Bad aid to NGOs – a case of partnership or conspiracy?

Alan Fowler

The past 15 years have seen non-governmental organizations involved in international development (NGDOs) come into their own – largely owing to the ‘civic’ funding policies of the official aid system. Within the framework of strengthening civil society in developing countries and a quest for ‘partnerships’ with non-state actors, this trend is set to continue in the medium term. Today, tax-based funds constitute over 50 per cent of NGDO disbursements globally and the proportion is growing.

However, performance assessments indicate that NGDOs seldom live up to the probably too high expectations of those that fund them.[1] A recently published report suggests that only 20 per cent of projects supported by official aid are sustainable.[2] To what extent are the funders themselves responsible for this?

Studies of NGDO impact suggest four explanations for their uneven and modest achievements in sustainable development that benefits the economically poor and politically oppressed or marginalized:

  • too rapid expansion due to the accelerated availability of official aid;
    a progressive dominance of donor funding conditions which work against applying best practice;
  • underinvestment in capacity growth;
  • macro environmental constraints, particularly poor public management and policies.

Irrespective of the proportionality of these causes, it must be in the interest of donors to ensure that their contribution to NGDOs’ performance shortfalls are eliminated. This article focuses on the constraints on performance arising from the quality of the aid NGDOs receive from official donors.
 
The quality of aid

What is meant by the ‘quality’ of aid? Quality can be defined as the product of policies, conditions and practices of development finance when set against the requirements of best practice in development work. High quality aid conforms to these requirements, low quality aid does not.[3] Common sense suggests that the quality of funds an NGDO receives can enhance or constrain effectiveness. Emerging evidence bears this out.

A uniform set of operational criteria for aid quality cannot be generated. Why? Because best practice varies between different development goals and the activities required to achieve them. For example, best practice in reducing environmental degradation, say through tree planting to protect a watershed, differs markedly from making governance more inclusive through civic education or empowering women. However, a useful general criterion for assessing donor funding quality is an ability to tailor assistance to the specific requirements of different users, goals and activities.
 
What generates ‘bad aid’?

Bad aid to NGDOs stems from deep-rooted pathologies in the aid system. Most significant is the overriding pressure to disburse funds. Paradoxically, this illness is reinforced by tying levels of aid to a percentage of a donor country’s GDP. As donor economies grow, so does the level of aid that has to be spent or returned to national treasuries. In effect, the system is supply led rather than demand or performance driven.
 
Aid is also infected by donors’ own implicit agendas. These have little to do with their overt goals of poverty reduction. The underlying concerns are for market share and penetration for domestic businesses; reverse flows of aid money to support the domestic economy and employment – so-called tied aid; and selective social investment to reduce migration pressures and foster the local stability required for markets to work efficiently.

The uniform approach to allocating aid through discrete packages called ‘projects’ is another bureaucratic ill — a convenience that is at odds with the complex nature of all but the most physical types of development, for example bridge-building.
 
Accountability is narrowly equated with satisfying audit conditions. These requirements are akin to a virus transmitted down the aid relationship to NGDOs and project holders so that the administrative tail eventually wags the development dog. One consequence is to displace the focus of NGDO management from satisfying ‘clients’ to satisfying funders.

Donor pathologies induce pathological responses in recipients. Aid dependency is one syndrome, where local solutions and resource mobilization are discounted or undervalued.[4] Another is the displacement of a southern government’s own income from productive and social investments to other areas such as defence and armaments.
 
Is incremental reform enough?

The above diagnosis is not particularly new and donors are not unaware if it. The problem is that, while aware of the illness, the patient finds it very difficult to swallow the necessary medicine of significant institutional reform. Instead, piecemeal innovations, such as a shift from project-based to longer-term and more flexible programme funding, are being tried and applied with some success. But they remain peripheral and have yet to become a mainstream way of working.
 
Meanwhile, more structural reforms get nowhere. One example is a proposal for the creation of a trust fund for African development jointly governed by donors, recipient governments and civic representatives. This innovative proposal, resulting from and endorsed by a high-level conference held in Uganda in 1993 under the auspices of the Global Coalition for Africa, has not progressed since.

