Why the 'Grand Bargain' failed to deliver its promise of local funding

When it was created in 2016, the “Grand Bargain” — a unique platform of donors, United Nations agencies, international nongovernmental organizations and local groups — pledged by 2020 to give at least 25% of its signatories’ humanitarian funding to local and national stakeholders “as directly as possible.” They didn’t even get close. Only 3.4% of their aid that year was channeled directly to local and national stakeholders, according to independent observers. And the rate has only dropped since then. The Grand Bargain was renewed in 2021 and with that second iteration — the Grand Bargain 2.0 — having wrapped up in June, the rate of humanitarian funding given directly to local and national stakeholders dropped to 1.8% in 2022. A third attempt at making progress will begin next year, and once again there is talk of how to get closer to the target. But why has there been such failure to make progress so far? And are there any reasons to be optimistic about doing better in the future? Lack of progress Observers blame a mix of factors for the failure to reach the 25% target so far, including inconsistencies around what aid is counted and how it is measured, calcified donor structures that make it difficult to channel money to local and national stakeholders, and a lack of local awareness of the commitments made in high-level international meetings. “It really shows that there’s a disconnect between global policies and the actual funding that’s provided to local and national NGOs,” Anita Kattakuzhy, director of policy for the Network for Empowered Aid Response, told Devex. Known as NEAR, the network co-convened the Grand Bargain 2.0 caucus on funding for localization. “To not only have there be no progress, but to actually be a decline, there’s a contradiction and a disparity that really shows that donors are over reliant on international actors to meet localization commitments,” she added. Since its creation at the World Humanitarian Summit in Istanbul, when the five biggest donors and the six largest U.N. agencies initially came together to try to increase the efficiency of aid, the Grand Bargain has grown to have 66 signatories, but narrowed its approach, from 51 commitments across 10 separate workstreams, down to two priorities: quality funding and localization. “There has been a huge amount of disappointment and fatigue with the slow progress. But that the Grand Bargain remains on the table, that localization is at the top of the agenda, is a hopeful sign.” --— David Fisher, a manager at the International Federation of Red Cross and Red Crescent Societies As it gears up for its new three-year phase, dubbed the “Grand Bargain beyond 2023,” the 25% target remains a keystone commitment, even if there is little expectation the signatories will meet it. “The 25% commitment might be a bit aspirational and something we might not reach within the timeframe, but it guides the direction of travel, a direction toward which we should all be working,” said Clarissa Crippa, a senior policy adviser to the secretary general of the Norwegian Refugee Council, Jan Egeland, who served as the eminent person for the Grand Bargain 2.0. “The 25% is, in a way, the branding of the Grand Bargain,” Crippa went on. “It’s something that should be very easy to measure and quite self-evident to reach.” It turns out it has been neither. A failure to measure Seven years after the target was announced, there is still a lack of clarity around how to calculate the funding going to local and national stakeholders. An independent evaluation by the Overseas Development Institute’s Humanitarian Policy Group measured the percentage of funding going directly from signatories to local and national stakeholders as 1.8% in 2022, while an independent report from Development Initiatives put the percentage at 1.2%. Meanwhile indirect funding, from signatories via intermediaries such as the U.N. and INGOs, remains a particular blind spot. DI’s rate rose to 2.1% when researchers included the indirect funding they were able to track, but much of it cannot easily be identified. “There’s very, very little that’s publicly recorded,” Angus Urquhart, DI’s crisis and humanitarian lead, told Devex. “And transparency hasn’t shifted a lot.” Crippa said that if the money passing through intermediaries was accurately captured, the percentage of funding for local and national stakeholders could more than double reported totals — a considerable improvement, but still well short of 25%. Then there is the question of what actually counts as humanitarian funding. Thirteen of the 66 signatories self-reported that they reached the 25% commitment in 2022, but there are questions about whether what some are including — cash, in-kind contributions or projects where local partners are providing last-mile services — should actually be counted. “We have signatories that are saying they’ve really hit 25% and they’re far surpassing it, but then at the country level there’s not a significant change that’s being felt,” Kattakuzhy said. Solving the problems of how to count and what should count was the primary task of the caucus on localized funding that NEAR led. The caucuses were an innovation for the Grand Bargain 2.0, designed to pull together particularly engaged stakeholders to resolve political issues around specific topics. NEAR co-convened its caucus with Egeland and drew in key donors, including USAID and the Directorate General for European Civil Protection and Humanitarian Aid Operations, or DG ECHO, alongside a handful of INGOs, local networks and others. Ultimately the caucus reached an agreement that to count as local funding, money must be given directly to a local organization or pass through only one intermediary. They also reached consensus within the caucus that all funding to local and national stakeholders should be reported through one of the publicly available platforms — the U.N. Office for the Coordination of Humanitarian Affairs’ Financial Tracking System or the International Aid Transparency Initiative — although this requirement is not binding. A road map to growth In addition to addressing questions of measurement, the caucus also secured commitments from members to draft road maps to reach the 25% targets. This comes alongside a USAID commitment to send a quarter of its funding through local organizations and a DG ECHO guidance note this year on promoting equitable partnerships with local responders in humanitarian settings. The engagement of these major players is vital, said David Fisher, a manager at the International Federation of Red Cross and Red Crescent Societies who has been supporting the organization’s engagement with the Grand Bargain. “It doesn’t necessarily get you to the 25% right away,” he said. “But they have a presence everywhere and if they’re