Aligning your funding strategy with current donor strategies

The world is changing rapidly and these changes are reflected in donor’s priorities.

To maximise the limited resources and time that INGOs have to generate sufficient funds, they must tailor grant applications to the latest donor priorities. The better a bid speaks to current donor trends, the more likely it is to be successful.

MzN International analyses the latest donor trends and programmatic directions quarterly from influential donors like USAID, GIZ/BMZ, the EU and Nordic donors, as well as from the finance and investment community and the corporate sector.

As we navigate the changing landscape, one critical focal point emerges: achieving a fair and just world demands more than just government grants; we must mobilise private capital.

USAID, thought leader in localisation

USAID stands at the forefront of the ‘localisation’ agenda, embarking on a comprehensive approach to allocating funding in three ways: through government-to-government channels ($199 million), direct local funding ($1.6 billion), and direct regional funding ($57 million).

By 2030, USAID envisions dedicating a minimum of 25% of its funding directly to local partners. For NGOs aspiring to engage with USAID grants and commercial contracts, this represents a pivotal opportunity to align with USAID’s vision for localisation.

USAID has increased funding for direct local partners significantly, currently standing at 10.2%. This figure has been consistently rising since 2019 and shows promising signs of further growth. The consensus among political leaders is strongly in support of this approach, reinforcing the importance of localisation in USAID’s strategy.

Amidst ambitious goals, USAID faces challenges, including a notable staffing shortage that has led to delays in contracting activities. As of mid-July 2023, only 74 of 235 contracts planned between January 2023 and January 2024 have been awarded, underscoring the need for increased workforce capacity.

USAID has also unveiled a new gender policy, mandating gender analysis for certain awards and introducing minimum effort levels to address gender considerations effectively. This policy emphasises USAID’s commitment to promoting gender equity and inclusion in its initiatives. We recommend that all bids make appropriate inclusion commentary accordingly.

GIZ (and other German donors)

GIZ, as one of Germany’s prominent donors and the second-largest bilateral donor worldwide, has experienced a significant surge in funding while keeping its development priorities constant. With an increasing focus on six critical areas – health and pandemic prevention, gender equality, education, food security, climate mitigation, and adaptation – GIZ’s commitment to these crucial sectors remains steadfast. While localisation efforts are underway, GIZ’s emphasis on locally led agendas stands at around 10%, which is lower than USAID’s. We expect GIZ’s commitment to localisation to grow slower than that of USAID but possibly be more consistent.

European Union (EU)

Despite limited access for UK organisations, some EU funding opportunities remain available. Three key funding agencies, The Department for International Partnerships (DG INTPA), The European Neighbourhood Policy and Enlargement Negotiations (DG NEAR), and The Directorate-General for European Civil Protection and Humanitarian Aid Operations (DG ECHO), offer potential avenues for UK NGOs to tap into funding. DG INTPA has launched the “Next Generation EU” program with a total funding of €3.1 billion for 2021-2027. While challenges persist, UK NGOs can explore grant options or become part of relevant frameworks to access EU funding. We see a spike in UK-EU NGO collaborations, including mergers to secure access to EU funding from the UK.

Nordic donors

Among the Nordic donors, Sweden’s leading role is prominent, with a significant budget of $5.8 billion in 2021, allocating approximately $1.2 billion to NGOs. A major change is reducing multinationals, providing more to civil society organisations instead. Another new policy is that aid is conditional on the recipient country to cooperate on the return of failed asylum-seekers, a policy that is already enforced.

Norway’s donor agency, Norad, holds a smaller budget of $4.7 billion, with approximately $1.2 billion allocated to NGOs. This year, budget cuts in sub-Saharan Africa have impacted the region, signalling a redirection of resources. Despite budget cuts in 2023 for regional grants in sub-Saharan Africa, the Middle East, and North Africa, donors are committed to return to 1% ODA in 2024, underscoring the importance of international assistance as Sweden is possibly reversing an austerity programme.

DANIDA, the international development agency of Denmark, launched a new strategy called “The World We Share” in 2021. It prioritises social and institutional issues, including poverty, inequality, migration, and conflict, and allocates 30% of its budget to climate change initiatives. We recommend referencing this strategy in all DANIDA bids.

Let’s face it: There is just not enough cash

Achieving the SDGs by 2030 can sometimes appear elusive and with one crisis mounting on top of another, a simple question becomes more pressing: How do we pay for it all?

Traditional philanthropic donors and governments simply do not provide enough funds and are often too slow. We need to unlock large-scale capital, and quickly. NGOs need to get smart on finance.

Engaging and accessing private-sector funding

NGOs have explored private-sector funding for decades. But only recently has the investment and finance community become not just receptive, but actively looking for investment opportunities that provide a social and/or environmental return in addition to the financial one.

Through our sister company Human Planet Ventures, MzN has raised significant funding from such “dual use” investments, building small-scale, local energy-producing infrastructure, hospitals, food storage and water solutions. One key challenge is for the non-profit and investment communities to speak to each other efficiently. We recommend that NGOs actively scan their programmes for “dual use” cases and reach out.

In today’s ever-changing landscape, aligning your NGO’s funding strategy with current donor trends is pivotal in raising the funding needed for impact. Armed with these insights and updated quarterly, NGOs can navigate the funding landscape effectively and stay on course with donor strategies. MzN’s donor updates are held every quarter and can be attended here.