In Kenya, over 45,000 community-based organisations (CBOs) are on the front lines, delivering essential services to their communities. Despite their vital role, many of these organisations are underfunded, under-resourced, and structurally fragile. They are often held back by a lack of strong internal systems for things like human resources, financial management, and governance.

The Tiko-Daraja (Daraja – Shared Services Platform) Capacity Building Project aimed to tackle this challenge head-on. Between 2024 and 2025, the project piloted a new approach to help 35 CBOs in Kenya strengthen their internal systems. The project combined group workshops with one-on-one coaching for a select group of 15 organisations, while a control group of 20 organisations received the group training. The results provide a powerful proof of concept. These improvements weren’t just procedural; they were transformational. CBOs reported clearer staff roles, stronger donor alignment, revitalised governance, and greater morale among staff and volunteers. Perhaps most importantly, coached organisations built the confidence to sustain and scale these systems long after the project ended.

The Transformative Impact of One-on-One Coaching

A comparative analysis of the two groups revealed that CBOs with personalised coaching consistently and significantly outperformed those who only attended group workshops across all key indicators. This tailored support helped organisations move beyond theoretical knowledge to practical, sustainable change.

Here are some of the key findings:

• Human Resources Management: Personalised coaching played a decisive role in helping CBOs implement new HR policies. An impressive 85% of coached CBOs updated or created a comprehensive HR manual, compared to only 50% without coaching. Similarly, 88% of coached CBOs clarified staff roles and job descriptions, while only 60% of the uncoached group did so. This support helped CBOs with limited administrative staff implement complex policies like performance appraisals, with 78% of coached organisations doing so versus 50% of those without coaching. The average confidence in their HR systems was also significantly higher for the coached group (4.4/5 vs. 3.8/5).
• Financial Management: The coaching was also crucial for strengthening financial transparency and accountability. 88% of coached organisations improved their bookkeeping systems, a notable difference from the 65% of CBOs who only attended group training. The coaching helped these organisations navigate unique funding streams and set up ledgers and reconciliation processes tailored to their needs. A standout success was audit readiness: 35% of coached CBOs initiated an external audit for the first time, whereas none of the CBOs without coaching did so. Overall, coached CBOs reported an 80% success rate in aligning with donor reporting requirements, compared to just 50% of the uncoached group. This demonstrates how one-on-one support builds not just technical capacity, but the confidence to manage grants responsibly and answer donor questions.
• Governance and Leadership: In an area often overlooked, personalised coaching helped CBOs formalise their leadership structures and boost board engagement. 75% of coached CBOs reported having more active and engaged boards, compared to 50% without coaching. The coaching provided a safe space to discuss sensitive topics and create realistic meeting schedules and agendas. This support was also vital in clarifying roles between the board and management, with 70% of coached organisations successfully doing so, versus only 45% without follow-up. Coaching also led to better succession planning, with 52% of coached CBOs developing a plan compared to 25% of the other group.

The Confidence Factor and Path Forward

Beyond the numbers, the most powerful outcome of the personalised coaching was a palpable boost in confidence. CBOs with one-on-one support rated their average confidence to sustain improvements at 4.3/5, while those without coaching averaged 3.7/5. This gap reflects a deeper sense of ownership and practical know-how among staff and leaders, ensuring that improvements are not just procedural but are truly embedded into the organisation’s culture.

The project’s findings make it clear that one-off training is insufficient for driving lasting systems change. To replicate this success and scale the model, the project recommends several key actions for future capacity-building efforts:

• Prioritise personalised coaching: It should be a core, non-negotiable component of all future programs.
• Strengthen peer learning: Create formal, structured platforms for CBOs to share tools, lessons, and provide technical support to one another.
• Expand support for fundraising: Provide practical assistance with grant writing and donor engagement.
• Partner with local governments: Embed this successful model into county-level civil society support plans to ensure sustainability and alignment with local priorities.

The Tiko-Daraja Capacity Building Project has shown that investing in tailored, context-driven capacity building with sustained mentorship significantly strengthens grassroots CBOs, making them more credible, accountable, and resilient partners in local development. This approach not only builds stronger organisations but also empowers local leaders to drive their own transformational change.  By connecting and harnessing a network of developing CBOs, this enables shared learning, resource exchange, collective problem-solving, and mutual support, leading to stronger collective outcomes. As Tiko looks to expand its support to new CBOs and countries, it plans to continue partnering with Daraja- Shared Services Platform to build upon the strong foundations they have already established.

About Tiko

Tiko is a non-profit leveraging technology to transform sexual and reproductive health for underserved girls in urban and peri-urban Africa facing the ‘triple threat’ of unintended pregnancy, HIV and sexual and gender-based violence.

Tiko uses a community led, tech-enabled model to connect otherwise fragmented stakeholders on the ground, such as private and public medical service providers, community-based organisations and pharmacies, so that adolescent girls have access to high-quality health and wellbeing services and products, at no cost to them.

At the core of Tiko’s approach is working with existing, established partners and harnessing their community-level expertise and reach to create an enabling environment for the young people we aim to serve—our Tiko clients. In 2023 Tiko sought to go beyond only serving and doing more for our Tiko clients, but our invaluable community partners as well. Partnering with the highly experienced and capable team from Daraja – Shared Services Platform gave Tiko the technical skills and ability to do just that. 

For more information please reach out to mitch@tiko.org

 

In our last article we explored potential solutions to address barriers for domestically registered organizations to receive international funding. In addition to those solutions, we believe new, practical pathways are required to address challenges donors face providing funding to domestically registered organizations. Without considering and addressing constraints on both sides, we will continue to see limited progress. As with our previous article, we’ll be considering solutions that consider different segments of the market as we look to identify feasible and targeted solutions.

While we’ll present and consider these solutions individually, as we noted in previous articles, some of them will be most effective when launched in concert with complementary solutions. 

Proposed Solution 1: Catalog Domestically Registered Organizations

ALL ORGANIZATIONS

One near constant refrain we heard during our research and interviews was that donors simply aren’t adequately familiar with the ecosystems of domestically registered organizations in a country. There was near uniform belief that a simple catalog of domestically registered organizations could be transformational.

But our conversations also highlighted that several of these cataloging efforts exist, targeting slightly different parts of the market. Global Giving, Building Markets, Adeso, Ashoka, NGO Source, Catalyst 2030, and Echoing Green were just a few of the organizations that our colleagues mentioned as attempting to address this issue. USAID recently launched its own platform to identify more domestically registered organizations, and several aid transparency platforms such as IATI and FSRS offer additional pathways to identify potential partners. Further, many country governments provide lists of registered NGOs.

We approached our exploration with a hypothesis that the community needed a new platform to catalog domestically registered organizations. We no longer believe that is necessary. Instead, we believe these cataloging efforts would benefit from defragmentation, with an investment in bringing best practice, learning, and data together to maximize impact.  These many data collection threads would be stronger woven together. Ideally this disbursed data could begin to be centralized into one platform, but even an intentional landscape effort to “catalog the catalogs” could be additive.  

We further believe there would be good value in developing a Multi-Stakeholder Initiative (MSI) consisting of engaged data consumers (donors), data collectors (current platform “owners”) and data providers (individual NGOs) to curate best practice, refine a standardized baseline in data collection, and ensure coordination over time. In addition, this MSI could identify new ways to centralize due diligence data collection, or create new certifications for NGOs that meet certain operational standards. This initial vetting could further expedite donor’s ability to identify and engage domestically registered organizations, replacing duplicative, tedious, and time consuming background assessments. The STEP effort by Tech Soup’s Global Validation Services aims to address some of these priorities by creating a tiered due diligence framework with local evaluations.

