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The time for innovative funding is now

By October 30, 2020No Comments
sign about uncertainty

This is part one of a three-part series that discusses the role of innovative funding in our current climate.

There has been a rapid shrinkage of government budgets and the re-prioritisation of donor funding.  The economic impact of the COVID-19 pandemic may well propel changes in development funding similar to the way in which it has flung the world into virtual meetings, working from home and less work-related travel.

Amidst all the uncertainties, it is very clear that humanitarian and development needs have increased. And will probably continue to increase in the next months and even years. Knowing that governments will battle to meet these needs in a constrained financial environment, and that donor priorities may have changed, doing things the same way as in the past, is no longer an option.

Value drives innovation

Other role players in humanitarian and development funding are philanthropic funders, the private sector and non-profit organisations. Reality is that some role players have funding available and want to fund deserving initiatives. But they need bang for their buck. The anticipated emphasis for value may well be what is needed to push a quicker shift from input-funding to impact funding.

Input-funding is what governments and donors have done in the past. Plans are developed to implement projects and programmes, which (sometimes underpinned by research, good practice and sound logic) hopes to achieve certain objectives. These link up with governments’ strategies, donors’ priorities, and global development goals.

Whether these programmes generally achieve the desired outcomes is a hotly debated topic in the development sector. The Paris Declaration, the Aid Effectiveness High Level Forum and the Accra Agenda for Action sought to address challenges regarding aid effectiveness. Some of the issues that torpedoes aid effectiveness include perverse compliance a check-box attitude, window-dressing and whitewashing, and in some instances, corruption[1].

quote about social impact bond

Options for innovative funding

Innovative funding options, such as social impact bond funds, shifts the focus to impact funding. Investors fund projects based on impacts achieved and verified evidence.

Innovative funding solutions also provide the opportunity for non-traditional funders to get involved. In addition, it provides opportunities for the government to deliver services via reputable non-government Organisations (NGOs).

This way, they utilise existing local expertise for context-specific service delivery, as well as already established networks that can deliver services efficiently and seamlessly in the communities where they are present.

In the NGO sector itself, it opens up opportunities for collaboration between like-minded NGOs. This not only extends reach, but also enables collaboration and harmonisation instead of competition for resources.

New approaches to funding can help the development sector to navigate difficult terrain, and to ultimately improve development impacts.  Ultimately, what is important is that human development needs are met. And that funding is spent on projects, programmes and services which produce the desired results.

quote about uncertainty

An interesting initiative regarding innovative finance is research of the UCT GSB Bertha Centre’s work on innovative finance for education during and after COVID-19. Read more here.

Also see the special JET Bulletin, Extending the capacity of governments and communities to save lives: The role of education systems in responding to COVID-19 and other threats on Capacity of government and communities to save lives: The role of education systems in responding to COVID-19 and other threats.

By Fia van Rensburg

Stay tuned for the following posts:

  • Part 3 of the 3-part series: IT IS TIME TO TALK ABOUT AGENCY AND INTENT

[1] Aid Effectiveness and Governance – the Good, the Bad and the Ugly