I recently ran across a very good article entitled: “Going the Extra Mile: The Liability of Foreignness in U.S. Foundation International Grantmaking to Local NGOs”.  It was written by three US professors namely Carrie R. Oelberger, Jesse Lecy, and Simon Y. Shachter.  Essentially for a number of reasons posited, local NGOs only receive about 10% of grants from US foundation, reflecting about 15% of funds from US foundations targeting the Global South.  They don’t look at size of local NGOs but I would surmise that if one looks at small local NGOs the problem is much worse.  We have the same problem in Canada with funders doing international philanthropy and little desire by some to fix it. I have written about this recently.

 

Here is the abstract of the article:

 

Abstract
Local nongovernmental organizations (local NGOs) based in less economically advanced countries suffer from a “liability of foreignness” in attracting international funding: They are geographically, linguistically, and culturally distant from funders in more economically advanced countries. As a result, although U.S. foundations gave 27,572 grants to support programming occurring within less economically advanced countries between 2000 and 2012, only 10.4% went to local NGOs within those areas. We argue that while favoring NGOs in more economically advanced countries minimizes funder-NGO foreignness, or the distance between the foundation and the grantee NGO, it increases NGO programming foreignness, or the distance between the grantee NGO and the site of their programming, creating crucial trade-offs. We draw upon organizational theory to predict under what conditions U.S. foundations would fund local NGOs, finding that local NGOs receive more support from older foundations and those with greater geographic and program area experience. Furthermore, local NGOs receive larger, longer grants but with lower probabilities of being renewed. These results identify the conditions under which foundations “go the extra mile” and fund local NGOs.

 

The authors discuss numerous reasons why it makes sense to fund local organizations:

 

Philanthropists interested in supporting programming in less economically advanced countries must decide which NGOs to fund. As they make grantmaking decisions, multiple streams of research offer robust evidence for prioritizing local NGOs, organizations based within the countries or regions where the funded programming occurs, given their multiple advantages over their global counterparts (Balboa, 2014; Bebbington & Perreault, 1999; Beckfield, 2008; Brass, 2012; Fowler, 1991; Platteau & Abraham, 2002). First, programming run by local NGOs benefits from contextual knowledge and social capital that arguably increase the efficacy of the programming (Bebbington & Perreault, 1999). Second, strengthening local NGOs has long been considered a crucial component of shifting asymmetrical power relationships between more and less economically advanced countries (Beckfield, 2008; Fowler, 1991; Platteau & Abraham, 2002). Third, some research has found that local NGOs are located in areas with greater need (Brass, 2012), and reinforced by research on global NGOs that has emphasized that more geographically and culturally distant organizations are constrained in their abilities to create sustainable local change (Balboa, 2014).

Finally, notwithstanding the difficulty in calculating NGO population estimates, the number of local NGOs in less economically advanced countries dwarfs the number of global NGOs available to implement programming in these countries, thus eliminating a supply-side restriction of local NGOs (see Brass et al., 2018; in addition, for an example from Russia, see Evans et al. 2006; for an example from India, see Mahapatra, 2014; for an estimate on global NGOs, see Brubaker et al., 2019). Taken together, this body of literature identifies the advantages of local NGOs “foreignness” and suggests that funders would most effectively enact their aspirations to support programming in less economically advanced countries through support for local NGOs based within those regions.

Funders’ grantmaking patterns fail to support this hypothesis, however. Local NGOs receive a disproportionately smaller share of international funding, when compared with global NGOs. The most recently published analysis identified that only 11.7% of the U.S. funds to support programming overseas went to local NGOs based in the country that the grant was serving (Needles et al., 2018). Funding NGOs in less economically advanced countries at such a low rate may reinforce existing global power inequities by diverting significant aid dollars toward more economically advanced countries (Beckfield, 2010). These patterns can result in the field of international grantmaking recipients becoming increasingly centralized and unequal, exacerbating social stratification in a process that some scholars classify as an “allocative failure” (Kallman, 2017).

The vast majority (89.5%) of grants supporting programming in less economically advanced countries are funneled through global NGOs based in more economically advanced countries, illuminating strong tendencies to mitigate the liability of foreignness with grantee selection decisions. Our analyses further illuminate the conditions under which foundations do support these local organizations, both with respect to their own experience and with respect to how they design their grants to those organizations.

 

The authors looked at funding in different countries – some with restrictive laws but concluded “We feel confident in concluding that foundations display a clear preference for global NGO grantees which is not driven by a fear of funding local NGOs in countries with restrictive laws.”

 

The authors note that “we find that foundations tend to minimize funder-NGO foreignness, by making more grants to global NGOs, while generally passing up on minimizing NGO programming foreignness.”   In the US study they noted that only 1/5 of international grants went to less economically advanced countries.

There is a particularly interesting note:

Despite this evidence, some scholars and practitioners operate off the assumption that global NGOs have more capacity to implement higher quality programs, which will ultimately do more good for less economically advanced countries, even if a large percentage of those funds is diverted to high-income countries along the way. Through present, however, this assumption has not been substantiated. Ascertaining, documenting, and communicating valid and agreed-upon measures of quality is an issue that the nonprofit sector will continue to grapple with for many years, rendering this comparison next to impossible.  Furthermore, the question of quality may be even less relevant in the context of supporting work in less economically advanced countries, as many argue that dismantling global inequality requires bolstering weaker local civil society.

International philanthropy from Canada is important.  It was before COVID and will be even more important during and after COVID.  Money going from Canada to the Global South is about 4-5 billion per year.  In my view both Canadian charities and government agencies prefer to fund Canadian charities, governments, large Western organizations, and often skip small local NGOs.   A reminder that Canadian charities can work with partners in almost any country – whether for-profit, non-profit or foreign charity using structured arrangements.  We have a large number of resources on our website on international philanthropy.

I wish someone would do a similar analysis in Canada but it is a complicated undertaking and we are fortunate that these US professors put so much effort into understanding this area.  In the Canadian context it would be difficult because CRA only provides publicly the names of up to 3 intermediaries that receive funds for foreign activities per registered charity and not the full list of intermediaries.   Many of the bigger Canadian foreign activity charities are funding many intermediaries abroad.