Incremental reform would probably be acceptable if, in the meantime, we could be sure that aid pathologies were not doing harm to those who are assisted. But unfortunately this is not the case. Bad aid can do harm.
 
Harmful aid for NGDO capacity-building – an illustration
 
Increasing local abilities to define and effectively undertake development initiatives is a guiding feature of the nineties approach to aid policy and practice. The common term for this is ‘capacity-building’. But there is no real consensus on what the term means or how it is best made operational.[5]
 
Best practice in capacity-building pivots on adopting an organizational development (OD) approach to enhance NGDO capabilities. Effective OD has a number of key features:
The process is holistic – in other words, all elements of an NGDO must be considered.
It treats an NGDO as a living community. Individualized approaches — such as one-off training courses and sending staff for further studies — can be a useful part of, but are not the same as, OD.
The process must be ‘owned’ by the organization concerned. Imposing change from outside, typically by using funding as carrot and/or stick, seldom works well or for long once donor involvement wanes.
A hierarchy of organizational elements need to be taken account of — from clarity about vision, mission and causes of the problems to be addressed, through strategy, into development interventions and their specific activities. An OD process should improve coherence within this hierarchy.
NGDO achievement should be assessed in terms of outcome and impact not effort and output. Impact, not effort, is the ultimate test of effectiveness.
The process must factor in limiting preconditions, environmental constraints and local norms, plus the current stage of history of the NGDO.
The process adopted must itself generate capacity, for example a better internal understanding of how the organization works.
 
Aid for capacity-building in practice
 
Results from studies in capacity-building of southern NGDOs undertaken by the International Working Group on Capacity-Building (now the International Forum on Capacity-Building) and other analysis indicate that the aid system has significant limitations in relation to financing for the best practice described above.[6] A number of shortcomings stand out.
 
First, to remedy weak NGDO capacity, a common donor approach is to finance a supply of OD services while tying them to their other assistance, such as project funding. This effectively ‘blackmails’ recipients into accepting the services donors fund and disempowers NGDOs.
 
Another limitation is to treat project tools and methods in a mechanistic way. Capacity is then equated with the existence of discrete, standard organizational elements such as planning and budgeting systems, human resource management manuals, adequate and appropriate human skills, job descriptions, physical facilities, well-functioning boards, reporting and accounting systems and so on. Factors such as internal power relations,  organizational culture and features of gender beyond the number of female employees and their positions may be recognized but are not readily accommodated.
 
In judging organizational improvement and better performance over time, there is also a tendency to discount contextual factors — such as a regime hostile to civic actors, or political strife and instability. Commonly the norms donors apply to southern and eastern NGDOs reflect expectations about the behaviour, sophistication and capabilities of their northern counterparts.
 
New methods are being tested that could adapt donor behaviour to the demands of best practice. For example, USAID is experimenting with vouchers which NGDOs can use to ‘purchase’ the capacity-building services they want. But past experience does not suggest that such experiments will transform a disbursement culture or displace it as the mainstream way of donor functioning.
 
What harm does this ‘bad aid’ do?
 
These, and other factors, make official investment in capacity-building at best ineffective and at worst harmful.  Examples of damage are: 

  • establishing unhealthy levels of external dependency;
  • over-financing to accelerate disbursement, which reduces cost-effectiveness while creating disincentives to local economic rooting;
  • disempowering local NGDOs because policies are effectively handed down through funding availability and conditions;
  • dislocating local NGDOs from their social base;
  • distorting the market in terms of NGDO conditions of service that bear little relation
  • to country norms, economic conditions and future domestic capabilities;
  • feeding a public perception that local NGDOs are self-serving or self-employment enterprises by another name, mistrusted by the people and the government.
  • This is not to say that such negative effects are found in all capacity-building interventions  But they are commonplace enough to be of urgent concern. And they break the most cardinal of all development rules – do no harm!
     
    What can be done to stop bad aid?
     
    Funders often fail to see the need for reform because of the way they distance themselves from the effects of bad aid. Distancing is achieved by treating the aid system not as a system but as discrete links in a chain, with each coupling protected by a fire wall. For example, NGDO impact studies do not include the behaviour of and preconditions set by donors as an element in performance. Projects are commonly evaluated as stand-alone entities, detached from the sequence of processes and actors which created and guided them.
     
