Over the last decade, there has been a gradual, yet significant shift in the way large international donors give foreign aid in countries like Rwanda. Increasingly, major development donors, such as the United States Agency for International Development (USAID), have begun giving money directly to developing country governments and local nongovernmental organisations (NGOs).
Often referred to as “aid localisation,” this movement bypasses traditional international NGOs to directly empower grassroots organisations; ensuring aid reaches its intended recipients. As the trend of aid localisation continues, the global community is starting to pay more attention to the impact localization is having for the organisations that receive the aid on-the-ground in developing countries.
Amref Health Africa, a nonprofit organisation with a focus on women and children that is committed to improving the health of Africans by partnering with and empowering communities, is one of many NGOs across Africa and South Asia that has experienced the impact of aid localisation. Localised aid has dramatically changed the way these organisations operate, mostly in a positive way. With the right investment in local NGO capacity, localisation of aid can yield positive results in the long term.
In addition to the many benefits, the increase in direct funding from major donors has also created some unintended challenges. For example, localisation has imposed new operational and financial burdens on aid recipients, many of which have gone unnoticed by international donors. These include responsibilities related to grant applications and reporting systems – the responsibilities once typically handled by international NGOs, but now passed on to local partners.
These responsibilities have proven to be challenging for lots of in-country NGOs. Many do not have the strong operational systems needed to comply with the reporting demands. According to a new report surveying development experts, as many as 97 percent of aid recipients describe grant compliance – the process of tracking grant activities and budgets and adhering to donor compliance guidelines– as a growing burden.
This burden has increased demand for an already limited number of skilled operations and finance professionals, having predictable effects. Often, NGOs will recruit and train local administrative staff in financial and marketing tools, only to have them leave for higher-paying positions in the corporate sector.
Like many organizations, Amref Health Africa has experienced these operations challenges and pressures. But it has also found ways to respond and strengthen its administrative systems. As the impact of aid localisation began to be felt, Amref Health Africa invested in a system to track employee hours and allocate resources to build a team for grant applications.
While this required significant upfront investment, these systems are now paying dividends, allowing Amref Health Africa to take on new grants and improve efficiency. Amref Health Africa is also sharing the lessons it has learned with other local program implementation partners. The organization is helping strengthen local operational and financial capacity by sharing its own innovation initiative, known as Organisational Development and Systems Strengthening (ODSS). Ultimately, efforts like these are helping achieve the desired impact of localization: building the capacity of local NGOs to address local issues.
While this is a success story, many smaller NGOs are struggling to stay afloat. The global community must act now to empower on-the-ground organisations that can help the smaller NGOs meet the changing requirements. If we do so, in-country NGOs can continue to improve health and economic growth within their communities. But if we don’t address these challenges as a community, the overall effectiveness of aid will suffer.
Creative responses are already being seen around the world, led both by international and in-country NGOs. International groups are creating local affiliates within countries, investing in the operations and systems capacity of their grantees, and building regional technical support hubs. Developing country organisations are beginning to build their own internal capacity to manage these funds while also considering outsourcing operations tasks, employing local fiscal agents, and establishing partnerships with private accounting firms.
While these changes are helping, more needs to be done to ensure that the localisation of aid has the greatest positive impact. Donor harmonization – the aligning of grant requirements across many donors – would be a good first step. This will help reduce paperwork for local NGOs, giving these organizations the time to focus on program implementation. Many local NGOs have called for these steps, but there remains room to improve.
While the long-term effects of localization are still largely unknown, it is critical that the international community takes action to build local capacity on-the-ground. Ensuring that developing country organizations are equipped with the resources, talent and tools they need is critical to helping us all reach the ambitious development goals we’ve set.
Dr. Lennie Bazira Kyomuhangi-Igbodipe is the Interim CEO of Amref Health Africa, the largest Africa-based health development organization on the continent. Linn Dorin is the Principal of Global Finance Strategies, an international consulting firm providing operations and financing services for NGOs.