Earlier this month a report was published by GRAIN on the Bill & Melinda Gates Foundation’s expenditure and impact. The research shows how little of its roughly €3bn funding has gone to local initiatives, with roughly 80% of grants spent on European and North American organisations. The Gates Foundation refuted some of the conclusions from the report , but its factual claims remain uncontested. The fact that the development sector in general spends most money on itself- rather than on its supposed “beneficiary populations”- is nothing new, and the Gates Foundation is not an exception in this regard. The most relevant and urgent question for donors such as Gates is how their mission statements and overall objectives are best achieved. Is this by stimulating a strong development sector and spend money on governments and institutions, or by more direct support of local populations and thereby cutting out the sectorial or governmental middleman?

The answer is increasingly clear: effective human development requires local-led approaches. The development sector is too administrative, too institutional, too focussed on process and procedures, and too obsessed by internal evaluations to have the impact one would expect from such a billion euro industry. But most importantly, outsiders are not very good at knowing what is needed on the ground. Funders need to change tack if they are serious about achieving their own organisations’ objectives.

People have questions, needs and ideas. Foundations and other funders can- and want to- help them answer and achieve those.  This requires not only greater focus on Southern organisations and people, but a move away from the development sector in its current form. In order to effectively achieve stated objectives, less money needs to go to sectorial actors, administration and institutional support. More needs to be spent on direct support of local ideas and initiatives.

The current situation

Just like the answer provided above, the basic facts are clear: the development sector spends more money on itself than on people outside of the sector. Funding goes to NGOs, experts, evaluators, government institutions, expatriates and a whole host of other such typically “Northern” destinations. Take the typical NGO or institution receiving those funds, and their own expenditure reflects a similar pattern. Even those who claim low “overhead” – i.e. central office expenditure, administrative costs, etcetera – conveniently ignore that overhead does not tell the whole story. The remainder typically goes to sector experts, sector evaluators, sector expatriates, local sector employees, and very little actually ends up in the hands of the groups they aim to serve.

There are three general reasons why this may not be a bad thing. Firstly, money needs to be spent on those who do the best job, regardless of whether they come from Seattle or a village near Lusaka. If it is a non-monetary service that needs to be provided, then it is logical that the funding goes to the expert providing such a service, regardless of origin.

Secondly, unlike other sectors, development cooperation does not have natural adjustment or correction mechanisms. In private sectors, both shareholders and consumers exert daily pressures on companies and service providers to act effectively and in accordance with overall objectives. The development sector does not have such natural adjustment tendencies. It therefore requires, or so the argument goes, significant internal evaluation and assessment.

The third reason given for current approaches is that even though it may not be perfect, there is no practical way for donors to approach non-sectorial actors in an effective and meaningful way. Human development requires significant insight into people’s daily challenges. Donors themselves have neither the infrastructure nor the desire to spend significant amounts on developing such expertise themselves. There are just too many potential targets to support to do so directly, and therefore it needs to be contracted out to partner organisations and experts. These then become responsible for interacting with local communities and individuals that the funder wants to support.

The meaning of impact

GRAIN writes that ” of the $669 million that the Gates Foundation has granted to non-governmental organisations for agricultural work, over three quarters has gone to organisations based in the US. Africa-based NGOs get a meagre 4% of the overall agriculture-related grants to NGOs”. The Gates Foundation replied by stating that “the central assumption is that only organisations located in Africa can benefit African farmers – and we think that is incorrect.”

This is often true of course. Most organisations working on these issues will have some positive impact on local farmers or other groups. But the word “benefit” covers a wide range of results, from minimal and inefficient outcomes to significant success and effectiveness. Moreover, it does not cover the longer-term dynamics related to this issue. The sector is continuously and rightly criticised for ineffective behaviour and for not offering sufficient bang for the buck. The sector’s tendency to look inward rather than outward is one of the main reasons why: by supporting itself rather than more directly supporting local ideas and initiatives, its eventual benefits to local groups are much less than they could be.

Sector-heavy approaches tend to lead to administrative deliverables rather than true local improvements to people’s livelihoods. They are designed to focus bureaucratic patterns, rather than on the outcomes for targeted people. This problem is almost inevitable given the scale of the development industry, and can only be avoided by micro approaches in which the target population becomes the client of a service provided, rather than a beneficiary who is supposedly being helped. Only then will systemic dynamics start revolving on the right kind of human impact, rather than intra-sectorial results.

