From Promises
to 10 Radical Actions

Most donor support to local civil society organizations comes in the form of grants, but as currently structured, they are akin to analog technology to support change in a digital world. To achieve goals long pursued, we must re-envision the “donor industrial complex” and current system of “piping” restricted project funds through international NGO and multilateral recipient organizations. Such reforms must include increasing general operating support grants, but it is even more important to use and develop new financing solutions that shift power to locally-led initiatives.

Photo Credit: Riva Kantowitz

Impact investing and innovative finance approaches such as outcomes funds are exciting models because they have the potential to bring in new sources of funding, provide a financial return and focus on impact versus onerous reporting.

Other promising approaches include giving seed funding to community foundations and supporting giving circles or community philanthropy in places where such approaches do not exist or are informal. Increasing attention is being drawn to regional philanthropy and foundations and the role of the national private sector in funding social change; these trends offer opportunities to attract new funders who understand the cultural context and have a stake in the well-being of their own societies.

Grants are not our only funding tools—we must invest in and scale new and better tools.

These ideas for reform are currently scattered across the development and donor fields; one of the goals of Radical Flexibility Fund is to define and compare them in one place so that we may better understand their advantages and disadvantages and support local organizations to use them effectively.

Grant funding—often short-term, inflexible and project-specific—neither suits the changing situation on the ground nor enables local organizations to prioritize their own solutions and develop financial sustainability for the longer term. Because grants are the most common funding vehicle, many funders are not structured or willing to use other funding tools even if they can support greater flexibility, greater inclusivity, greater impact and greater sustainability. These include approaches that focus on communities generating their own assets through support to social entrepreneurship, direct cash transfers or seeding community foundations; innovative finance tools, like impact bonds and outcome-based funding; and increasing use of new technologies like Blockchain to help local communities shape and define the impact of their work. These tools allow communities and organizations to generate their own assets, enabling them to determine their own priorities. They also expand access to finance from a more diverse set of funders, including private equity, that are not always bound by the same constraints as traditional philanthropic and government donors. 

Community-led approaches also lead to better outcomes. By bringing together people from a variety of groups in stratified and divided societies, participatory funding—where many people get to decide what to spend money on—strengthens relationships between individuals, within communities and with institutions. 

Creating flexible pots of money both allows resources to be deployed rapidly and enables local partners to tailor programming priorities to changing situations. In areas affected by escalating tensions, being able to react quickly to defuse tensions and respond to early warning signs of unrest or closing democratic spaces ensures action instead of reaction, minimizing negative impacts on the community.

In contrast to established philanthropy efforts, innovative finance involves adapting new tools (including outcome-based financing tools such as social impact bonds and outcome funds) and emerging technologies (such as Blockchain) to countries and communities. While innovative finance does not have a precise definition, it does have several key signatures: changing existing financing tools to make them more effective; filling gaps in funding, particularly by using flexible, not project-specific, funding; integrating new tools into existing funding approaches; providing efficient funding at the national level, thereby enabling each country to identify its own priorities; and finding and funding creative approaches to social change. These hold the possibility of radically disrupting traditional funding models, thereby improving sustainable and impactful development, peacebuilding and humanitarian work.

Photo Credit: Riva Kantowitz

Several tools that have been developed in other sectors could be applied more widely and tested in new areas such as peacebuilding: social or development impact bonds, community bonds and outcome funds. A bond is a public-private partnership that allows private (impact) investors to provide capital for public projects that deliver social and environmental outcomes. If the project succeeds, the investors are repaid by the government (social impact bonds) or an aid agency or other philanthropic funder (development impact bonds) with capital plus interest. If the project fails, the interest and part of the capital is lost. Community bonds are an instrument designed to attract small-scale, grassroots investors to a "loan fund" that will provide affordable, micro, unsecured loans to social enterprises. Outcome funds are structured on a framework in which payments are made to a grantee only if or when pre-agreed societal outcomes are achieved.

Social impact bonds and outcome funds typically fund large-scale development or humanitarian projects and have not been structured or adapted to fund locally-led efforts; however, any type of activity that can be measured through outcomes could be funded this way. One problem with impact bonds is they require a verifiable causal relationship between intervention and specific outcome, and thus may not be suited for processes that involve complex constellations of variables where it is harder to discern whether one specific intervention directly led to the proposed impacts.

Innovation need not be restricted solely to funding instrument or methodology, and, in fact, the most radical and productive innovations may be concerned with donor organizations themselves. Advances in distributed ledger technologies like Blockchain make it possible for donor organizations to make funding decisions based on recipient organizations’ decisions and priorities. For example, instead of relying on limited information to make decisions, donors can rely on experts chosen for their past performance in allocating funds or selected by voters in the communities they serve.

People lead social change. Local leaders are in the best position to choose priorities and make decisions on funding mechanisms and their outcomes. Participatory grantmaking, trust-based philanthropy, and community philanthropy are all approaches to the relationships between funders and funding recipients. 

Further when regional and national actors fund social issues in their own countries, important opportunities for dialogue and evolution of social norms are created. 

