Melinda Gates’ recent $12.5 billion pledge echoes MacKenzie Scott’s ongoing wave of transformative multi-billion dollar donations, offering a glimmer of hope for real change in communities around the world. This bolder approach to philanthropy has indeed shifted the focus towards impact and empowerment. However, a closer look at both Melinda and MacKenzie’s commitments reveals that a significant portion of their new-age giving still goes to established NGOs, many headquartered in the US. This raises a crucial question: what resources are left for local, small-to-medium NGOs in developing countries?

It’s important to clarify that this blog isn’t intended to discourage large-scale philanthropic initiatives. On the contrary, I encourage more philanthropists and donors, particularly those outside the US, to follow the lead of Melinda and MacKenzie. Established and large organizations undoubtedly play a crucial role in achieving social impact. However, my deepest wish is to see a rise in philanthropy that reaches further – specifically, to local and small-to-medium non-profits in developing countries. These organizations are often the true changemakers driving societal progress.

Local and small-to-medium non-profits are deeply embedded in their communities. They understand local needs and challenges better than large, international organizations. Despite their potential for significant impact, these organizations rarely receive the funding they need. Even in cases where they receive funding, it’s often restricted, potentially perpetuating a nonprofit starvation cycle. As reported by Development Initiatives in 2023, only around 1% of all global development aid reaches local NGOs in developing countries. Paradoxically, while philanthropists and donors often demand agility and innovation from these local changemakers, the funding gap leaves these community-driven organizations struggling to survive, retain high-quality talent, and thrive.

Why the Funding Disparity?

With the noble goal of creating a just, equitable, and sustainable future for all, how can we, in the development and impact space, keep recreating this funding disparity?

Many discussions have explored potential justifications for not funding local organizations. Counterpart International highlights five key reasons, and I’ll reword them and add some insights from my experience as a fund manager at intermediary organizations:

• Donor Bias: Funders may unconsciously favor established organizations with proven track records. Risk aversion can lead them to see larger organizations as safer investment choices.
• Due Diligence Challenges: Verifying the credibility of smaller NGOs in regions with limited infrastructure can be resource-intensive for donors.
• Visibility and Networks: Smaller organizations in developing countries often lack the visibility and connections needed to attract funding.
• Complex Application Processes: The administrative burden of applying for grants can be overwhelming for small nonprofits with limited staff and resources.
• Local NGO Challenges: Local changemakers often lack expertise in grant writing and navigating complex application processes. In my experience as a fund manager, I’ve seen how language barriers can further disadvantage them.

Bridging the Gap: Actionable Solutions

The solutions to these challenges may not be novel, but they are necessary:

• Shifting Priorities: Donors should prioritize impact potential over scale alone. Partnering with local experts to identify and empower locally-driven solutions is crucial.
• Flexible Funding: Move away from restrictive grants, allowing local NGOs the flexibility to address community needs over the long term.
• Building the Visibility of Local NGOs: Creating platforms and networks that showcase the work of local non-profits can attract more funding.
• Capacity Building: Invest in programs that equip local NGOs with the skills needed to compete for funding and manage resources effectively.
• Simplified Grant Processes: Streamlining application and reporting requirements can make it easier for small organizations to apply for and manage grants.

Additonally, intermediary organizations like consultancies, impact networks, and accelerators can play a vital role in this process. They can act as a bridge between donors and local actors. For instance, an intermediary organization might help a donor with limited experience in a specific region identify high-impact local organizations working on critical issues. These organizations can provide capacity-building support to local NGOs, advocating for more equitable funding practices, and assisting them in developing the skills and infrastructure needed to secure and manage grants effectively.

Funding for Lasting Change

Funding local, small-to-medium organizations is about more than just scaling solutions. It’s about fostering true social justice and ensuring that the voices and solutions closest to the problems have the resources to create lasting change.

Philanthropy has the power to amplify the voices of those closest to the challenges. By investing in local and small-to-medium organizations in developing countries, we can empower true change from the ground up. Let’s move beyond the headlines and ensure that philanthropy becomes a tool for lasting impact, one community at a time.