Humanitarian and International Development NGOs

A continuing theme on which I’ve commented several times (links here, here, and here) concerns the increasing share of private resources in development aid.  Sam Worthington, the president and CEO of InterAction, the leading coalition of 165 U.S. development and relief NGOs, was on campus this week to kick off the NGO Leaders in Humanitarian Aid and Development seminar series and discuss the shifting landscape for NGOs.  The subject of money - and private money in particular - kept coming up.

Sam’s statistics were stark.  In 2000, the revenues of the U.S. NGO community working to reduce global poverty were approximately $4 billion.  About 50% of that funding came from government, 50% from private contributors.  In 2006, revenues had grown to $8.8 billion - but $6 billion came from private resources.  The $800 million increase in government funding was dwarfed by a $4 billion increase in private funds, and the balance was suddenly close to 70% private and 30% public.

On the surface, such a trend might seem liberating to NGOs, offering the space to be more creative and take greater risks in their mission to serve the poorest people in developing countries.  Federal funding is intended to serve the national interest, and it carries constraints.  Early versions of the strategic realignment of U.S. foreign assistance, which brought the Director of Foreign Assistance under the auspices of the State Department, did not even include the word “poverty.” It is challenging for NGOs to stay true to a development mission using U.S. funds when all other interests appear to trump it.

Yet it matters just how that $6 billion in private money is comprised.  Major philanthropists and foundations, the kind that participate in the Global Philanthropy Forum or the Clinton Global Initiative, for example, often impose their own constraints in pursuit of strategic impact.  There have been too many times in the recent quest for innovation that donors have created large projects without taking advantage of the development expertise hard-earned by NGOs through three decades of trial and error.

Whereas before NGOs could voice their views to one entity - the U.S. government - and know that they were  attempting to influence a major segment of their market, suddenly they are faced with educating and negotiating with a multitude of actors, all with their own individual agendas.

As Sam Worthington noted in our discussion, unrestricted money best provides NGOs the freedom to act on their own knowledge and inclinations.  Paradoxically, those NGOs where countless small donors make up the largest slice of revenue are likely to feel freest to pursue their agendas on their own terms - and may result in more innovation and more empowering relationships with local communities than otherwise.  Foundations and philanthropists who believe that NGOs, left to their own devices, are effective at developing successful strategies to reduce poverty would do well to build a percentage of unrestricted funding into every grant.

This is important for a bottom-up approach to development.  Helping local communities and individuals find their own voice and build their own leadership often brings change at the deepest level, but it is not linear, and progress along the way is often hard to measure.  To be successful requires long-term commitments (from 10-20 years) with money that allows strategies to be flexible and priorities to be adaptable.

Some critics* contend that the ties between large Northern NGOs and their host countries have grown too close and diluted the NGOs’ ability to offer approaches that differ significantly from their country’s aid program.  It’s not clear that the increasing share of private funds within foreign aid, while significant, will offer much respite.

* From Can NGOs Make a Difference?  The Challenges of Development Alternatives: “There are serious doubts regarding how far NGOs in the North are able to do anything that is especially alternative to their host countries’ bilateral aid programmes.”

While working through a backlog of reading I came across this post by Lucy Bernholz* on Philanthropy 2173, in which she characterizes “foreign aid” as “international philanthropy” while referencing Reinventing Foreign Aid, a new volume edited by William Easterly.

Private philanthropy is part of “foreign aid,” and as I’ve mentioned in previous posts, arguably its fastest growing segment.  Yet for folks in the NGO field, the term generally connotes funding made available to developing countries by Western governments and multi-lateral institutions like the World Bank and UN (and, from a cursory skim, this is the general sense in which the book uses it).  They have traditionally set the intellectual framework for how and where aid is deployed.

That one of our leading commentators on philanthropy uses the two terms interchangeably might be another example of the growing influence of private dollars within aid.  Yet most of us would not equate government funds and philanthropy and would be careful to draw a distinction between the two when examining domestic nonprofit and public services.  However innocent Lucy’s characterization (the point of her post was something else entirely), it surfaced for me the challenges of perception faced by the international NGO community.

No matter how strong the humanitarian values of the U.S. general public, they misunderstand or are uncertain about our government’s role and aspirations in providing development assistance.  According to data collected by Public Agenda, half of the country believes that we spend more on international aid than Social Security and Medicare.

They also remain pretty skeptical about its value.  As Joe Lockhart (the former White House press secretary) said at InterAction’s 2008 National Forum, “foreign assistance” are two words sure to create strong negative reactions in the American public.  Most view U.S. foreign aid as “charity” — i.e., something based on a moral impulse rather than a strategic imperative — and worry that the money is being wasted.

Major U.S. NGOs are part of a push to modernize and reform U.S. foreign assistance, an issue that they hope will get serious attention from the next presidential administration.  Convincing the public that this should be a priority will be a challenge.  And helping them understand that focusing on the reduction of global poverty as an important goal in and of itself, rather than making it subordinate to our national security or foreign policy strategies - helping them realize that this focus may ultimately have the most benefit for our security will require significant education.

“Foreign aid” may not be the same as “international philanthropy,” but it should aim to be “philanthropic” - strategically invested, with a focus on maximizing its impact on poverty.  Doing so successfully will increase human security worldwide - and increase our national security at home.

Full disclosure: I have taught seminars with Lucy Bernholz and consider her a personal friend, as well as one of the field’s leading thinkers about the future of private philanthropy.