Foreign aid is at a crossroads — here’s the path to take

Western aid agencies, including USAID, are scrambling to “decolonize aid” by directing more of their funds to local organizations in the countries they hope to help. This “localization” strategy is an encouraging alternative to interventionism.

However, at USAID it’s no secret just how superficially—and unsuccessfully—localization has been implemented to date. Despite it being a priority, only 6 percent of funds reached local organizations last year. It’s time to consider more fundamental changes to its model, if the agency wants to ensure local voices are afforded the dignity of leading their own vision for change.

Last year, newly confirmed USAID Administrator Samantha Power set new targets for local funding, hoping to reach 25 percent over the next four years and 50 percent in a decade. Ambitious targets were previously set, and abandoned, beginning in 2011 by then-chief Rajiv Shah. Power’s targets may face the same fate.

The reality is much of USAID funding goes to for-profit international behemoths such as Chemonics and Creative Associates, which are built to handle the agency’s onerous paperwork and accelerated timelines. What’s more, those companies can enjoy fast-track opportunities that bypass competitive bidding and fair-opportunity procedures when the agency is under pressure to spend money quickly on political priorities.

For example, during Vice President Kamala Harris’s visit to Central America last summer, she promised to get to the “root causes” of migration. This prompted USAID to give Creative a no-bid contract worth $135 million to work in Honduras, El Salvador, and Guatemala. Creative was tasked with finding local organizations to do much of the downstream work, but as Devex recently reported, local organizations balked. In short, they failed to see value in the project, and they had no opportunity to change it.

By simply requiring large, for-profit companies to find local organizations to do its bidding, USAID is only pursuing the veneer of localization. Instead, USAID should look to the philanthropic community for lessons on doing localization right. One experiment in localization, funded in part by the Hewlett Foundation, saw $200 million invested in local think tanks across 20 countries. An independent evaluation of the project suggested that localization works best when grantees are free to set their own priorities and, at the same time, required to diversify their funding sources to increase their capacity and independence.

My organization has drawn on those and related insights to develop three guidelines for doing localization right. First, development priorities and definitions of success should come from grantees that compete to win support from outsiders. Those priorities, of course, must fit the missions of prospective donors, but those donors must let go of their desire to design change from the outside. Local knowledge is at a distinct advantage when it comes to determining what is achievable and what is worth achieving in context.

Second, award amounts should fit the capacity of the grantee, not the predetermined spending targets of outsiders. Few, if any, grants from outside donors should represent a large majority of the local organization’s budget. Likewise, project budgets should attract a diversity of donors, both as a signal of third-party buy-in and as a strategic commitment to grantee capacity building.

Third, accountability still matters. Though generated by grantees, definitions of success should be used to evaluate performance. Those definitions should be ambitious, achievable, measurable, and meaningful. Future funding should be contingent on a combination of results and demonstrated learning to improve future performance.

Localization done this way works. It’s a funding model that led to important development results, even during the pandemic, such as strengthened property rights for women in South Sudan, affordable food in Indonesia, and a level playing field for microenterprises in Burundi. Each of those projects was conceived and advanced by local civil society organizations working on behalf of their own communities, not outsiders.

Whether USAID can make these changes, given its existing structure and political commitments, is not clear. Localization is not just about who gets the money; it’s about who leads development. That puts USAID and other aid organizations at a crossroads.

Matt Warner is president of Atlas Network and co-author of “Development with Dignity: Self-determination, Localization, and the End to Poverty” (Routledge, 2022).