Devex: There is a clear financial case for localizing aid
This op-ed was originally published in Devex.
New evidence reveals a compelling financial case for localizing humanitarian aid: Local organizations are delivering assistance in a more cost-efficient way than their international counterparts. And yet they remain woefully underfunded.
This week, donors, diplomats, and aid workers will gather in Geneva for the Grand Bargain annual summit to discuss the landmark 2016 commitment by aid agencies and donors to shift power and resources to the countries where humanitarian programs operate.
This year is on track to set yet another record for people in need of humanitarian assistance: 362 million and counting. Conflicts are spreading, resources are not keeping pace with this demand, and international humanitarian law is being routinely floated. But new evidence shows that the system is also failing on localizing aid, one of the central Grand Bargain commitments.
While Grand Bargain signatories pledged by 2020 to give at least 25% of humanitarian funding to local and national stakeholders, only a tiny fraction of that — just 1.2% in 2022 — went directly to local and national groups.
There is a clear ethical argument for localization — local actors should play a central role in deciding what happens in their communities. These groups are deeply embedded in their communities, know best what the needs are, and are the ones who stay when the going gets tough.
“The system must stop treating local organizations as subcontractors and meet them on equal terms as partners who lead.”
But a new series of studies, “Passing the Buck: The Economics of Localizing International Aid,” also reveals a compelling financial case for going local. Detailed budget analyses in four countries — Ukraine, Nigeria, and two anonymized studies in the Middle East — find that local organizations are delivering assistance that is 17% more cost-efficient on average. Global data suggests that this figure could be as high as 32% for large U.N. and INGO budgets.
In Ukraine, the world’s largest humanitarian response, in analyzing budgets across United Nations, international nongovernmental organizations, and local actors, the results are clear. If donors had channeled one-quarter of all aid directly to local actors over the past two years, they could have unlocked up to a quarter of a billion dollars in cost efficiencies that could have been redeployed to save more lives in Ukraine or other hotspots across the world such as Sudan.
The Passing the Buck studies in Ukraine and Nigeria also reveal a deeply unfair system. A review of almost a hundred projects supported by U.N. country-based pooled funds (or CBPFs — multidonor humanitarian financing mechanisms) in 2023 found that INGOs share funding for overhead costs with their local partners.
This is vital for building healthy and strong organizations with safeguards and systems in place. In both cases, however, U.N. agencies receiving money from the pooled fund appeared to retain these overhead costs without any pass-through to their local partners. In addition, the U.N. charges more than double for their international staff as compared with INGOs and up to 28 times more than staff at Ukrainian and Nigerian relief groups — all for comparable positions.
The system must stop treating local organizations as subcontractors and meet them on equal terms as partners who lead. If the goal of international development is to foster self-reliance and prosperity in global south countries, why do high-income governments and philanthropies from the global north continue to channel nearly all funds through nonlocal groups? While donors such as the U.S. Agency for International Development have doubled down on their public commitment and plans to go local, there are a few key moves that could set the stage for meaningful change.
1. Increase transparency
Donors and international organizations, including the U.N., must strengthen transparency. Clear and detailed budget disclosures will help identify inefficiencies and opportunities to shift more money and power to local actors. It will also help build a culture of accountability around localization in the aid community.
2. Partnerships built on equal footing
The international humanitarian community must also move beyond the inequities of the subcontractor model and build true partnerships with local groups. Donors can start by mandating that all U.N. agencies and INGOs pass through overheads in full to local groups. This will give them the resources to build robust systems and capacities and a more equitable field.
3. Leveraging existing tools
Donors should also look toward leveraging existing instruments, such as the CBPFs. In Ukraine, the U.N. pooled fund worked hard to onboard more Ukrainian organizations and changed its requirements to prioritize key localization principles such as equitable partnerships, the fair provision of overheads, and “duty of care” protections for front-line responders. The result was more money flowing more directly to Ukrainian groups. Pooled funds in other crises such as Sudan give little if any money directly to local counterparts and can be better utilized.
4. Alternative models
Finally, the aid sector needs to build new ways of working. There are many alternative models to get more funding and shift power to local actors. New locally led pooled funds are emerging in many countries. Coalitions of local actors, anchored in the global south, are becoming an important mechanism to channel more donor dollars. Models like the Global Fund to Fight AIDS, Tuberculosis and Malaria in the health sector and the NEAR Change Fund offer inspiration for how donors could take humanitarian localization to scale.
The evidence is clear. The call to action is urgent. Let’s act decisively to reform humanitarian aid and make a meaningful difference in the lives of those who need it most.