Development’s original sin

The origins of the development sector are one of “aid”, rather than “outcomes”. This is still visible in current thinking. National and local governments as well as NGOs are supported in their efforts to help target populations. As long as that help is visible by means of awkwardly named “measurables”, “deliverables” and project evaluations, funders tend to continue their support. Sectorial organisations, especially of the northern kind, are very good at providing their paymasters with such numbers: the number of children gone to a newly built school; the number of tools provided to organic farmers; the number of seminars given on gender equality. This is both because of decades of experiences as well as due to high comfort levels with process and procedure as opposed to outcome. The content and impact of these numbers, however, are much harder to quantify and qualify. Hence the typical ineffectiveness of such measures. To make matters worse, when asked about their levels of satisfaction, local populations have little incentive to be critical; better something than nothing at all.

Local organisations are also becoming pretty good at this please-the-donor game, with many African and Asian NGOs popping up mimicking Northern language on both website and in grant proposals. Local experts and evaluators are becoming increasingly popular in the sector as well, especially among progressive development NGOs and north European governments. Admittedly, this in itself has two positive consequences. Firstly, it ensures that some more money goes into the local, rather than European, economy through expert and evaluator fees. In other words, if you are going to spend money on the sector, it is better to do it on those that actually live among target beneficiaries. Secondly, supporting local experts and evaluators strengthens local capacities rather than those in Northern countries.

Unfortunately, the main problem remains, regardless of where organisations and experts are based: those working in the sector are focussed on satisfying the sector. Evaluators do not write their report for the target population of the project, they write it for the responsible NGO or the foundation financing the project. This is a completely different exercise than evaluating outcomes for local populations. Similarly, grant writers do not send project proposals to funders based on what is best for the beneficiary populations; they write project designs so as to maximise their chances of success during the grant process. That does not necessarily lead to bad designs, but it is nonetheless a perverse mechanic that reduces effectiveness and impact.

Listening to the wrong people

In one project evaluation I carried out years ago, I had to evaluate its peacebuilding outcomes. This was the main stated objective of both the project and the funder, and the basis for the grant. The executing NGO did this through building a medical centre that was to be open to all the different ethnic groups present in the region. Many of these groups had until recently been at each other’s throat in a bloody civil war. During the evaluation it turned out that originally the NGO had- on request of locals- just wanted to build a medical facility without the political baggage. Because of lack of funds, it eventually rewrote the whole grant proposal to make it suit the funder’s peacebuilding agenda. Locals always knew that this would never work, and indeed: because of all the political infighting that occurred between towns because of the imposed multiethnic approach, the project eventually failed. No peacebuilding; no long-term medical centre.

As the GRAIN report argues, “it is hard to listen to someone when you cannot hear them. Small farmers in Africa do not participate in the spaces where the agendas are set for the agricultural research institutions, NGOs or initiatives, like AGRA, that the Gates Foundation supports. These spaces are dominated by foundation reps, high-level politicians, business executives, and scientists”.

These people from the development sector- as well as those hovering in its periphery- work in order to obtain funds. Without it, their organisation or their personal employment will be terminated. It is true that funders know this potential flaw in the system, and therefore impose a whole range of administrative measures to ensure compliance with their ultimate goals. This does not work, at least not in general terms. Not only does it make the sector slow and bureaucratic, it also makes it hopelessly ineffective in achieving desired outcomes. It is almost paradoxical: as long as the sector works to please funders rather than local people, the funders will not get what they ultimately aim for.

The Gates Foundation, as well as many others, is aware of this challenge: “The needs of millions of smallholder farmers – most of whom are women – are very much at the centre of the Gates foundation’s agriculture strategy. Our grants are focused on connecting farmers with quality farming supplies and information, access to markets, and improving data so that government policies and resources are in line with their needs. Listening to farmers to understand their needs, and to developing country governments to understand their priorities, is crucially important“, said spokesman Chris Williams.

Less oversight, more results

The challenge for the development is not related to changing general objectives or having better intentions. The problem is one of ineffective systemic patterns. Intra-sectorial ineffectiveness is not solved by greater administrative control or simply by employing more local NGOs or experts from Southern regions, even if that is a slight improvement by itself. No, the solution lies in making the relationship between funders and beneficiary populations as direct as possible.

Let the people who are referred to in foundations’ mission statements and governmental policy papers decide how to spend the funds that are ultimately supposed to improve their lives. Remove the middleman, stop encouraging the sector’s excessive administrative processes, and create direct connections between local people and financing. That kind of local-global alliance can then contract services from organisations and experts, instead of the sector contracting itself. This will not only reduce overhead and intra-sectorial spending, it will create a natural market mechanism in which all those currently trying to win favour with donors need to show outcomes to developing communities. Fortunately, if you are a foundation or a development NGO, this is a change that you will surely welcome. After all, your mission statement says that satisfying local needs is what you are all about.

Full disclosure:  the above article makes the case for ReSeT’s current Polis Project. Our team is setting-up such a local-global mechanism to link local ambitions with global resources. Bringing this project to life involves a lot of grant writing to please-the-donor. Local populations will have to wait. As always.