championing this, it will make a big difference.” Structural barriers In order to increase local spending, donors will have to overcome major historical and structural barriers, not least breaking away from their traditional funding patterns — particularly in a crisis when they are quickly channeling large amounts of money. “The default has been to provide that to the larger agencies that can handle large volumes of cash and can handle it quickly,” Urquhart said. Most donors do not have links with local and national organizations, he said. Nor do they have the capacity to develop and maintain those links. So they look to large INGOs and U.N. agencies to act as bridges. INGOs receive less donor money than U.N. agencies but are working harder to build local links. Whether under pressure from the international donors that partner with them or making the shift independently, many are demonstrating a willingness to prioritize localization and direct implementation by local partners. Meanwhile U.N. agencies, DI reports, received 61% of total international humanitarian assistance funding in 2022. And that came in a year when total international humanitarian assistance increased by $10 billion, from $36.9 billion in 2021 to $46.9 billion. But the agencies also present some of the biggest challenges. “INGOs are showing different levels of ambition,” Niklas Rieger, who heads DI’s research and analysis, told Devex. “With the UN agencies, it’s unclear to us how and where they’re concretely changing the way they operate to make good on localization commitments, as there’s no full transparency on who they’re funding and how much in which country.” Observers said that large institutions can be slow to change. Some agencies seemed engaged in reaching the Grand Bargain’s goals — the World Food Programme, for example, has plans to formulate a localization strategy — while other agencies appeared more skeptical. But across the board there was room for more engagement. “We really need to see how UN agencies can better share the funding that they receive,” Kattakuzhy said. One positive learning has been the effectiveness of pooled funds, which allow donors to combine their contributions. The funds are not earmarked, allowing for flexibility in how the money is ultimately allocated. UNOCHA runs several pooled funds — both at the country level and through the Central Emergency Response Fund. In 2021, 18% of the CERF funds were subgranted to local and national stakeholders, according to DI. And 28% of the country-based funds were passed through to local and national responders in 2022. It’s not clear if donors may be pulling back from the U.N.’s pooled funds. The amount of funding has dropped in percentage terms in recent years, although it has remained similar in cash terms. But NEAR believes it can help build new, long-term, and locally led funds that offer donors a mechanism for easily delivering money to local and national stakeholders in regions that are facing persistent hardships. These pooled funds would allow them to bypass international agencies that may not be responsive to localization concerns, while limiting the points of contact for donors. Kattakuzhy pointed to the Syria-Türkiye Solidarity Fund which NEAR set up in response to the earthquake that struck the region in February, and which is designed to quickly channel money to local groups working to meet community needs. “We hope over time that they have the infrastructure that can really receive high volumes of funding,” she said. “That they can act as an intermediary bridge.” Local awareness Another hurdle in reaching the 25% target has been a lack of awareness at the local and national levels of the commitments the signatories are making in their high-level meetings. To correct that, the Grand Bargain 2.0 introduced National Reference Groups, coordinated by local stakeholders to encourage them to share their needs and expectations with local representatives from donor agencies, INGOs and other Grand Bargain signatories, and to hold them accountable to their promises. “We strive to engage donors in dialogues, emphasizing the efficiency and effectiveness of local responses, and showcasing the impactful work done by local actors,” Raja Thapa, who is helping to coordinate the recently established NRG in Nepal, explained to Devex in an email. Outside a few settings, though, “the local actors didn’t have the capacity to ensure that the different stakeholders come to the table,” Tamara Kajtazovic, who leads the Grand Bargain Secretariat, told Devex. The Grand Bargain facilitators are still considering how they will integrate the NRGs into the next iteration. The wrong focus? There is some concern that the focus on the quantitative target of 25% funding for local and national stakeholders is obscuring other, interlinked commitments, including providing more multiyear support and more funding to cover the overhead costs of local and national organizations. “If we only focus on a percentage, it won’t make much difference,” said Smruti Patel, the international coordinator of the Alliance for Empowering Partnership, a coalition of local stakeholders that is a signatory to the Grand Bargain. “We need to think about what that percentage means. How is it being transferred? Is it an equitable partnership? Are they making decisions together about what’s needed within the community?” Ultimately, she said, the focus should be on building institutional capacity so that when a crisis strikes, local institutions can immediately initiate a comprehensive response, rather than waiting for the INGOs and U.N. agencies to arrive or to start providing them with funding. What next? Localization remains a key focus of the next iteration of the Grand Bargain. In place of an eminent person, the platform will host three ambassadors, one of whom will focus on localization and quality funding. They will also prioritize participation of affected people and shrinking the needs through strengthened partnerships and innovative approaches. Kattakuzhy is not convinced that will result in a significant advance in funding toward the 25% target. “In the next year or two, donors are really heavily reliant particularly on UN agencies to pass on funding to local actors,” she said. “We’re not going to see a real big shift in the data on direct funding.” But observers said there were benefits of the Grand Bargain 2.0 that can’t be measured in tangible funding, like keeping global attention on more — and higher quality — funding for local and national stakeholders. That it is continuing will signal to donors, INGOs and U.N. agencies that these remain global priorities. “There has been a huge amount of disappointment and fatigue with the slow progress,” IFRC’s Fisher said. “But that the Grand Bargain remains on the table, that localization is at the top of the agenda, is a hopeful sign.”