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Localising aid to NGOs: issues and challenges highlighted by a multi-country study

Written by Gideon Rabinowitz

According to the OECD 12.1% of total OECD aid was delivered to NGOs in 2010/11; the US, the world’s largest donor, delivers almost double this figure (21.7%) via NGOs. But is this aid helping to strengthen local civil society in the long term?

ODI’s localising aid research (supported by USAID) has been testing the theory that channelling aid to and through local institutions and organisations, rather than international contractors, is the best way to empower and ultimately strengthen them to lead development efforts. It builds on two main areas of concern with the use of international contractors. First, that channelling money through international suppliers is likely to lead to reduced amounts actually entering developing countries which could be invested in strengthening local actors. And second, that international organisations may have less local knowledge, a key component of strengthening in complex social and cultural contexts.

As part of our work we visited Uganda and interviewed NGOs, donors and the government about progress in the HIV/AIDS sector, and we found that concerns about non-localised aid deserve greater attention.

One donor – the US – dominates this sector, providing at least 70% of the total funding (including national government funding), the vast majority of which is delivered through non-state actors. Our research found that of the 25 US projects in the health sector worth over $5 million, only four, equivalent to 10% of the total value, are managed by indigenous non-state actors, and another five, 15% of the total value, are managed by the local offices of international NGOs or contractors. Therefore at least 75% of US assistance to this sector is non-localised.

One non-localised USAID project managed by an international company without a Ugandan office which we looked into allocated 17% of its budget – over $6 m. – to overheads, which were presumably disbursed to the foreign base of the company for a very limited role in the project (given that a further third of the budget was spent internally on in-country implementation costs). Such resource transfers are likely to emerge whenever an international actor is involved, but may be more pronounced where the organisation has no permanent local presence in the country.

The issue of ill-informed project design and implementation by international actors without a strong local presence was also highlighted to us during stakeholder interviews (admittedly, with some local actors who are likely to be biased when making such statements) in the sector and in exploring some donor project evaluations.

Having said that, we also gathered evidence in Uganda and other case study countries, namely Liberia and Guatemala, that international actors are playing an important and sometimes unique role in development. Many local actors were keen to emphasise their role in building local capacity in areas such as financial management and monitoring and evaluation (as well as the contribution their neutrality from local politics and international links can make to development objectives).

Some donors do appear to be changing their ways of working in Uganda, and an increasing number of international NGOs and companies are setting up local offices, based on a perception that this will go down well with funders.

However, our research implies two clear shifts that would, we argue, make the context more propitious to empower local civil society and increase sustainability.

·        Overly strict financial management and reporting requirements from donors poorly adapted to local contexts may to some degree help sustain and justify the role of international actors; an issue that is extensively addressed by the literature on donor support to NGOs (see section 5.2.3 in our ‘Localising aid’ report). If these requirements were better adapted to local contexts then this role would be less critical and there would be more space for gradually allowing local actors to lead development interventions supported by aid.

·        Second, there seemed to be little strategic analysis and decision-making as to whether international or local actors should be used to support NGOs, beyond (understandably) focusing on who will deliver the required results in the timeframe of the project and can effectively handle the funding requirements.

If donors are to build on, develop and help sustain local capacity successfully, they need to understand better where gaps in local capacity exist, to target suitable support in those areas, and to gradually nurture local organisations to take greater leadership of the interventions that they support.