Global and regional funding shifts
Funding trends
Author: Jenny Lah. The analysis on funding trends draws on data, funders’ documents, other news reports and a series of semi-structured discussions with 16 funders and network staff. It relies on data sources that demonstrate scale and trends — namely the Creditor Reporting System of the OECD’s DAC. More on scope, methodology and data.
In this article:
COVID-19 and transparency, participation and accountability (TPA) funding
Since COVID-19, funding to TPA-related issues has likely decreased
Interviewees didn’t see much change in 2019 on 2018 trends, which seems re-affirmed by preliminary DAC data (OECD DAC, 2020). In 2020, overseas development aid (ODA) increased by US $10 billion due to support for Covid-19 (OECD DAC, 2021), though there were significant cuts by the UK.
Though overall disbursements were up, many bilaterals faced challenges with their programs and re-directed resources to respond to the health situation and related crises in livelihoods, education, and other areas (DAC Working Party on Development Finance Statistics, 2020). They have also delayed work that’s difficult to implement in pandemic conditions. Other changes resulting from COVID-19 included additional reliance on local partners and increasing emphasis on digital approaches (OECD, 2020).
Some countries and blocks (like Canada, Germany and France) have maintained or increased ODA. There are concerns that ODA has not increased enough to address the crisis however. There are also concerns that future cuts are likely, including countries with a lower gross national income (GNI) reducing their ODA to match their commitment to a percentage of GNI.
Some donor governments may decrease public spending later as they seek to curb their growing public debt. Eurodad’s analysis looking at the post-2008 global financial crisis period suggests that even if there aren’t cuts now, bilateral donors may make cuts a few years from now (Van de Poel, 2020). This may lead to more bilateral governments changing their strategies (as the UK is doing) but thus far, no other country has yet followed in reducing its ODA-to- GNI commitment.
For philanthropies, COVID-19 has led to a focus on health and direct response to crises
A study on US philanthropies’ responses to COVID-19 shows that a majority were planning to spend more, and the focus areas for increased spending were health services, social justice, economic recovery and other responses (Dalberg, 2020). TPA-specific issues did not figure highly.
Dalberg also found a similar trend among African philanthropies in their responses to COVID-19, who have also increased funding to health, food security and economic issues (Mwangi, Tsan, & Tweed, 2020).
In theory, more funding to health could lead to more funding to some TPA issues like social accountability for health. Many field actors have presented and written on social accountability during the pandemic (Open Government Partnership, 2020), but it is not clear if and how funders are involved. It does not appear to be a part of vaccine finance yet, with calls for open vaccine contract going unheeded.
Multilateral financial institutions have increased their funding during the crisis
Multilaterals increased their commitments much more than bilaterals during the crisis. Initial analysis found that bilateral commitments declined by 17% in 2020 compared to 2019, while multilateral finance institution (MFI) commitments increased by 31% (Dodd, Breed, & Coppard, 2020).
For many MFIs, these extraordinary efforts were achieved through frontloading future budgets. This means that they will need replenishments to continue their spending in the future. As MFIs are funded by shareholder countries, this could lead to lower spending later if replenishments are insufficient to maintain current levels.
The World Bank is under pressure to increase its disbursements to meet its over US $100 billion commitment to respond to COVID-19 as it has been behind (Duggan et al., 2020).
One way to do this quickly is to make loans to governments in ways that do not require significant project preparation like budget support. The World Bank has increasingly taken on aspects of the TPA agenda, but this is subject to negotiation with country clients and ongoing donor pressure. Many analysts and advocates are watching these loans for adequate transparency and accountability.
The International Monetary Fund has provided some of the quickest response packages in reaction to the COVID-19 crisis. However, many advocates are concerned about austerity conditionalities in emergency packages, which could impede democratic control over budget spending in the medium to long term (Jones, 2020). Advocates also note that a third of countries ‘failed to commit to undertake audits for their Covid-19 expenditures’ (Daar & Tamale, 2020).
- Download the briefing paper ‘International funding form transparency, participation and accountability and COVID-19: trends and implications for funders’.
Global and regional funding shifts
Global governance funding increased slightly
International funding for governance as reported to the DAC increased slightly from US $19.5 billion in 2015 to US $22 billion in 2018.