Proposed Solution 2: Create Fiscal Intermediaries

Fiscal intermediaries have an important role to play in localizing funding through managing risks and breaking down transaction sizes. We believe fiscal intermediaries specifically designed to address this need can have a significant impact on localizing development. New fiscal intermediaries should be registered in the global south, maintaining strong relationships with, and accountability to, the communities they serve. Staff, leadership, and boards should represent those receiving funding, and be tirelessly committed to finding and supporting opportunities to shift power, funding, and decision making authority directly to impacted communities.  

Different types of domestically registered organizations, and different award sizes require different types of intermediation. While facilitation of funding might be centralized in one organization, we would envision unique organizations designed to specifically address the unique needs of differentiated segments. 

MICRO AND SMALLEST ORGANIZATIONS

Achieving stated donor goals to localize international funding will likely require significant growth in the number of small, medium, and large sized domestically registered NGOs capable of absorbing this funding. While brand new organizations may be part of resolving this barrier, the growth of existing domestically registered organizations to take on additional funding, expanding in scope and scale, will also be necessary. We fully acknowledge that some micro-NGOs (annual budgets under $100,000) may either prefer to operate on a smaller scale, or are best able to serve their communities by constraining their own growth. However, other micro-NGOs could leverage initial funding to expand, building the cadre of organizations suited for larger scale international funding.

The characteristics of micro-NGOs make scaled international funding particularly difficult. Award sizes generally need to be very small. And while it is impractical to build robust compliance infrastructures, it is equally necessary because micro-NGOs are often perceived as creating the most significant donor risks.  

We recommend the creation of intermediaries that can create portfolios of micro and small NGOs to receive pooled, outcome focused funding. These portfolios of organizations would be mutually accountable for outcomes, de-risking activities for donors while creating synergies and promoting learning and knowledge sharing to build capacity of organizations in the portfolio. There are some promising examples of intermediaries focused on supporting coalitions of community based organizations. One example is the Local Coalition Accelerator, which supports the design and execution of cross-sector community development plans, and helps to build bridges for future direct investment in local groups by bilateral donors. We see an opportunity for these intermediaries to demonstrate a pathway to include unrestricted and restricted projects.

SMALL, MEDIUM, AND LARGE ORGANIZATIONS

During the interview process we were surprised by how consistently we heard donors lamenting the dearth of domestically registered intermediaries to facilitate funding of small and medium sized awards to domestically registered NGOs. We entered our conversations assuming global north donors would prefer to provide funding directly to small and mid-sized international organizations (annual budgets from $100,000 to $5 million), with IRS regulations serving as the primary barrier to funding domestically registered organizations. However, we discovered that most donors believe their internal policies and systems were not well suited to supporting and providing appropriate risk-responsive monitoring of smaller international NGOs. We believe this space could be filled with new domestically registered intermediaries focused on providing these services.

MEDIUM AND LARGE ORGANIZATIONS

One of the most significant barriers to funding localization targets is the mis-match between award sizes made by major bilateral donors and domestically registered organization’s ability to absorb awards of those sizes. USAID’s December 2021 business forecast includes five projected awards valued at over $1B each. Assuming those very large awards are unlikely to be awarded to domestically registered organizations, the overwhelming majority of all remaining prospective funding would need to be awarded to domestically registered organizations to meet donor’s percentage-based localization targets.

Out of Reach: Majority of USAID funding projected to be distributed through $1B+ mechanisms

As the chart below illustrates, based on conservative award sizes, nearly three quarters of prospective USAID funding is projected to be distributed through these five very large $1B+ mechanisms. When even a much smaller $50M award feels unachievable to many domestically registered organizations, pathways to substantive shifts in bilateral funding percentages appear very narrow.

Based on USAID’s own disclosures, and what we know of international development and humanitarian relief work more broadly, many of these larger awards go to a small collection of global north based organizations that specialize in winning and administering these large and complex agreements at scale.  And, bilateral donors’ preference for large transactions is likely to persist since it streamlines the donor’s award management and promotes a more coordinated approach to global challenges.

We recognize that regardless of country of registration, a fiscal intermediary that distributes and manages funding in the billions will have a significant power imbalance compared to smaller organizations and individuals in unique communities. However, there may still be space for the development of LMIC based and led corollaries to these larger global north development and humanitarian relief firms. These new organizations could offer new types of commitments to represent local populations and communities at the staff and board levels, along with a clear mandate of accountability to advance the development and capacity of domestically registered organizations. 

There are several examples of domestically registered organizations that are winning and successfully managing larger USAID awards, but they tend to be more narrowly focused on a single country, or a single priority. Leveraging the built in skills and capacities of these organizations, either through a joint venture or other mechanism, could be a good starting place to consider LMIC growth in organizations to manage high dollar value bilateral funding.

Proposed Solution 3: Develop New Donor Accountability Mechanisms

ALL ORGANIZATIONS

Organizational change is hard. And it is particularly difficult in government agencies and foundations. Public oversight and public scrutiny, particularly around widespread, but often baseless concerns around fraud and mismanagement, creates risk aversion. Organizational goals don’t always align with individual incentives, and the risk of a project not going well matters more than achieving potentially greater impact, especially over time, in funding domestically registered organizations. There’s also a layer of incumbent intermediaries that benefit from the risk aversion.

So, how do you help shift these donor organizations and the broader system? We see three potential ways.  

First, the hard work of reviewing procurement policies, procedures, and processes needs to be done to identify areas that may limit a donor’s ability to solicit from, and provide funding to, domestically registered organizations. Organizational goals, as well as individual incentives and performance plans, need to be adjusted. Significant training needs to be conducted to meet new requirements and build new capabilities. Operational funding needs to shift, potentially toward locating program and grant managers closer to the organizations being funded and communities being served. Omidyar Network India (an impact investor that does both for-profit investments and grants) has gone a step further by creating a local geo-entity with its own strategy, with an empowered country leadership and entirely local staff that drives funding decisions. Over time, with strong leadership and support, these operational shifts will lead to a new organizational culture and set of norms. We see independent organizations, such as the Center for Global Development, as well-positioned to help provide the intellectual leadership here, particularly with government agencies.

Second, we need to build the evidence base of the efficacy and value of localizing development. Initial research from ODI shows that the risks of localization are based more on perception than empirical evidence. While ODI’s report comprehensively considers the information currently available, this work and evidence needs to be expanded to create a broad consensus that localizing funding is a better use of resources. It needs to be robust enough to address concerns from public oversight bodies, provide cover for government agencies, and build an evidence based foundation to prioritize the internal changes noted above. Moreover, operational research can help inform the best ways to localize development, maximizing efficiency and outcomes.

Third, and finally, we recognize that organizational change of non-commercial entities may be unlikely without some external pressure, or at a minimum, transparency. An objective rating system for bi-lateral government agencies, and for foundations, that collects quantitative information (e.g., funding flows directly to domestically registered organizations) and qualitative information (e.g., grantee feedback on power dynamics, decision-making and flexibility) may create a race to improve. A similar system for the large development contractors and iNGOs may also ensure authentic commitments to localizing development and even help inform award decisions by donors to support their own internal goals. Other rating systems – such as the World Bank Doing Business Report – have helped improve business conditions in countries as government agencies work to improve their scores.

