With USAID funding accounting for over 40% of total humanitarian and long-term development aid, the current U.S. administration’s pullback – even if ultimately rejected by courts as illegal – underscores the importance of engineering new models of humanitarian and development financing. We must change, adapt and innovate.

This blog aims to share few thoughts on alternative financing mechanisms we must invest in more as a sector, especially by national civil society organizations in the global south given our collective commitment to decolonization and localization. More than ever, the critical work of poverty and inequality reduction, and holding governments and corporations accountable, must continue. Citizens’ rights to freedom, education, health, food, gender equality, and a clean environment are on the line. Here are six avenues to rethink resource mobilization:

Strengthen Domestic Resource Mobilization (DRM) at National and Subnational levels:

The political impetus for DRM is increasing, but it is not new. For decades, governments have been trying to improve their tax systems, often with support from donors and multilateral institutions. However, new approaches are urgently needed – which strengthen progressive taxes and the citizen-state compact. In Nigeria, for example, implementing a progressive wealth tax could generate over $7.5 billion annually – enough to double the current health budget.

When tax systems are more progressive and people are part of decision-making on how taxes are used, evidence shows this increases taxpayers’ willingness to pay. Tax morale is a catalyst for DRM, not a nice-to-have byproduct. However, many people in low-to-middle income countries distrust their government due in part to an inequitable fiscal system.

A transformative approach that prioritizes progressivity, decentralizes taxation, uses modern technologies for transparency and involves taxpayers in decision making can unlock significant resources. A participatory management system ensures these resources finance community development projects, such as road construction, marketplaces, health centers, daycare facilities, schools and school meals, based on community needs and preferences. Mission driven organizations have the expertise to help national and subnational governments deliver this and are already doing so in many countries, from Ghana to Philippines.

Engaging the Diaspora

Diaspora communities remain deeply connected to their countries of origin, sending an estimated $857 billion in global remittances in 2023 — 21 times USAID’s $40 billion budget that same year. This immense financial flow represents a significant opportunity, but nonprofits must engage diaspora communities carefully and strategically. Many people in the Diaspora may not understand or may be skeptical of the aid complex. Effective engagement requires active listening to understand their priorities, perceptions, expectations for accountability and how they would like to engage. Innovative ways to channel diaspora contributions into sustainable development efforts include financial tools such as impact bonds, results-based financing, impact investing, cryptocurrency donations, blended remittance funds, and crowdfunding.

Expanding Social Enterprises

Many nonprofits have already adopted social enterprise models, but further exploration is needed to fully harness their potential. Organizations possess valuable expertise and resources that can be monetized by offering services to private companies, universities, government entities, impact investors, and many more. This could include consulting services, training programs, research and evaluation, innovation, and other specialized offerings. However, transitioning to a social enterprise model requires innovation and careful planning to ensure alignment with the core mission. Nonprofits must identify marketable skills and services that do not compromise their values or objectives.

In some cases, nonprofits should consider creating a spin-off social enterprise with the appropriate governance structure and skill sets to generate revenue that could subsidize the social mission. This approach allows the nonprofit to comply with local laws and maintain its focus on social impact while the spin-off enterprise operates with a business mindset. Nonprofits can learn from existing examples such as BRAC or Grameen in Asia and many more2. Additionally, nonprofits should seek partnerships and collaborations to access to new markets, resources, and expertise, further enhancing the potential for success.

Public Fundraising & Domestic Philanthropy

In many low-to-middle income countries, people are generous in supporting family, friends, faith-based organizations and causes they care about. However, formal giving to nonprofits remains limited due to a lack of awareness, trust and accountability. To unlock this potential, organizations must advocate for charity laws that provide tax or fiscal incentives for formal giving. Transparency measures such as third-party charity evaluators can build trust by highlighting organizations with strong governance, transparency and impact. Non-profit with deep experience and expertise, especially in the global north, should support their peers in this endeavor.

Strengthening Private Sector & Corporate Partnerships

The private sector holds significant potential to drive social impact while advancing its business interests. With the push towards sustainability, respect for human rights, increasing consumer awareness and demand, and the ubiquity of social media, many companies in the global north and south should strive to do the right thing. More nonprofit organizations should explore co-creating initiatives with corporations selected through careful due diligence to achieve shared goals. However, it is crucial to remain vigilant against greenwashing and ensure that partnerships lead to meaningful and accountable impact rather than mere public relations exercises.

Leveraging Pooled Philanthropic Funding

Foundations and philanthropic organizations can play a pivotal role by pooling resources to incentivize nonprofits with demonstrated results. Establishing ‘challenge funds’ can spur creativity and innovation, encouraging organizations to explore merging, develop new solutions for pressing global issues. Additionally, philanthropists should adopt more flexible and agile funding mechanisms, enabling nonprofits to share power, partner effectively with organizations in the global south, become decolonial, experiment with new ways of tackling poverty and inequality, and ensuring their investments generate the greatest possible impact. Our own experiments within Oxfam and the sector have great learning to bring to bear.

Moving Forward

The landscape of international development funding is shifting dramatically, not just in the US but in other places as well, and we must adapt accordingly. By investing more in these alternative financing mechanisms such as national and sub-national government domestic resource mobilization, diaspora engagement, social enterprise, public fundraising, corporate partnerships, and philanthropic collaboration, we can build a more sustainable and resilient development with nonprofits organizations re-inventing themselves and making strong contributions to achieving the sustainable development goals. The urgency to act has never been greater, and now is the time to innovate, re-imagine, and take bold steps toward securing the future of our mission-driven work.