These approaches should also curb the worst neo-colonial tendencies of external funders to impose values and priorities, while diminishing the likelihood that external actors will be seen as or blamed for imposing their own outside values.

Local change makers bring expertise in a range of fields that can solve community challenges. Instead of the default approach of sending in international consultants to build capacities determined by outsiders, funders should first ask communities and organizations what skills they have, what they need and the challenges they face to acquire these skills. Then they should fund local experts who have these skills to train others, creating long term sustainable change. International experts can add value but should not be the default. 

Donors and intermediaries often define priorities and metrics. While identifying and being accountable to priorities helps donors justify spending by ensuring money is spent as promised, this process is not designed to measure impact for the community itself. 

Photo Credit: Lauren Bradford

Measuring outcomes to show progress is not inherently negative; however, the current bureaucratic measurement exercises use indicators that reinforce imbalanced power dynamics. These indicators are often based on knowledge, norms and metrics created in and used by the Global North. As various sectors have been increasingly driven by results, donors have focused disproportionately on those things that are easiest to measure, regardless of their importance. If an organization must prove to a funder that it achieved certain goals, it is likely to pick those that are specific and more easily quantifiable. These may not be the most important to improving the quality or impact of social change work and can undermines the work of systems thinkers and visionaries who see fundamental social change in big picture terms. 

Local organizations need to define their own metrics that can be shared with donors, and their communities, and have the resources to track them. One idea of participatory goal setting is to change the evaluation methodology to community reporting, whereby the effectiveness of an intervention would be judged not by a donor-designed metric but by the community’s view of it. By putting communities and implementing organizations at the center of priority setting, those communities can define their own outcomes, needs and what impact means, which will also ensure the donor achieves its outcomes.

Furthermore, the measurement process often puts a great burden on the implementing organizations’ capacities, siphoning off scarce resources to respond to donor-imposed requirements. Donors also use significant resources to monitor grants and it is common that they can neither keep up with vast piles of traditional quarterly reports nor use their findings. 

Because they are not designed around local priorities, requiring grantees to give primacy to donors’ ideas and projects, or to devote time to superficial and repetitive demands by donors, diminishes the effectiveness of donors’ funds. Furthermore, many grantees have multiple donors, each of which might have different priorities and administrative requirements including measuring impact. Grantees therefore may have to contend with conflicting donor priorities and needs, some of which might also conflict with community priorities. As a result of this structure, we see duplication of reporting efforts and an absence of standardized reporting formats. Both local and international NGOs are therefore forced to hire employees solely to meet the reporting and administrative demands of even just one funder, taking scarce resources from program work and partnership development. Many INGOs would like to better fund local organizations but are locked into this system with its administrative demands. General operating support is already underfunded. Donors don’t provide enough resources for organizations to meet donor requirements, carry out programming, and do the work of building equitable partnerships.  

Social change funding is most often viewed as the provision of money to an organization to implement a project or deliver a service. However, these funds, in fact, are going to people with ideas and enabling partnerships. Why is it that the narrative about funding focuses on projects?

The international “donor industrial complex” has systematically underinvested in people and organizations working in their own communities. Between 2011 and 2015 the largest 1,000 U.S.-based foundations made $35 billion in international grants, only 12% of which went directly to local organizations based in the country where programming occurred. It is well documented that small pools of unrestricted funding—that is, not project focused—can be critical for organizational resilience, especially in difficult environments; in recent years, however, only 1% of the value of international grants  has been for general operating support to local organizations. 

The United Nations has noted—and research has demonstrated—that supporting civil society to create its own solutions can be the most constructive path toward sustainable social change. A 2019 report examining more than 70 external evaluations found that local peacebuilders demonstrated significant impact in preventing, reducing or stopping violence; improving relationships among citizens (i.e., horizontal relationships); and improving relationships between citizens and those who govern them (i.e., vertical relationships). 

These data demonstrate that when you shift resources away from projects to invest in people, relationships and communities, you transform power dynamics. Community members become participants, not recipients, as donors facilitate locally generated priorities and solutions. This creates more effective and durable responses to social change problems. 

Interventions focused at the project level which may be more transactional in nature are not necessarily bad. However, in order to contribute strategically to social change, they need to be understood as part of a larger transformative set of goals. In funding people and networks instead of projects, donors can support a “movement mindset”; that is, they can work in partnership with civil society to achieve larger transformational goals such as combatting global trends that run counter to human rights, peacebuilding and humanitarian work. This has been seen to be true in the human rights field, where donors are more likely to fund activists and movements. These donors do this by supporting collective actions such as campaigns, individuals, coalitions and movements that aim to empower grassroots actors (which are not always the same as “civil society”), as well as linking communities to national institutions.

Funding groups or networks across sectors builds bridges and enhances collaboration. It also strengthens civic trust, which is both one of the most essential qualities for stable societies. Finally, donors that extend funding to groups of individuals or organizations have taken the time to build trust in and understanding of existing networks, which allows them to build more authentic partnerships.

Only through recognizing the interconnectivity of people will we create safe, healthy and just communities and societies.

Donors hold a number of assumptions regarding control, due diligence and risk. Risk for whom? Donors talk about appetite for risk, but not appetite for trust – in reality local organizations and people are assuming the real risk including to their jobs and sometime their lives. The risk to funders can be fiduciary and is often reputational.  