The subset of that governance funding from DAC-member bilaterals (the largest bilateral donors apart from China) also increased from US $11 billion in 2015 to US $13 billion in 2018–10% of overall ODA disbursements (DAC Network on Governance, 2021).
Governance funding to sub-Saharan Africa is robust based on DAC data
Overall, sub-Saharan Africa (SSA) and South and Central Asia receive the most funding compared to other regions. In terms of trends, governance funding was up in SSA, the Middle East, Europe and South America since 2015. Governance funding was down significantly to the Caribbean and Central America and Far East Asia by 2018.
In 2019, the top-five country recipients of international funding for governance in SSA were:
- Kenya (US $400.6 million from all sources),
- Nigeria (US $308.1 million),
- Ethiopia (US $271.9 million),
- Niger (US $231.0 million) and
- Uganda (US $196.0 million).
Some funders, including Germany and the EU, have shifted their focus to Africa (Federal Ministry for Economic Cooperation and Development, Germany, 2017) (European Commission, 2020).
The Sahel region in particular has also received increased attention in light of conflicts, humanitarian crisis and increased migration of refugees (Alliance Sahel, 2020) (European Commission, 2020).
Analysts have long expected (or even encouraged) donors to reduce concessional finance to stable middle-income countries like Ghana and Senegal. Analysts and funders have discussed moving to other kinds of partnership models, such as peer learning (Provost, 2014) (Steensen, 2014). However, for Ghana and Senegal specifically, ODA did not fall from 2015 to 2019.
Interviewees noted that Ghana and Senegal, as well as Kenya, remain regional hubs, meaning that funders locate their offices there and develop regional programs from these countries. This creates network effect, and entities in these countries receive more funds compared to other countries.
Most African philanthropists are not interested in TPA
Most African philanthropists are not interested in funding TPA issues according to a recent study by Bridgespan (Schwier, Wallington, Holland, & Magoronga, 2020). They want to avoid politically risky issues and thus frame their giving as addressing ‘basic needs’, such as poverty reduction, hunger, health and education. This matches the findings of an earlier study on funding to think tanks in developing countries (Lah, 2017), which also found that philanthropists in developing countries tend to focus on traditional charitable giving topics or topics relevant to their businesses, e.g., entrepreneurship.
Types of organisations being funded
Developing-country governments are the most common recipients of international funding
‘Recipient governments’ receive the most funding out of all the organisation types, because bilaterals and multilaterals tend to work with them. Support through recipient governments was down slightly in 2018.
The four other common types of organisations receiving funds are donor governmental bodies, donor-country NGOs, UN institutions and other multilaterals. In 2018, DAC bilaterals increased funding through their own governments and the private sector compared to 2015.
NGOs received more funding
NGOs saw an increase in funding, including a slight increase in funding to developing country-based NGOs. However, donor-based NGOs still receiving the bulk of funds to NGOs, and funding to developing country-based NGOs increased from a lower base. Funding for listed INGOs (which are categorised separately but often headquartered in the Global North with many regional and country offices) was also up slightly.
Interviewees suggested that philanthropies and some bilaterals are discussing funding local civil society organisations directly more frequently. However, it is not yet clear how much budgets and investments have actually changed.
Several interviewees reported shifting their funding away from organisations based in the Global North and towards regional or country-based organisations. USAID has moved in this direction, launching a New Partnership Initiative to allow ‘USAID to work with a more diverse range of partners, including local organisations in partner countries’ (Maloney, 2020). USAID has been attempting more local contracting since the Obama administration, so it is likely that some efforts will continue in this direction under the Biden administration. But funding or attempting to fund local organisations is not a uniform trend among bilaterals and philanthropies. Based on strategy documents, some bilateral funders are not focused on this.
Other interviewees noted that there was more emphasis on improving funding through coalitions, partnerships, networks and INGOs. They mentioned co-ownership and better ways to support subgrantees through Global North-South partnership. Some staff of philanthropies discussed this option because they do not have country-level presence to facilitate direct grant-making.
Large-scale African philanthropy is not yet a major source of funding for local NGOs
Large-scale philanthropists based in Africa tend to ‘give mainly within their own countries’ according to a recent Bridgespan study, but not generally to NGOs (Schwier, Wallington, Holland, & Magoronga, 2020).
This giving goes predominantly to the public sector (such as public hospitals and government programmes) and to their own operating foundation, with only 9% going to local organisations.
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