Where Do We Go From Here?

As we begin to wrap up our initial exploration of barriers and practical solutions to localizing development funding, we consider where we go from here.  At GDI, we’re approaching this with several priorities:

• We look for feedback, critique, and refinement of the recommendations we’ve put forward to strengthen these proposals. Please reach out to us to share your own perspectives: localizingdevelopment@meredithh2.sg-host.com
• We will be exploring ways to make these recommendations into living solutions, considering donors and other partners that want to invest in progress using one or more of these approaches.  
• We will be sharing more about GDI’s own journey to consider how we need to localize and decolonize our own work. Similar to other advantaged global north organizations, we need to be transparent about our work, and how we are, and are not, advancing these ideals. We’ll be sharing more about this journey in our next article in this series.
• And finally we want to continue to explore other opportunities and practical models for progress. We’ll do that through highlighting unique and innovative approaches that might inspire a wider audience and expanding our consideration of how to localize or decolonize in areas outside of funding flows.

We invite our colleagues to join us in this process, considering actionable ways to make real progress both in their own organizations, and through new approaches in the community at large. We invite you to share those thoughts with us so we can highlight them and continue to encourage each other in our work.  

Join our mailing list for updates and follow this series for our latest thinking on GDI’s work in this area.

Our initial exploration into localizing development was based on an idea: there are barriers to progress that need practical solutions if we want to make significant progress. We explored those barriers in detail in our previous article. As a consensus came together outlining the issues, it was time to identify practical solutions.

As we considered solutions, a recurring theme arose: how could we most efficiently address capacity gaps at scale? There is a significant chasm between donor commitments to directly fund domestically registered organizations and where we are today; to effectively address this we knew we needed to consider solutions that had the potential for significant scaling. What that looked like might vary: for one solution it might include leveraging scalable technology, for another it might include catalyzing a larger commercial market to serve a need, and for another it would look like demonstrating proof of concept in a pilot phase that could be easily replicated.

Before we begin exploring potential solutions, it is critical to acknowledge that many passionate individuals and organizations are already working to localize or decolonize development. We’re familiar with many of these organizations, and are inspired by their creativity and breadth of approaches to spur real progress. We hope to highlight some of these organizations and ideas later in this series and welcome recommendations on innovative approaches that we should consider learning about and sharing.

How We Evaluated Potential Solutions

In addition to scalability, we saw another key challenge: solutions addressing individual barriers might make incremental progress, but the launch of multiple solutions in tandem promised the most significant impact. We needed to consider which were absolutely required to move first, setting the stage for success down the road. We began looking at factors such as:

• Whether there is any current mechanism serving that need, even if subscale or suboptimally
• Whether the solution’s success is heavily contingent on another solution moving forward first, or in parallel
• How time consuming or complex the solution is to launch or prove the concept
• Where we have the strongest resonance in interviews with potential stakeholders
• What solutions GDI individually could have the most influence over because the solution is not contingent on current actors outside of GDI changing their internal processes or approach.

Categorizing Market Segments

Throughout our process we grouped solutions by two characteristic sets: (1) did they solve a barrier for donors, or for funding recipients and (2) what size domestically registered organization were they most likely to impact.  

In this article we will consider solutions to support funding recipients, which we consider the demand side of the equation.  These proposals will consider how to expand the capacity of domestically registered organizations to receive funding.  In our next article we will consider solutions to support donors, or the supply side of the equation.  It will explore options to expand capacity and options to give funding to domestically registered organizations.  Throughout both articles we’ll consider solutions to impact organizations of a variety of sizes, recognizing their needs and challenges can vary significantly.  In this series we’ll use the following terms to describe domestically registered organization based on annual budget size:

• Large: Greater than $5,000,000
• Medium: $750,000-$5,000,000
• Small: $100,000-$750,000
• Micro: Less than $100,000 (informally this segment if sometimes referred to as “grassroots”)

We recognize this distribution is imperfect at best, and the characteristics of organizations within these bands can vary greatly.  But in general, we believe that these dollar figures represent tipping points where the needs or organizations, and challenges they face, begin to transition.

Demand Side Problems: Managing Donor Requirements and Scaling Domestically Registered Organizations

THE PROBLEMS: Subscale operational infrastructure and subscale cadre of operations professionals for NGOs

• Small and medium sized domestically registered NGOs are not able to provide donors with adequate confidence that they can meet compliance and management requirements.
• There aren’t enough domestically registered organizations at scale to effectively receive significant funds from global north donors.
• Limited numbers of in-country, highly qualified operations staff limits domestically registered organization’s options to develop and demonstrate operational excellence.

A quick skim of the characteristics of domestically registered organizations consistently showed much smaller scale organizations, dwarfed by their global north counterparts, and significantly smaller than the country registered affiliates of international organizations. As discussed in our previous article outlining challenges, it remains difficult for these smaller, domestically registered organizations to secure significant funding from global north donors, particularly considering a minimum organization size was generally required to fund the type of infrastructure donors were coming to expect.

USAID administrator Samantha Powers described the challenge this way:

Often, there’s just a lot of gravity pulling us toward very large, often U.S.-based contracting partners that may deign to enlist local partners as part of the overall contract or grant. But fundamentally, the investments are not made in that internal capacity and that ability to have the accounting capacity, the ability to comply with USAID regulations, which many of which are in place in order to be responsive to the need for oversight that you [the congress] have.

Administrator Power’s comments highlight a critical point that is confirmed by OECD data highlighted in their 2020 report, “Development Assistance Committee Members and Civil Society”

Donors believe domestically registered organizations offer compelling programmatic strengths and benefits, while concerns about direct funding largely center around operational barriers.

Where Do We Start?

Here perspectives on the path forward begin to diverge.  We can either look for donor requirements to change OR we can build a system to meet the needs and expectations of donors. For our approach we are starting with strengthening recipient capabilities to meet current donor requirements rather than focusing on changing donor requirements. While we appreciate the value of donors streamlining their expectations, efforts in this area have had limited impact to date. In the context of our recommendations, adjusting donor policies and behavior do not meet our criteria for scalability, efficiency, and ability and likelihood of outside parties to substantially influence.

Current donor compliance requirements necessitate highly skilled staff in a range of areas, from operations, to finance and accounting, to monitoring and evaluation, along with robust governance and IT infrastructures, along with strong policies and procedures in areas ranging from contract monitoring to safeguarding.

While donor requirements for this type of infrastructure raises the operating bar of organizations, funding for these investments most often must come from the donor’s indirect cost allowance or unrestricted funding. With indirect cost caps at many donors ranging from 7% to 20% for many bilateral and private donors respectively, significant organizational scale is required to build an indirect cost base large enough to create the necessary indirect infrastructure. Ironically, those donors with significantly more rigorous compliance infrastructures tend to also have much lower indirect cost rates allowances, further exacerbating the challenges.

Illustratively, an organization with a $1M budget may only receive $100,000 (10%) from donors to cover indirect costs and investments.  One highly skilled finance and compliance officer may have total compensation and benefits of $70,000*, leaving only $30,000 for the rest of the organization’s overall management, indirect costs, policy development, staff development, systems, and infrastructure.  For most organizations, this math simply does not work.

Case Study: Funding Flows in Kenya

This challenge quickly becomes a chicken and egg issue, the organization needs funding to scale to a size to build donor expected infrastructure, but has difficulty securing those funds because they haven’t fully built out this infrastructure.  