Photo Credit: Riva Kantowitz

The funding system has developed in such a way that funding intermediaries (or re-grantors—funders that distribute foreign aid usually in small(er) grants) and international NGOs exist in part to absorb risk. This extra layer may not increase the effectiveness of grants but instead channels money away from the problems those grants seek to fix. Inscrutable layers of rules that might once have fulfilled the bureaucratic intent to provide oversight or combat corruption have increasingly served to tick donor boxes. Donors would better use their money through an examination of the assumptions related to risk, a more nuanced understanding of the capacities local organizations need to carry out their work and a commitment to support those organizations’ development. 

These assumptions about risk exacerbate inequality, further ingrain power dynamics and, ultimately, impede the work these funds are meant to enable in the first place. These assumptions perpetuate donors’ lack of understanding about the impact of local organizations’ work and their  tendency to privilege “known” organizations (usually national or international-level organizations) when making funding decisions. 

Donors can better support local organizations to accurately assess their strengths and weaknesses, including accounting systems, security challenges and political posture. This could in turn assist the donor in committing resources to helping organizations address their weaknesses—which exist in every organization, no matter the country—and finding ways to plan for perceived risks to the funder’s work or reputation. 

Funders need to start turning towards a venture capital mentality. We know that the usual funding bureaucracy is not a good fit for innovating, particularly in complex operating environments. We need to reach beyond mechanisms like pooled funds that generally serve the needs of donors by pooling risk. A much more dynamic approach—which is part of what the Radical Flexibility Fund sets out to catalyze—is needed. If we apply the ethos of venture capitalism, for example, we would expect 30% of a funding portfolio to fall short of its goals. Instead of seeing that as a failure, we would see it as the natural consequence of pushing boundaries. This ethos is particularly well suited for private philanthropy, as such donors can more easily be the vanguard of innovative, bottom-up and democratic approaches to funding than can governments. 

Donors tend to think about accountability first in terms of the people who contribute the funds that they disburse—that is, taxpayers for government donors, trustees and boards of directors for private funders. In order to effectively and ethically support social change efforts, donors should also think of themselves as being accountable to the local communities they seek to assist. 

Money from outside the community or country can often corrupt or distort grassroots, mission-driven movements. The influx of development aid, which can flow in massive amounts in crisis-affected settings, can fundamentally change incentive structures, commodifying movements and introducing competition for resources that did not exist before. In the U.S., private philanthropy is accountable only to the Internal Revenue Service, meaning accountability is limited to whether tax laws were followed. In contrast, accountability to communities and partners is almost non-existent or certainly not uniform. 

Community-led financing can be a powerful antidote to the distortional effects of external resources. The inherent accountability among community members has been demonstrated by approaches such as the community savings and loan movement.  

Donors could also improve accountability by incorporating more regular internal evaluations of their assumptions (by asking, for example, “Did we help communities engage and solve their own problems? If not, why not?”), committing to community-led evaluation of impact and regular assessing international donors’ effects on a certain context. In 2020, the UN Peacebuilding Fund published a guide on “community-based monitoring and perception” that could help donors incorporate this type of regular assessment. 

Finally, donors could improve accountability by using different criteria for judging success. Boards, donors and governments are unlikely to surrender either the control they have over how and by whom their funding is used, or the associated need for reporting, but this focus on control and accountability could be redirected to more beneficial ends. When a donor that has adopted community-defined metrics to gauge project success requires reporting and accountability from a recipient organization, that accountability serves both the donor and the affected community. When the community has the power to identify the goals of an intervention, donors become charged with enforcing the rules and standards of the community rather than imposing their own standards. 

Social transformation rarely happens in the one-, two- and five-year cycles used by donors. As one person in RFF’s research noted “Impact is often clearest at the generational level. The impact of the women’s rights movement around the world is very clear, we can talk about it in both a policy context—there are now 40 countries where domestic violence is illegal—and in our lived experience in our families in the ways our grandmothers’ lives are different than ours.” Local organizations need sustainable, long-term funding in order to work effectively. Some such funders exist. For example, the NoVo Foundation has committed to seven years of core support. Thousand Currents started with three years of support, realized this was insufficient, agreed to provide another three years and then increased this to ten. 

Photo Credit: Lauren Bradford

Many funders have noted that despite decades of discussion about how such policies are the way forward, little has changed. Reasons for this include: inertia; deeply vested interests; the donor industrial complex that focuses on hard skills, projects, and measurable outcomes that need to be accomplished in certain time-frames; and the fact that interventions related to certain economic, social, cultural and political rights – such as freedom of expression or due process -- are often subject to the same expectations applied to agricultural development or water and sanitation issues, despite the vastly different processes and time horizons involved.

Intangible goals, such as making more resilient those networks that are vulnerable to erosion in conflict settings, also take longer to achieve than the time usually allowed by donors Resolving grievances stemming from human rights abuses is another such intangible goal and is very important to ending conflicts. To achieve such goals, funders must either change their timelines or create strategies that can be funded in shorter time increments.