‘As soon as donor money stops, the project ends.’ This remark, by Rakesh Rajani, Vice President of Programs at Co-Impact^[1], sets out the prevailing orthodoxy in international aid.

Tribal women celebrate with a traditional dance in Odisha. Photo courtesy of the H&S Davidson Trust.

In light of this, why do funders persist with the time-limited project? As chair of a grantmaking trust, I would like to know whether it is more effective to fund local organisations which are not time-limited, rather than projects which are?

At the H & S Davidson Trust, we have always funded time-limited projects, mainly as part of matched funding with two major INGOs. Our focus has been on at least doubling income and empowerment levels of women and their families in very poor communities over a five year period.

Our strategy has been to undertake testing new, higher-risk projects, lasting for at least five years, then get them scaled up by larger funders like governments.

In the past fourteen years, we have participated in eight overseas projects of which two failed, six succeeded, and three of these were scaled widely, mainly by governments. We made mistakes, but learned a lot, mainly from people working on the front line, and were fortunate in the quality of people we worked with at INGOs and local NGOs.

In a one or two year project, it is very difficult to build sustainable new capacity. 

Our trustees are now examining whether to continue with the project approach or to collaborate with like-minded donors to fund local organisations with no time limits. Which strategy is more effective and sustainable?

For projects, sustainability depends on building local capacity and attracting new funding. The two main costs in our projects are capacity building through training, mainly in women’s self-help groups, and capital investment. Training, if well done, produces sustainable outcomes, but capital investment needs renewal over time.

The short timescale of many projects is a limiting factor. In a one or two year project, it is very difficult to build sustainable new capacity. 

What are the advantages of funding local organisations rather than projects? Here are some thoughts: 

1. Organisations are likely to last longer than projects, especially if funders do effective due diligence before selecting them.
2. People who live locally are likely to be committed to the locality and be well networked within it. Staff turnover therefore likely to be low and motivation levels high.
3. A local organisation will probably have an existing base of deep local knowledge and information, centred in one place. Diffusion of data can be a problem for INGOs since they have higher staff turnover, lots of paperwork. Implementation in the field is often done mainly by local NGOs. Knowledge is widely dispersed across many people and places, collective memory is weak, and learning is lost or forgotten.

This blog is not a discussion of the merits of fund recipients – INGOs versus grassroots organisations. INGOs may direct funds to local community groups rather than projects and many do so. Furthermore, a significant part of their income is for emergency aid, which has fewer restrictions than projects, and enables them to enlist the help of local organisations. But the project approach remains the preferred norm among governmental and international bodies who account for a large proportion of INGO funding, and this is where change is most needed.

What do you think? To find out the answers to these and other questions, Alliance magazine, with Jigsaw Research and H&S Davidson Trust, has initiated a new global survey on ‘Equal Voices, Collaboration and Scaling’. The aid sector is on the cusp of major change. Please help us shape the new future by participating in this survey, making your voice heard. It only takes five minutes to complete.

Hugh Davidson MBE, MA.Chair, H & S Davidson Trust. He has worked full time as an unpaid volunteer and funder since 2005 and written several books, including The Committed Enterprise – How to Make Vision, Values and Branding Work.