Kenya NGO board data illustrates what this challenge looks like in Kenya. In Kenya, only 54 NGOs report annual budgets over $1M. 65% of those 54 organizations are affiliates of large international NGOs. From here, budget sizes continue to go down, we assume much smaller average budget sizes of approximately $100,000 for the next 3,000 NGOs that do report data with an additional 6,000 reporting no data at all. 

This data highlights two major challenges to increasing funding to domestically registered organizations.

• There are very few organizations that are at a size where it is affordable to build the in-house financial, compliance, and operations infrastructure major global north and bilateral donors have come to expect. 
• The small collection of organizations that are large enough to build this infrastructure are predominately “affiliates” of larger US organizations. In addition to having more funds to work with, they often can benefit from the highly specialized expertise of their US counterpart, and may receive significant infrastructure, policies and procedures, and systems at no or very low costs. This disparity further widens the gap.  

Proposed Solution 1: Shared Services Platform

SMALL AND MEDIUM ORGANIZATIONS

We propose that a shared services model that allows domestically registered organizations to share the cost to build and maintain operational staff and infrastructure could be the key to unlocking this barrier. A shared service provider would offer the necessary compensation and job stability to attract the limited pool of expert country resident staff, allowing smaller domestically registered organizations to purchase a “share” of the time of these highly qualified staff, gaining the advantage of the same expertise that previously had been largely constrained to international NGOs.

We expect NGOs with budgets as small as $100,000 and as large as $4M could benefit from this type of platform, although we expect that at $2M many organizations could begin to transition to bringing these activities in-house. Shared service platforms should be explicitly designed to support the growth phase of these NGOs, with an intentional goal to build their own internal capacity and to help organizations reach the scale required to bring these activities in-house over time.

We frequently see this model in the United States, across a broad range of organizational functions. We often fill this function at GDI during the incubation process, allowing new organizations to leverage our internal Finance & Operations, Brand, Marketing & Communications, and Talent teams. With a similar approach, new organizations could gain access to highly skilled talent at a fraction of the cost, strategically meeting their evolving needs until they have grown to scale and can bring these functions in-house. We often refer those incubated initiatives to other shared service platforms as they conclude their incubation process: co-employment organizations (PEOs); client services firms specializing in accounting, recruiting, and IT; consultants and law firms specializing in donor compliance, and organizations specializing in M&E. If this shared service model is so well developed and normalized in the US, why hasn’t this market developed more fully across LMIC domestic markets?  

We believe this is another chicken and egg issue, and it needs an intentional effort to break the cycle. This services market has too little demand because the domestic NGO sector is not at a scale to create this demand; and, the NGO sector can’t grow to create this demand until the services market is more well established and donor funding increases.  We’ll be looking for one or more donors to partner with us in our vision of piloting the building of a shared services market, with the intention of catalyzing transformational impact in the funding going directly to domestically registered organizations

In a future article we look forward to sharing more about what this shared services model might look like, and how we believe it can be scaled to support transformational global impact.

Proposed Solution 2: Upskilling and Developing Organizational Capacity through Technical Assistance

ALL ORGANIZATIONS

Many donors invest in varying types of capacity building for their awardees, from requiring prime contractors on large awards to conduct capacity building as part of their work, to deploying technical assistance directly. It is relatively well accepted in the international development community that capacity building plays an important role in strengthening the domestic ecosystem. But even with these investments in capacity building, overall progress to strengthen the ecosystem of LMIC domestically registered organizations remains slow.

We believe this can be attributed to several factors:

• Capacity building is targeted to a very small segment of the domestically registered organization community, specifically to those few organizations that already have established relationships with donors. In order to achieve scaled growth of the number of domestically registered organizations that are able to attract and manage donor funding, technical assistance must be expanded to include those many organizations that do not currently receive funding.
• Certain areas of organizational development are much more well suited to technical assistance capacity building than others. Capacity building should be focused on areas that are incrementally less technical (for example effective hiring, meeting facilitation, and goal setting), while areas that are more technical (for example accounting, tax, compliance, and legal) may be more effectively addressed through shared services.
• Many of the organizations that are providing capacity building have a problematic incentive structure. The majority of technical assistance and capacity building is conducted by organizations that are also direct competitors to those receiving technical assistance. While we are not suggesting that these organizations are acting in bad faith, it creates an uncomfortable incentive structure that should be further considered.
• Very little current donor funded technical assistance is currently targeted toward micro organizations with budgets under $100,000/year, which make up the majority of the potential expanded partner pool. Support to these organizations would need to be highly scalable due to the sheer volume of this collection of organizations, and customized to their unique needs, prioritizing translation into local languages.

Proposed Solution 3: Online Training Platform

MICRO AND VERY SMALL ORGANIZATIONS

We recommend building a centralized online training platform that is highly customized to the needs of this segment and translated into local languages. Multiple high quality online training platforms exist (just one of many examples is Kaya, which gathers and provides humanitarian sector trainings from multiple organizations at no cost).  While current platforms provide strong benefits to the international development community overall, their content is inadequately targeted to the audience, is too donor or subject area specific, is not translated, and/or the content is so expansive that it may feel difficult for a small organization to know how to effectively engage. Much of the actual training content may already exist in organizations, but needs to be brought together in a way that is highly targeted to micro organizations. Training content could include topics such as business development/proposal writing, M&E basics, project management, and program design. A more expansive version could also cover operational topics such as financial management, procurement, and governance. Content should be highly digestible and laser focused on this micro-community.  

We think this could be even more impactful if the training was not only available for free, but included a small stipend for organizations that complete the training in full, incentivizing organizations to complete the full curriculum. Donors would benefit from this type of platform as it further builds out the catalog of organizations that are on donors radars, and would serve as a basic “seal of approval” of a basic skill set for organizations engaged in their communities.  

Proposed Solution 4: Hub and Spoke Platform

MICRO AND SMALL ORGANIZATIONS

We also would point to other innovative models that allow for rapid and context appropriate scaling of micro and small organizations. As one example, we previously highlighted the Effective Philanthropy Multiplier (EPM) model, as piloted in China, as a highly scalable, quick to impact, context and local community sensitive model:

Instead of only driving replication one organization or model at a time, we can also invest in creating the infrastructure in a given social sector ecosystem to scale and sustain replication to the last mile. This infrastructure consists of building two “aggregators”: 1) neutral hubs located at the provincial/state, city and/or county levels that can aggregate the local organizations and needs of the local community to drive adoption of products, source locally created products, and build the capacity of local organizations to mobilize resources from local government, corporate and public donors; and 2) a nation-wide product platform that aggregates the best products (models and interventions) and facilitates their replication.

EPM has created a network of 38 hub organizations at both provincial and city levels, connecting EPM to over 13,000 local organizations. Its nationwide product platform has sourced 49 products or intervention models for different social service needs including disabilities, elderly care, child protection and environmental protection. EPM conducts roadshows together with the local hubs to facilitate the replication of these products to tens of thousands of local organizations.

This model, which actively refines based on feedback from domestically registered implementing partners shows impressive results for scaling.  

In just three years, EPM has managed to achieve 49,477 distinct replications through 8,607 local community partners, including local NGOs, community groups, schools, corporates and volunteer groups. Collectively, in these three years, the replication infrastructure, together with the hard work of the brand and local organizations, has reached 65m beneficiaries and mobilized an estimated 923m RMB (130m USD) of funding.

