CSO funding in Europe: Is DFID still leading the way?

In December 2018, HIVA-KU Leuven published a study commissioned by the Belgian NGO-federation, which compares trends in government funding of development civil society organisations (CSOs) in six European countries: Belgium, France, Germany, Sweden, the Netherlands, and the UK.

So how does the CSO funding landscape in the UK – which often prides itself on being a frontrunner in the development of innovative funding policies – compare to that of other European countries?

Is CSO funding under threat?

In most countries, budgets for CSO funding have withstood the rising tide of populist and anti-aid politics. In Germany and Sweden, a gradual increase in CSO funding even leads to cautious optimism. In the UK CSO funding budgets have also continued to increase –although the upward trend of recent years seems to be coming to an end. In Belgium and France, funding levels have remained relatively constant, although there has been a gradual erosion of specific funding mechanisms. Of the six countries in our study, the Netherlands is the only one that has seen a significant decline in CSO funding.

Despite this resilience, interviews with civil society representatives from the different countries revealed a growing sense of unease over the future of CSO funding. At least in part, these concerns relate to the ways in which this funding is managed.

A more fragmented and unstable funding landscape

The UK has undoubtedly seen the most drastic changes in the funding environment. More precisely, the end of programme funding (the PPAs) has coincided with a proliferation of smaller and more short-term project grants.

This trend towards a more fragmented funding landscape can also be observed in the Netherlands, and to a lesser extent in France and Belgium. Due to their shorter funding cycles, these new funding mechanisms are more sensitive to political interference, and tend to reflect the strategic and political priorities of (successive) development ministers and/or government agencies.

Funding with strings attached

Shorter funding cycles and political interference tend to go hand in hand with new thematic, administrative and geographical conditionalities. Development CSOs that aim to secure government funding are facing a growing range of “hard” entry barriers, like new accountability and control systems, and Payment by Results requirements.

In other cases, conditionalities take the form of soft incentives, including efforts to stimulate consortia-building with other CSOs or the private sector. While DFID has been a clear frontrunner in stimulating private sector involvement, three countries in our study (Belgium, France, the Netherlands) have put in place funding mechanisms that explicitly stimulate public-private partnerships.

The triumph of managerial approaches to CSO funding?

So what do these changing funding policies mean for the role and autonomy of CSOs? Somewhat surprisingly, the Dutch CSO policy framework [PDF] provides us with interesting insights. It explicitly distinguishes between two policy approaches a managerial approach and a social transformation approach.

Broadly speaking, donors that work within a managerial approach treat CSOs as service providers and as implementers of government policy. Donors that adopt a social transformation approach see CSOs as incubators of social change, and give them the autonomy to fulfill this role.

While donor approaches in all six countries embody elements of both approaches, DFID is arguably the strongest proponent of a managerial focus, with its focus on value for money, its increased reliance on commercial contractors, and a creeping “privatisation” of its CSO funding schemes which includes the Code of Conduct for grants. There are clear indications that this evolution poses challenges for smaller CSOs, who lack the expertise and resources to respond to exceedingly stringent government demands.

Lessons to be learned?

The managerial approach is now so deeply engrained in UK funding policies that it may at times seem as if there is no alternative. Yet the situation in other countries may prove otherwise.

One example is the Netherlands, where the development ministry is explicitly moving away from a managerial approach, towards a social transformation focus that aims to give development CSOs the freedom and flexibility to fulfill their political role in developing countries.

A second example is Sweden where, rather than relying on private contractors, the government is outsourcing control over parts of its CSO funding budget to “framework organisations”. These large development CSOs, with whom the Swedish government has a privileged partnership, are in turn sub-granting funds to smaller CSOs. This system of sub-granting enjoys widespread legitimacy, not only because it is seen as cost-effective, but also because it is tailored to the needs of smaller CSOs, who can bank on the support of framework organisations in their dealings with the government.

Explore more funding topics and trends at the Bond Conference, 18-19 March in London.