Funding International Development


Shifting Sands in Changing Times

A recent report by the Brookings Institution reveals that the sands are shifting for organizations working to achieve the United Nation’s 17 Sustainable Development Goals (SDGs). The SDGs provide a framework for global development, recognizing that “ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth – all while tackling climate change and working to preserve our oceans and forests.” But are we actually making headway on achieving these goals? How is the funding landscape affecting progress?

Let’s take a look at the impressions shared in the Brookings Institution report—entitled Global Development Disrupted: Findings From a Survey of 93 Leadersand compare them with the data.

Changes to Traditional Sources of Funding

The greatest change or disruption for organizations working in international development is in the area of funding. This was a key takeaway from Global Development Disrupted, which is based on a survey of leaders in the field, including those working for NGOs, foundations, governments, multilateral institutions, and the private sector. The report states, “The most frequently mentioned challenge is access to funding and resources, which is viewed as a fundamental challenge to addressing human needs worldwide as well as to the financial health and viability of development organizations and their missions.” Thirty-nine of the 93 leaders surveyed cited this as the most important disruption taking place today, while 31 respondents predicted that this trend would continue in the next five to ten years.

But does the data back this up?

Traditionally, countries in the Global North have dedicated a portion of their gross national income (GNI) to assist less prosperous countries on their road to development. In the U.S., this support has normally been funneled through USAID. In other countries, these government-funded institutions go by names such as the United Kingdom Department for International Development, Australian Aid, and the Swedish International Development Cooperation Agency, also known as Sida.

However, data from the Organisation for Economic Co-Operation and Development (OECD) reveals that few countries are meeting international targets when it comes to the percentage of GNI that they dedicate to official development assistance (ODA). In fact, for the period from 2017 to 2018, only seven countries reached the goal of .7% ODA/GNI, those being Denmark, Luxembourg, Norway, Sweden, Turkey, the United Kingdom, and the United Arab Emirates.

OECD statistics also show that government aid has been shrinking in recent years. ODA from Development Assistance Committee (DAC) members declined in 2017, with initial figures also indicating a decrease for 2018. In 2016, ODA totaled $147.6 billion, compared to $147.2 billion for 2017 and $143.2 billion for the following year. To make matters worse, ODA directed at the most needy, the least developed countries, is currently lower than previous levels.

What’s more, there is an increasing trend away from offering ODA in the form of non-repayable grants. Between 2008 and 2017, the percentage of gross ODA provided in the form of loans, private sector investments, and equity rose from 11% to 18%. The higher reliance on loans may be increasing the financial burden on developing nations, as the number of countries classified as “high risk or in debt distress” nearly doubled from 2013 to 2018, rising from thirteen to 24 in that period.

In addition to changes in the amount and types of aid, politics are further complicating the situation for emergent nations. According to Global Development Disrupted, current trends such as the mushrooming of populism and nationalism are perceived as hindering international development. Some survey respondents believe that these movements are fueling isolationism and strengthening the public’s resolve to focus spending on domestic affairs. The report notes that “many are concerned over a growing political demand to connect development to immediate national interests rather than long-term goals like global economic growth or the reduction of human suffering.”

While this tendency may be more difficult to quantify, OECD figures indicate that the percentage of ODA directed at fragile contexts (68%) is at its highest level in six years. Of note, Syria received $10.4 billion in aid in 2017, which was more than any other fragile state. In addition, from 2015 to 2017, a total of $26 billion was disbursed to aid refugees and their developing country host communities. One explanation for this may be that Western countries, concerned about refugee flows from distressed states, are investing more money to stabilize the situation in those countries and prevent further influxes of immigrants.

A Decreased Role for Western Governments

Another key finding of Global Development Disrupted is the increasing involvement of new players on the international development scene, including the private sector (i.e. corporations, foundations, and individuals), China, India, and middle-income governments. Their arrival lessens the traditional role of Western governments and other entities such as the World Bank and multilateral institutions, resulting in a “more crowded, decentralized development ecosystem.”

According to the Index of Global Philanthropy and Remittances 2016, the total of all private financial flows to developing countries (in the form of philanthropy, remittances, and investment) more than doubled in the period spanning from 2010 to 2014, rocketing from less than $400 billion to $801 billion. In addition, 2014 private sector flows dwarfed the total provided in the form of government aid for that year, which stood at $147 billion. A recent report by the Indiana University Lilly School of Philanthropy, The Changing Landscape of U.S. Cross-Border Philanthropy, notes a similar trend. Giving by private sources in the United States to U.S.-based international organizations went from $16 billion to nearly $23 billion from 2010 to 2018.

Respondents to the Global Development Disrupted survey saw these changes as both a blessing and a curse, opening up new opportunities while also adding further complexity to the system. For example, while they anticipated that private sector solutions will drive innovation in development, some NGO leaders found it difficult to establish partnerships with private sector entities. Regarding China, respondents from nonprofits and the government were apprehensive about the country’s increased involvement, citing issues such as governance and human rights, whereas private sector respondents held more favorable views on China. What does seem certain is the fact that with more players comes a wider range of interests from would-be funders.

Evolving Concepts of Development

Global Development Disrupted also pointed out that the very concept of development may be evolving. The report states that, “some respondents anticipate what might be termed an ‘end of development’ due to an increasingly meaningless distinction between ‘developing’ and ‘developed’ countries” as “developing and developed countries participate in an increasingly multidirectional flow of ideas, technologies, human talent, and expertise.”

In addition, UN data indicates that more nations are lifting themselves out of poverty. The report World Economic Situation and Prospects 2019 reveals that in 2018, three countries (Bhutan, Sao Tome and Principe, and the Solomon Islands) were recommended to move up from the least developed country (LDC) category, the highest number ever reported for a single year. (In the past 47 years, a total of only five countries have graduated from LDC status.)

Moves such as these may pave the way for other SDGs, besides poverty, to take the forefront in international development. There was a general consensus among Global Development Disrupted respondents that not enough is being done to address climate change, with one respondent stating, ““Climate change will swamp everything we do in the future, but we lack the vision to see how it will impact our work across sectors.”

Moving Forward

While changing norms in international development may be disorienting for organizations accustomed to more traditional models, the rise of new actors and the injection of private capital into the arena may facilitate the emergence of novel solutions to vexing problems such as climate change. For example, C40 Cities is sidestepping federal inaction on climate change by empowering mayors in its worldwide network to collaborate on reaching the Paris Agreement goals at the city level. Private funders such as MIT’s Climate CoLab and the Rainforest Action Network are nurturing innovation and local action to combat the global warming crisis. Hopefully, development organizations can benefit from these changes, even if they have to rethink traditional approaches to securing support, diversify their funding sources, or balance competing agendas with their organizations’ goals.

Action steps you can take today
  • Click on the links above to learn more about these trends and others in the area of international development.
  • Visit the PathFinder website to discover useful tools and other resources to help you in your funding research.
  • Become a GrantStation Member to search for funders supporting the SDGs.