Introduction of these types of models at a country or regional level, along with highly scalable training platforms has the potential to position the micro and small NGO community for significant scaling to meet localization goals.

We plan to highlight other innovative platforms that promote organizational upskilling and development in future parts of this series.

Proposed Solution 5: Expand Local Service Providers Capacity for Technical Assistance

MEDIUM AND LARGE ORGANIZATIONS

Medium and larger organizations often need different types of technical assistance and capacity building than the smallest organizations.  

We recommend expanding and reinforcing the work of domestically registered organizations that are exclusively focused on providing TA to other domestically registered organizations. In some cases these organizations exist but are subscale, and in other locations new entrants are required. These TA providers would be sensitive to the local context and needs, and would be engaged and accountable to domestically registered organizations. These service providers would have better aligned incentives, supporting better outcomes. This mechanism could be one of the offerings of a shared services platform, or provided through other, or stand-alone entities.

Proposed Solution 6: Upskilling and Developing Cadre of Professionals in the Industry

MEDIUM AND LARGE ORGANIZATIONS

One of the stickiest issues we repeatedly noted during our investigation is a subscale cadre of  highly skilled operations professionals compared to the number of individuals required to achieve adequate growth in domestically registered organizations to meet localization goals. Part of this is simply a product of a limited number of these positions currently existing due to lack of funding directly to domestically registered organizations outside of affiliates to major US entities. Building a highly skilled larger cohort will require time and intention.

In the near term, we expect that larger international NGOs that have a great deal of specialized expertise in these areas could adjust at least a segment of their business model to provide services in these highly technical areas to domestically registered organizations, at the request of and engaged by the domestically registered organization rather than as an intermediary. Significant transition of funding to domestically registered organizations should in tandem create additional bandwidth at global north NGOs which can be leveraged to good use to support the transition period.

As we continue our exploration in this area we’ll also consider whether mentorship programs, a partnership with a respected vocational school or large firm like one of the big four firms, stronger professional associations, and highly specialized longer term curriculums (to complement short term technical assistance) also could have a role to play in addressing this structural barrier.

Sharing Recommended Demand Solutions to Advance the Conversation, Build Momentum

We share these recommendations recognizing that the issue is complex, and will require a range of collaborators and interventions to make real progress. We welcome feedback from others on ways to strengthen these recommendations, or other recommendations that may address lingering demand side barriers to transitioning funding flows directly to domestically registered organizations. We also welcome feedback from those who want to join us to partner in this work, either as donors, implementers, or further expanding our network.  

In our next article we’ll begin to explore potential solutions to address intermediation constraints and barriers on the supply/donor side of the funding equation. We look forward to working together to find ways to make progress. 

Join our mailing list for updates and follow this series for our latest thinking on GDI’s work in this area.

*We should note that compensation rates for experienced and exceptionally skilled compliance staff tend to be uniquely high because (1) there are a limited number of individuals with these skills in country and (2) they are generally employed by large international NGO’s which are able to offer both higher salaries and more job security as they disproportionately receive higher dollar value donor funding.

Despite their proximity to crisis-affected communities, deep contextual understanding, and tailored programmatic solutions, domestically-registered NGOs and civil society organizations (CSOs) in low-middle income countries (LMIC) receive disproportionally little funding from global north donors. In our inaugural post on localizing development, we observed that funders are collectively and individually demonstrating a will to change the status quo through public commitments to increase the share of money going to these groups. Yet, less than 6% of bilateral funding and less than a quarter of the philanthropic funding that is going to CSOs goes to domestically registered CSOs.

Helping Identify and Understand Barriers to Progress

We went into these conversations with a desire to surface practical, scaleable, and impactful solutions. A lot has been written and said on this topic, but most pieces fall short of laying out a concrete and comprehensive set of actions that systematically address barriers to progress. Our first goal in this exploration was to understand the full range of barriers so that we could then apply GDI’s comparative advantage to the issue; our ability to conceptualize and stand up initiatives that can bring about systems change, our ability to bring together diverse actors in multi-stakeholder initiatives, and our openness and flexibility to feedback and constructive criticism that ensures initiatives are relevant and impactful.

In this post, we lay out our understanding of the set of barriers holding back donors from giving directly to domestically registered NGOs. Subsequent posts will discuss proposed solutions. We are not the first to attempt this exercise. However, we hope that our insights, synthesized from speaking with a diverse group of actors, will deepen the understanding in the field and create a framework for action.

Figure 1: Summary of barriers to localizing development

Demand-Side Barriers: Operational infrastructure and operational talent

Barriers exist on both the demand (organizations looking for funding, in this case, domestically registered NGOs) and supply (organizations providing funding, in this case, global north funders) sides. 

On the demand side, the issues are two-fold:  

• Domestically-registered NGOs typically have sub-scale operational infrastructure. They often lack the resources to undertake complex financial reporting, audit, and compliance activities. Capacity for grant-writing, monitoring & evaluation activities, dedicated fundraising, and marketing is also limited. This is a critical constraint because global north donors tend to conflate the performance of domestically registered NGOs with their ability to undertake financial compliance and risk management. While this conflation itself is deeply problematic as discussed later, the limited ability of organizations to undertake these functions hold them back from accessing international funding. This resource constraint is itself a manifestation of historical inequities. International NGOs, many of whom emerged post the two World Wars, had a headstart in accessing global north funding, building cash reserves and getting to the scale at which they could create dedicated teams for compliance, finance, grant-writing and M&E. These functions, often centralized in their global north headquarters, give them the platform to rapidly expand to new issue areas and geographies where they compete with and crowd out domestically registered NGOs. Moreover, the international funding that domestically registered NGOs do access are typically earmarked for specific projects. Very little funding is available to cover indirect costs that can be put toward institution building. This limits their ability to hire operational staff and build operational infrastructure (such as IT systems) that are project-agnostic.
• This brings us to the second demand-side challenge: domestically-registered NGOs typically have to work within a sub-scale cadre of operations professionals. Related to the challenges of funding continuity, the pool of skilled operational staff available to domestically registered NGOs is limited. There is no dearth of talented individuals. Limited funding to invest in operations at the organization level, however, when rolled up to the ecosystem, leads to limited jobs and career pathways in non-profit operations. The opportunities that do exist are concentrated in the country offices of international NGOs. Limited career pathways also translate into limited demand for degree or certification programs that cover accounting, financial reporting, and auditing specifically for the nonprofit industry. Additionally, individuals with experience writing grants for donors that often have very exacting and lengthy requirements similarly tend to be absorbed by larger international NGOs. The result is a limited professional cadre of operational talent available to domestic NGOs.

Bridging the Gap between Donors and Domestically Registered NGOs

Many individuals and organizations believe that these barriers are in fact manifestations of the exaggerated risk perceptions of donors. We agree with their assessment. Our divergence comes rather in deciding what to do with this assessment. Some people and organizations in this space believe that the onus of lowering these barriers lie solely with donors – they should lower their threshold for compliance and increase their appetite for risk. This is a fair and ambitious goal. They also, however, view working with domestically registered NGOs to increase their compliance capabilities as further perpetuation of colonial paradigms that impede localization in the first place. We understand and appreciate this perspective.

