local nonprofits through skills transfer and leadership building.

The international community is reimagining the future of crisis and humanitarian response with a greater emphasis on increased coordination with local stakeholders and service delivery experts. It would be a mistake to immediately change the existing funding priorities and mechanisms already in existence, but changing the way funds are earmarked within the existing pattern might be an incremental step towards realigning the scales to build greater equitable partnerships between funders and local nonprofits.

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