Politics of Poverty

A speech, a pledge, and a paradigm shift

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A USAID water project in Ethiopia. USAID is committing to provide more direct funding to local organizations. AECOM

Ambassador Power sets a new course for the US Agency for International Development (USAID).

Hats off to USAID!

In a speech on November 4th, Ambassador Samantha Power—Administrator of the US Agency for International Development (USAID)—spelled out three ways to make foreign assistance more effective:

  • focus more on the needs and voices of the most marginalized;
  • help people and partners of more diverse backgrounds to participate in the aid system; and
  • respond to what partners themselves are asking for, rather than what donors think they should want.

We couldn’t agree more.

Then came a big commitment: USAID is pledging to provide 25 percent of its funding directly to local partners over the next four years.

This isn’t the first time the Agency has made such a pledge. Early in the Obama Administration, Administrator Shah committed the USAID to a 30 percent target, and in 2016 the US signed onto the Grand Bargain, whose signatories pledged to reach 25 percent. But the efforts to date have been met with bureaucratic and cultural obstacles, and the Agency has so far only achieved six percent. We hope Ambassador Power can breathe new life into this important initiative.

Why does “direct funding” matter?

With few exceptions, US government funding for aid and development flows first to for-profit contractors, the UN, and large international non-governmental organizations (INGOs). UN agencies and INGOs then pass it on to national and local partners that are carrying out work in their own communities. But each intermediary organization between the original donor and the NGOs on the ground takes a portion of the funding to cover its own expenses, so by the time it reaches the operational groups, there’s less of it to go around.

But direct funding represents more than just the money that powers a development project or emergency response.

The closer an NGO is to the source of its funding, the more influence it has on the design of the programs, and on the indicators of success. Because local organizations are more rooted in the communities than their international counterparts, direct funding translates into a better chance that a development project or disaster response will be tailored to the needs and preferences of the people on the receiving end of aid.

Indirect cost recovery (ICR)—the money allotted to overhead expenses—is another important issue. Organizations can’t survive—say nothing of thrive—without some way to pay their overhead expenses. Funders include a percentage of grants for ICR, but it is normally absorbed by intermediaries before it reaches local NGOs. Direct funding helps ensure that NGOs—so vital to the aid system—can keep their doors open.

Not only will domestic NGOs benefit from the USAID commitment—responsible governments could, as well. There are many governments and government agencies that are ready and willing to deliver services but lack the resources to do it effectively.

And finally, implicit in the direct-funding model is the recognition by major funders like USAID that local actors are effective and deserve credit for their ideas, experience, and accomplishments, and their strong connections to communities.

Oxfam has been working for more than a decade to encourage foreign aid that advances local leadership—that promotes a shift in power within the international aid system to enable domestic NGOs and responsible government actors to take the lead in responding to emergencies and development challenges. We applaud USAID for joining this fight, and for making it the centerpiece of its agenda. (Read more about Oxfam’s work on local humanitarian leadership.)

Some of the obstacles facing the Agency loom large. As they should. Colonial attitudes have plagued the aid sector for as long as there’s been an aid sector. Elevating the power, influence, and visibility of local and national NGOs represents a challenge to cherished assumptions that have held inequalities firmly in place for decades.

What will it take for USAID to become a good partner to local organizations?

The organizations themselves need to answer that question, but key issues include addressing colonial and racist assumptions about corruption (that local groups are inherently corrupt and international groups inherently honest). They include streamlining bureaucratic processes and rethinking megaprojects, in order not to overwhelm the systems and capacity of smaller organizations. And listening to local partners at every turn; for example, supporting the partners’ own capacity-strengthening agendas rather than imposing trainings on them that are conceived in Washington.

“Local voices need to be at the center of everything we do,” said Ambassador Power. We hope she means it.

Power’s speech went beyond the what to the how. She signaled USAID’s intention to ensure that gender equality and inclusiveness are at the heart of its localization approach. That alone deserved a standing ovation. And she connected USAID’s mission to wider issues of democracy—to the importance of defending civic space and journalists in the fight to uphold human rights.

Translating the vision she outlined into reality, from talk into action, is a serious undertaking.

“The status quo is tough to shift,” she said. “There is a lot of gravity pulling in the opposite direction.” Oxfam is pleased she has pledged to invest in USAID’s workforce—depleted in recent years, and lacking in diversity. And we urge our peers to throw their weight behind the Agency’s new approach and initiatives.

Managing the humanitarian and development challenges we face now and those looming on the horizon requires an aid system that is sustainable, nimble, and just. It requires that the grassroots be strong and that traditional leaders acknowledge their limitations and ease their grip on power and resources.

Last week, USAID came out swinging for progressive change and for justice, and it was a good day for us all.

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