We also believe that working with both donors and domestically registered NGOs is necessary given that many donors have constituents that require a certain level of oversight. Incremental changes that expand the capacity of the latter to receive international funding, even with the present constraints of donor requirements and perceptions, is a step toward localizing development. We take to heart their concerns around replicating similar power dynamics where a few large domestic NGOs step into the place of international NGOs, not inserting yet another intermediary that “grabs power” and recognizing that just expanding operational capacity for domestic NGOs is not the end goal. These concerns have been critical in shaping our solution to the demand-side barriers, which we will lay out in the next post. 

Donor Barriers: Risk appetite, transaction size and limited visibility into the pipeline

Donors face their own set of constraints and challenges that keep them from giving to domestically registered NGOs. These include: 

• Limited risk appetite: As many have rightly pointed out, the limited risk appetite of donors lies at the heart of this issue and drives some of the other barriers. Where does this limited risk appetite come from? First, assumptions about risk in localization efforts are not grounded in empirical evidence, but are driven by perception, as the 2021 ODI literature review on localization in humanitarian settings points out. Global North donors perceive domestically registered NGOs to have low capacity and higher vulnerability to pressure and bias given their proximity to local communities, which can drive higher rates of fraud and aid diversion. The ODI literature review finds that studies that have questioned this assumption find both international and domestic organizations to be similarly susceptible to these risks. These perceptions drive stringent compliance requirements and limited trust with domestic NGOs. Second, individuals within global north donor organizations, particularly bilateral organizations, are incentivized to “manage projects cleanly” rather than maximize impact. The risk of funding domestically registered NGOs, and then having an ensuing scandal (no matter how low the probability) far outweighs the reward of the additional impact that the project could create if it were implemented by a domestic NGO. As one of our interviewees put it, “Nobody wants to look bad and everyone wants to look good. But not looking bad is more important.”
• Preference for larger transactions: Many funder organizations themselves are capacity-constrained, with one person managing an outsized grant portfolio, which leads to a preference for fewer, larger transactions. The plan to “staff-up” included in USAID’s recent localization target, for example, is an acknowledgment that funders need to solve for this capacity constraint to give meaningfully to domestic organizations. On the other hand, few domestically registered NGOs have the capacity to absorb large grants. This disconnect is a key barrier that stops funding from flowing to them. 

Figure 2: Top 5 perceived disadvantages of working with different types of CSOs as cited by OECD DAC member countries

• Limited visibility into the pipeline of domestic NGOs: Lastly, funders often say that they simply don’t know whom to fund. Even in contexts where there is a fairly robust civil society that receives diverse sources of funding, such as India or South Africa, international funding tends to be concentrated in a few domestic “darlings”. For example, 88% of USAID’s assistance funding to local partners in South Africa went to five organizations. The cadre beneath those large domestic NGOs remains under-supported. The issue is not that they don’t exist – they do. It is rather that they remain invisible to donors in the global north for a multitude of reasons, including limited LMIC presence of donors, and stringent internal strategy documentation processes. 

Future Looks Bright

The good news is that funders do not doubt the ability of domestically registered NGOs to deliver excellent programing and impact. A survey undertaken by OECD of Development Assistance Committee (DAC) member countries found that DAC members found similar advantages to working with domestically registered as they did in working with international or donor country NGOs. Yet, despite similar advantages, a disproportionate amount of funding goes to the latter because of barriers discussed above.

Figure 3: Top 5 perceived advantages of working with different types of CSOs as cited by OECD DAC member countries

Donors have also demonstrated the will to change, with multiple public commitments to localize giving. We understand that not every project will benefit from localization. Considerations on input, output, comparative advantage, scale, and speed will make some activities better suited for it than others. (This thought leadership is an excellent framework to help funders nuance their localization strategies). But the current levels of localization are deeply inadequate and unjust, and we have a long way to go. Thoughtful, consistent and innovative initiatives driven by a multitude of actors to localize development make us optimistic that change is possible. 

In the next post, we will propose a portfolio of solutions that can begin to dismantle these barriers. As always, we thank you for joining us in our journey to support the decolonizing and localizing development community. We invite any feedback, comments, questions or discussions so that we may continue to grow and evolve from your experiences and expertise. We look forward to partnering with you as we move ahead.

Join our mailing list for updates and follow this series for our latest thinking on GDI’s work in this area.

As GDI began our journey to consider how we could contribute to decolonizing and localizing development, we were immediately faced with several questions:

• What does it mean to “decolonize” or “localize” development?
• How can we ensure we use terminology that respects others? 
• How can we participate in productive dialogue in such a politically and emotionally charged area?

While we knew there were many perspectives about how this language should be used, we were surprised to discover that even inside GDI there were differing, strongly held understandings on what terms meant, and which terms were most appropriate and respectful. We needed common ways of understanding the language and talking about this work, both internally and externally. 

In this series, we will largely use “localizing development” based on the research, discussions, and clarifications outlined below. We will share our thinking and process for transparency on why we use certain terms, and what they mean to us at GDI. 

At the same time, we will continue to learn and grow as an organization. If we discover that new terms or refinement of these definitions are better for our work and the community, we will reconsider and update the language we use. To that end, as always we welcome feedback, questions, or suggestions to help us strengthen and refine our process and thinking.

Key Language: “Decolonizing development” and “localizing development”

Our exploration starts with an acknowledgment that much of the terminology in this space, including the term “decolonizing”, is politically charged. In considering terminology with the GDI team, we had strong advocates for both “decolonizing development” and “localizing development”. Some colleagues suggested “localizing development” had the advantages of a more positive framing and fewer political connotations, which might make it more attractive to some parties we wanted to engage. Other colleagues advocated that “decolonizing development” was more widely understood, and frankly, it was acceptable for stakeholders to be uncomfortable with the conversation surrounding decolonizing development because the depth and breadth of required change should cause discomfort.

Over time we began to realize that we were unable to reach consensus because decolonizing development and localizing development are not precisely equivalent. We had difficulty coming to a shared agreement because individuals were describing different concepts. Both terms had an important role to play, but we needed to clearly differentiate between them.

Our Definition of “Decolonizing Development”

“Decolonizing” has been embraced by many as a metaphor, in some cases without a tangible definition. We knew, if we wanted to understand the landscape and assess where we could contribute, we needed to start with a specific description of what “decolonizing development” means so we could ensure we were discussing the same principles.

The focus of decolonizing development is to address systemic bias, with the final outcome goal of reimagining the entire development and humanitarian aid sectors and replacing them with more equitable and just alternatives.

To us, decolonizing development meant:

Proactively empowering and returning agency to communities that have historically been disenfranchised due to racism, colonialism, exploitative practices, and other systematic injustice, particularly in the context of international development and humanitarian aid.

Our Definition of “Localizing Development”

Localizing development, and the way it was used in conversation, consistently appeared to have a more narrow meaning. Localization looks more like directly funding “local” organizations, engaging community stakeholders in program design, and allowing affected communities to help set and manage their own priorities.

To us, localizing development meant:

Transforming unbalanced privilege structures to empower actors in the international development and humanitarian aid ecosystem with influence that is proportional to the impact of development and aid activities on their individual lives and communities.

Localizing Development Supports Decolonizing Development

With this approach, we view localization as supporting a broader decolonizing development agenda. Localization has the potential to catalyze or demonstrate progress toward a broader decolonization goal, but is inadequate in itself to fully achieve an ideal decolonized state. GDI’s initial focus in our own work will be on transitioning funding and power to domestically registered colleagues.  To represent this our work and writing will generally use the term “localizing development”.   