    Funders might like to consider five ingredients to cure bad aid in capacity-building of NGDOs in the South and East:[7]
  • Change the metaphors and mind sets. The mechanical images of ‘building’ capacity, more appropriate to physical structures than to communities of people, could be replaced with the metaphors of the natural world, such as growth and nurturing.
  • Give NGDOs choice in the services they use. This could be done, for example, by pursuing the voucher approach to financing OD, by providing information about proven sources of supply without dictating which one is used or by investing in improvements in the local supply.
  • Approach aid as a system. This would involve, among other things, altering ‘upstream’ preconditions which disempower recipients and actually reduce capacity.
  • Give preference to long-term processes over short-term products. Growth in organizational capacity takes time and cannot simply be equated with short-term financial and physical investments. The issue is how such investments are effectively applied.
  • Include citizens in strategies for capacity growth. In the long run, it is citizens’ support, not external funding, that is critical for NGDO viability.

Bad aid: partnership or conspiracy?

The current approach of NGDOs in the North is typically to tolerate what is on offer, argue in the margins when the opportunity presents itself, and rely on forums with donors to push for incremental adaptations. There are certainly no collective NGDO boycotts of donors whose funds are qualitatively poor or harmful, nor well-publicized, NGDO-inspired, mass media criticisms of the conditions under which taxpayers’ money is made available to them. Institutional self-interest, contracting and a mendicant position in the aid chain mitigate against such NGDO assertiveness in the North where donors live and public pressure is most easy to generate.  Given their even weaker position, the response of NGDOs of the South and East can hardly be expected to be better.

The observation of a decreasing assertiveness and a creeping self-censorship on the part of northern NGDOs is borne out by a number of studies. Their authors conclude that the ‘professionalism’ resulting from greater official aid is reducing the very comparative advantages donors want from NGDOs in the first place: flexibility, innovation, risk-taking, strong identity with constituencies, a critical voice alongside the poor, internal democratic practices where NGDO autonomy really mean something.[8]

Northern NGOs — and by association some of their partners — are being domesticated by official aid. If this is the case, it is probably unrealistic to expect them to exert the pressure needed to improve, other than incrementally and in piecemeal ways, the quality of the government aid they receive. From this perspective it is more appropriate to talk of donor–NGDO complicity rather than partnership in the aid system.

Conclusions

That the quality of much official aid to NGDOs is inadequate is in little doubt – to the detriment of citizens in the South and taxpayers in the North. The first have little to no leverage, the second have scant reliable information on which to form a sound judgement and assert their dissatisfaction because public information about aid is notoriously underfunded. Who, then, will take the lead in demanding higher quality before quantity? In all probability it will not be northern NGDOs or their dependent counterparts but poor people and the social movements they spawn outside of aid.

Dr Alan Fowler is a development consultant, analyst and writer currently resident in Ethiopia.  He can be contacted by email at AlanFowler@compuserve.com


Notes

1  Overseas Development Institute (1996) The Impact of NGO Development Projects, Briefing Paper No 2, London.
2  A Cox and J Healey (1998) Promises to the Poor: The record of European development agencies, Poverty Briefing 1, Overseas Development Institute, London.
3  A Fowler (1997) Striking a Balance: A guide to enhancing the effectiveness of non-governmental organisations in international development, Earthscan, London.
4  Swedish International Development Agency (1996), Aid Dependency: Causes, symptoms and remedies, Stockholm.
5  R James (1998) Demystifying Organisation Development: Practical capacity building experiences of African NGOs, International NGO Training and Research Centre, Oxford.
6  International Working Group on Capacity Building (1998) A Synthesis of Consultation and Surveys and Strengthening Southern NGOs: The donor perspective Vol 1, PRI, New Delhi.
7  For a comprehensive discussion of improving aid, see M Edwards (1999) Future Positive: International cooperation in the 21st century, Earthscan, London.
8  T Wallace, S Crowther and A Shephard (1998) The Standardisation of Development: Influences on UK NGOs’ policies and procedures, Worldview Press, Oxford.


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