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Navigating core funding frontiers: Assessing options for mobilising flexible multilateral financing

Working papers

Written by Nilima Gulrajani, Erik Lundsgaarde

Multilateral organisations face challenges in mobilising unrestricted core resources. This paper reviews the characteristics of three core revenue generation models with a view to informing choices on how best to improve the quality and quantity of multilateral finance. These three revenue models include:

  • Assessed contributions: core revenues raised according to a formula reflecting member state capacities to pay. This model is often found among entities within the United Nations (UN) Secretariat and UN Specialized Agencies.
  • Voluntary core contributions: revenues provided according to member states’ willingness to pay. They are a common source of funds for UN Funds and Programmes.
  • Replenishments: voluntary core contributions provided at periodic intervals following dialogue on organisational performance and strategies. International financial institutions and global vertical funds mainly employ replenishment models.

Our analysis of the comparative strengths, weaknesses, opportunities and threats of these three models proceeds from the perspective of two major stakeholders: multilateral organisations, who seek a large, diversified and stable funding base; and funders, who seek to influence multilateral action, hold organisations to account for the use of funds, and enhance visibility.

This analysis leads us to conclude that revenue models like replenishments and voluntary core financing can better satisfy contributor needs for influence, accountability and visibility. However, they also come with the risk of greater funding unpredictability for organisations, higher dependence on Development Assistance Committee donors and a smaller pool of contributors. Though assessed contributions satisfy organisational goals of predictable finance obtained through a diverse funding pool, they represent a declining share of multilateral contributions as contributors look increasingly towards voluntary financing options to satisfy their interests.

Acknowledging trade-offs between the objectives of multilateral organisations and funders is essential for identifying practical options to grow core funding.