Our Process to Develop the Language We Use

From there, we started a discussion of the terminology we wanted to use in our own work in this area. As Sarika Bansal shared: 

“Language matters. The words we use shape the stories we construct of people and places, and ultimately, the policies and decisions we make.”

In our background research we found many articles that were focused on what terminology shouldn’t be used, but far fewer that identified respectful and appropriate language that should be used. This was further complicated because virtually every term that was widely used – from global south, to developing nations, to lower-middle-income countries (LMICs) – had vocal supporters and detractors. Even inside GDI’s global team, across East Africa, East Asia, and the United States, we had individuals with strong opposing opinions on what language was best and no immediately clear consensus. 

So we began a process to consider how we would select, refine, and use language.  While this process was specific to our decolonizing and localizing development exploration, we quickly discovered the principles applied across much of our work, as you’ll see in some of the examples provided.

Our Principles for Selecting Language: Practical, accurate, and respectful

We began by developing clear parameters. Any language we used needed to be:

1. Practical: We need concise, easily understood terms that allow us to quickly share an idea. Imperfect terminology that is broadly accepted is preferable to longer, more confusing explanations.

2. Accurate: We hold ourselves accountable to find terminology that best matches the situation at hand. For example, an economic migrant and refugee are not the same; they do not have the same primary motivations and are not afforded the same legal status or protections. It is important that the language we select corresponds with the actual situation.

3. Respectful: We want to identify language that is respectful, or at a minimum neutral, for all parties. Our colleagues quickly identified a few areas where they had intentionally updated their language:

• Unskilled labor → Low wage job
• Intervention → Activity
• Beneficiary → Individual
• In the field → Direct or First hand

Specific to our decolonizing and localizing development work we always included one key question:

Would the same language work if you used it in both a global north and global south context?

And at the same time, we accepted that we might select language that not everyone preferred. We held ourselves to a standard of thoughtful, respectful, and reasonable language, but we knew we would not be successful if we held ourselves to a standard of universal acceptance. That didn’t absolve us of the responsibility to understand and consider the viewpoints of others, but practically we needed to select the initial language to move forward.

Key Language: “HIC”, “LMIC”, “global north” and “global south”

We recognize that any language that groups together large swaths of culturally, racially, and ethnically diverse countries will be by definition imperfect. Nonetheless, our work requires clear and concise ways of exploring both economic disparity, and differences in the experience of individuals from historically “colonizing” nations, compared to those from historically “colonized” nations. We’ve adopted two sets of terms to describe these differences.

• High-income country (HIC), lower-middle-income country (LMIC), and other related terms: These terms, while rather sterile, effectively identify the economic distribution of wealth between countries. We will use these terms when we describe economic differences.
• Global north and global south: We’ve adopted the term global north to refer to largely wealthy countries, largely in the northern hemisphere, that have disproportionate access to power and resources across a range of dimensions. We use the term global south to refer to countries that have historically, and still to this day, had less access to wealth, resources, and power, largely in the southern hemisphere. We acknowledge these terms are imperfect at describing the actual geographic location of each country, but we appreciate that they are widely known and understood shorthand for a collection of characteristics.  

Key Language: “Domestically registered”

Next we set out to consider whether we wanted to continue to use the term “local organization” to describe organizations that are led and registered in an LMIC. “Local organization” had the advantage of being widely understood and adopted, and very few practical alternatives had gained much traction. 

But that term didn’t pass the test of whether the same language would work if used in both a global north and global south context. A local organization in the global north implies that its work is limited to a narrow geographic area such as a neighborhood, community, or city. Did using the term “local” in this context inappropriately imply that all NGOs registered in the global south were, or needed to be, small, or geographically constrained?  

We decided to transition to the term “domestically registered in an LMIC” or simply “domestically registered” when the surrounding sentence provided ample context to indicate it implied location in a global south country. Our initial use of this language confirmed our assumption that this terminology was easy to understand and easy to use. Each time we used it in conversation it was successfully understood by the other party what we meant, so we’ve transitioned over to this lexicon.

Key Concept: What defines “domestically led and registered?”

One thing nearly everyone seems to agree on is that not all domestically registered organizations are the same when it comes to representation of and connections to the communities they engage. A locally registered affiliate of a large US-based organization that is not permitted to operate independently from “headquarter” guidance is significantly different from an organization that was envisioned, started, led, and staffed by individuals from the served communities. And a host of organizations operate somewhere along the spectrum of this continuum.

We believe:

The key hallmark of a truly domestically led and registered organization is that it has the authority to design its own strategy, programs, and operations, and fundraise for them without review or authorization from an organization in the global north.

Indicators that might point to whether an organization is locally led (or not) along this continuum could include: 

• To what extent does the board, leadership, and staff represent that country of registration?  
• Are there fully independent finance and accounting systems?
• Does the organization have an independent, country-specific strategic plan that is created by domestic staff?
• Does the organization raise its own funds, and have the authority to spend those funds on its own programs?

We acknowledge these indicators are imperfect, and certain organizations may be highly advanced on some of these indicators, while still heavily influenced or controlled by a foreign organization. 

There are so many opportunities for progress, and as we start our journey we want to be inclusive of as many organizations as possible that are actively striving to independently serve and represent the communities in which they work.

What’s Next

We know there are many other instances where we may still need to consider the language we use, and we are continuing an internal process to refine our work in this area.

This journey mirrors the GDI ethos of continuous learning and development of our thinking.  We approach this journey with a learning and listening-centric approach, and invite you to join us in this dialogue. That may look like considering how you use your own language, sharing your perspective with us, or discussing these issues with your colleagues.  

No matter what that path looks like for you, we look forward to learning, becoming better, and advancing this important work together.

Join our mailing list for updates and follow this series for our latest thinking on the language we use related to GDI’s work in this area. You can also read the first article in our series here.

Localizing development, or shifting the power to global south organizations, has been discussed as a priority in international development and humanitarian relief for decades. Over the past year, articles and reports on localizing development that call for more equitable power structures within these sectors have proliferated. Yet, this introspection and thought leadership has yet to translate into measurable change in funding flows.

Current State: Only 6% of bilateral funding to NGOs goes to domestically registered NGOs*

Development funding continues to be predominately routed through organizations based in the global north. OECD data shows that of the bilateral overseas development assistance (ODA) provided to non-profits and civil-society organizations, only 6% goes to “developing country CSOs” or domestically registered NGOs. When looking at the share that domestically registered NGOs receive as a share of total bilateral ODA, this number stands at less than 1%.

Source: OECD Data accessed here. See note on methodology at the end of the article.

The story is similar in private philanthropy. Aggregating data from 27 foundations (for which OECD had complete data), we find that less than a quarter of their giving to non-profits goes to domestic NGOs. When considering the share going to domestic NGOs as a share of their total portfolio–which includes giving to research institutions, multilateral organizations, etc.–this share is even lower at ~7%.

Other sources peg the share of funding going to domestic NGOs to be even lower. A study reviewing the Grand Bargain commitments (that were made in 2016) found the share of funding going directly to domestically registered NGOs to be at 5%. The Global Humanitarian Assistance Report 2020 found that direct funding dropped from 3.5% in 2018 to just 2.1% of total humanitarian assistance in 2019. 

Each source tells the same story. There has been too little progress, too slowly.

Why We Should Change: Self-determination and better outcomes

Like many in the community, we believe that continued effort toward localizing development is critical. But we wanted to reflect and truly consider why this is important, so we could more easily identify what success would look like. We acknowledge that different donors come with different motivations and priorities. For our own purposes, we focused on two major themes:

• Self-determination is a fundamental human right, and any work should arc toward advancing this priority. Our colleagues at the HPG literature review described the status quo this way, “the persistence of an unjust distribution of power…often kept those most affected by crisis furthest away from decision-making about how to respond to them.”
• Localized development (whenever appropriate) is more economically efficient and leads to better outcomes. In addition, while the evidence base on secondary benefits is not yet adequately developed, there are indicators that point toward clear potential additive impact from localizing development, including growth of local economies surrounding development activities, upskilling of individuals engaged in programs, and empowering citizens which can lead to more effective and accountable communities and governments.

Joining the Broader Conversation

We kick-off our exploration of these issues with a few critical and transparent disclosures. We know this area is fraught with potential disagreements, and misinterpretation of earnest dialogue is all too likely. To that end, we approach this topic with humility and a desire to learn and contribute in the way GDI knows best: exploring practical, systems change solutions; recognizing all good ideas become great solutions through a process of learning, evolving, openly considering advice and criticism; and valuing flexibility over rigidity.

We would like to specifically note that the language surrounding this area is particularly challenging. In this article, we explore our initial thinking on how to respectfully dialogue on these issues, and more about how we’re defining these issues in our series. We invite you to consider our initial exploration into the language as you join us in this learning journey.

Where We’re Starting: Funding flows

While funding flows are a primary indicator, they are only one of many areas where localizing work is required in the development and humanitarian sectors. Funding for social impact businesses is similarly lopsided in favor of founders in the global north. Representation of impacted communities remains low within organizations setting development priorities. “Knowledge creation” and ownership is concentrated in the global north, targeted at global north audiences, and offers little shared back with the communities they “analyze”. Even basic working norms within “headquarter – field office” structures, requiring local nationals to conform to time zones and working norms in the global north, perpetuate colonial ways of working. 

So where should we start? In development, like in other industries, money is a proxy for power, so a concerted push to change funding flows is a logical first step. Funding domestic organizations directly can be an effective catalyst to transfer ownership and decision-making power to communities where development takes place. It also provides a tangible, measurable metric to hold organizations accountable. 

We are starting our efforts by focusing on funding flows to non-profits and civil society organizations. We selected this channel for a few reasons: 

1. The non-profit channels often have the closest proximity and direct control over service delivery to communities. Localizing decision-making within this channel, we believe, is a difficult but relatively direct route to empowering communities being served, in the short-term.
2. In the long-term, strengthening domestic civil society ecosystems strengthens (or creates) a mechanism to hold governments accountable and put pressure on them to be more transparent, efficient, and people-centric.
3. This approach leverages our own comparative advantage of deep experience with and therefore ability to influence the non-profit ecosystem that includes funders, NGO recipients and intermediaries.

While it is outside our approach, we support and applaud our colleagues who are considering other pathways to progress, including increasing funding to LMIC governments, catalyzing domestic philanthropy, and private sector investment.  

Over the past decade there have been multiple, public commitments from global north funders and organizations to change existing patterns. In 2010, USAID launched its Forward program that committed to providing 30% of program funds directly to local entities by 2015. The Grand Bargain of 2016, built on years of advocacy to “decolonize” the humanitarian sector, included a commitment to ensure that at least 25% of funding goes to local organizations. Ambitious targets continue to be identified, with USAID committing to 25% of funding going directly to local partners in the next four years, and 50% of programing will “place local communities in the lead to either co-design a project, set priorities, drive implementation, or evaluate the impact of our programs.” While these commitments demonstrate a will to localize development funding, they seem to have barely moved the needle on actual funding flows. Why?

Overcoming Obstacles: Identify practical solutions and scale systemic change

We believe there are two significant issues at play, which we plan to explore further in subsequent articles in this series: 

• There has been too little focus on understanding and practically addressing concrete structural barriers at scale. The motivations and incentive structures of many global north funders are not built to support localization efforts. The “risk” tolerance, time and resources needed to find, due diligence, and invest in new, domestic organizations far exceeds the incentives to do so. Capacity building is required, but current pathways aren’t making adequately scaled impact. Individuals within donors and intermediary organizations are rewarded for their ability to cleanly manage projects, not necessarily to change systemic dynamics. Meaningful progress requires real, practical solutions to address these barriers.
• Change, particularly systemic change, is hard. In this case, it requires changes across a range of actors (donors, recipients, intermediaries) with diverse motivations and abilities to act. Few organizations have the ability to influence this entire spectrum. This systemic change is made even more challenging because the issue is entrenched, and needs transformation at significant scale.

In some ways, the decolonizing and localizing development “space” is already very crowded, so when we approached this issue, we asked ourselves what unique contributions we could make, and how we could learn from the good work already being done. Part of our exploration has been internal – how do we set up our own structures, systems and processes in a way that is just and equitable? Part of this exploration is external – what concretely is holding back the sectors from localizing? Where are we well suited to support progress? How do we, together with others, launch those activities and set them up for long-term success? 

We’re starting this process by sharing initial perspectives for feedback and discussion through a series of articles. We don’t have all the answers but we are interested in problem solving with the community, and, consistent with our values, turning good ideas into action together.

Our Proposed Goal: Majority of funding flows directly to domestically registered NGOs

As part of our exploration process, we want to propose an ambitious end goal. We want to support flipping the script on development, advancing solutions that eventually will result in the majority of funding going directly to domestically registered NGOs. Any progress is good, but significant movement will be transformational.

Our goal is for the majority of funding to flow directly to domestically registered NGOs. This goal has the potential to unlock other localizing development priorities including building and supporting a vibrant local development ecosystem with local donors and intermediaries; driving models of participatory and collaborative development; and empowering people everywhere to lead the development of their communities.

We recognize there is no one-size-fits-all solution. There are legitimate questions to be asked and discussions to be had on key questions where there isn’t uniform agreement in perspective. Those questions range the gamut, from how do you define a domestically registered NGO, to whether all development should be localized, to whether it is even appropriate to make incremental progress, to whether effort should be focused on making the current system better, or whether it is better to dismantle the current system and rebuild from scratch.

Next Steps

We’ll be sharing our perspectives on these issues along the way, recognizing these initial points of view may evolve, grow, and become more sophisticated as we learn and continue our work in this process.

Thank you for joining us in our journey to support the decolonizing and localizing development community. At GDI we are committed to supporting this work by identifying specific, tangible solutions to address barriers and determining what we can do to concretely advance those solutions. These efforts include transparently considering and proactively working to localize our own approaches and ways of working. Later in this series we’ll be sharing more about our internal and external work in this area, and we invite feedback or questions. 

We look forward to partnering with you as we move ahead.

Join our mailing list for updates and follow this series for our latest thinking on GDI’s work in this area.

*Note on methodology: When calculating the share of bilateral ODA going to domestic NGOs from OECD data, we take the numerator as “Bilateral ODA going to developing country CSOs” / “Bilateral ODA going to CSOs for the year 2019 for DAC members and other official providers”. The numerator includes both ODA going “to” and “through” “developing country CSOs”. In the denominator, we do not include bilateral ODA routed through other channels aside from CSOs, such as recipient governments, private sector organizations, public-private partnerships, multilateral organizations and regional development banks. 

Similarly, for philanthropic funding, we look at the share of funding going to “developing country CSOs” / Total funding going to CSOs. The aggregated view compiled by GDI is based on OECD data available for 27 private funders.