By Nathaniel Heller and Kristin Lord
Last year saw the cataclysmic destruction of post-World War II foreign assistance models designed to reduce poverty and improve the health and well-being of people around the world. A “perfect storm,” which included the dismantling of USAID and budget cuts to development assistance from multilateral institutions and government agencies across Europe and Oceania, left a spending gap that will not be closed easily. Private donors have faced a quandary of how to respond, unsure of whether to fill the gap left by government agency cuts or to wait and fund whatever promising initiatives emerge from the rubble. A few philanthropies charged into the fray with new initiatives focused on the future, but many chose to emphasize their roles as investors of patient capital.
We suggest a more intentional, proactive approach for private philanthropists going forward. Rather than wait for the macro political and economic environment to improve or become clearer, the coming months and years offer private donors a novel opportunity to experiment with new approaches. In this time of disruption, philanthropists can freely experiment with development assistance models anchored to evidence as well as superior models of partnership unfettered by traditional aid’s less appealing modes of engagement. Put simply, it is an opportune time to put philanthropic dollars to work when much of the traditional development assistance scaffolding has been torn down. Those experiments could generate data about what will work in the new context we live in and shape what the new future will look like. The opportunity for even relatively small investments to have outsized impact has not been this high for decades.
Opportunities for Private Philanthropy Between Now and 2030
So where should philanthropists and impact investors focus their attention? We recommend the following approaches:
1. Discover and elevate low-cost, high-impact interventions that national, regional, and local governments can afford on their own.
International development actors have long worked around governments, not with them. But the truly sustainable, locally-led future is for sovereign governments – that hopefully represent their people – to take charge of their own development. While short-term outcomes may not be quite as good as expensive, high-touch, or high-tech solutions, we recommend trading perfect for better and then working constantly to improve. A good example of this approach is a partnership between the World Bank, Global Partnership for Education, and Kenyan government that cut textbook costs by 65% in one year and enabled the government to extend access at a lower price point. Another example is how low-cost diagnostics can extend access to healthcare in a way that is both affordable and accessible to people living in remote regions. Yet another example are simple, low-cost protocols that save lives such as the use of postpartum hemorrhage drape, which reduced severe bleeding after childbirth by 65% in one study. Still another example can be found in the modest bicycle. Rural mobility remains a poverty challenge in too many communities, and while donors and governments could invest in pricey infrastructure projects and road building efforts, we know that bicycles can dramatically improve access to healthcare, economic productivity, and learning outcomes for children at a fraction of the cost of laying fresh tarmac.
Put simply: cost efficiency and return on investment should be at the center of donor priorities moving forward. These opportunities are easier to find than ever thanks to robustly vetted public lists such as GiveWell’s “Top Charities” and the newly launched DIV Fund. And this can help set the stage for public sector scaling up efforts later, which we discuss below.
2. Strengthen hyper-local organizations that can flexibly provide support and services at times of both stability and crisis.
Locally led development has been a mantra for years. Now is a superb time to double down on that aspiration. Hyper-local organizations that are deeply embedded in communities can be fixtures of long-term development as well as front-line resources when crisis strikes. READ Global is an effective model that has long-term proven impact and costs far less than traditional aid models. The new Resilio Fund aims to upend dependency on externally led disaster relief in low-income communities with hyperlocal, bottom-up approaches. We need the same shifts in philanthropy and aid to happen, too. The era of power and decision-making being centered in New York, London, or San Francisco should be left behind in favor of donor intermediaries and re-grantors who have proven their ability to identify high impact organizations at the grassroots level and effectively (and compliantly) funnel philanthropic capital to them. We need more leadership from the likes of the African Philanthropy Forum, Dasra in India, and the Asian Venture Philanthropy Network moving forward with North American and European donors embracing a posture of support and “crowding in” their capital rather than dictating from the front.
3. Embrace technology to do the business of both philanthropy and development better.
We’re “skeptical boosters” of the potential for Large Language Models (LLMs) and related AI breakthroughs to transform philanthropy. But the potential is real, particularly in reducing the inefficiency of “matching” donors to organizations and double bottom line companies with demonstrable records of impact. Modest investments in AI-driven automation can dramatically reduce the amount of time required of a donor to learn a new field or sector while simultaneously reducing the compliance and reporting burdens carried by grantees and portfolio companies. Startups like Agile Impacts are already doing this, experimenting with AI tools to vastly accelerate both “match making” as well as automating reporting in philanthropy and impact investing.
In parallel, a host of double bottom line companies and startups are leveraging AI to unlock potential breakthrough advances in development, some with funding from leading private philanthropies and corporate donors such as the Mastercard Center for Inclusive Growth and Google. Not all of these will pan out in the end, of course, but the coming years remain an opportune time for smart investments into practical AI applications that help address development challenges faster and more efficiently in the real world. Some applications, like personalized healthcare or education, can be high impact at a systems-level. Other, less glamorous applications, can lower obstacles to embracing locally led development. Local NGOs around the world can leverage AI to help with budgets, donor reports, and other day-to-day tasks that consume precious time and overhead.
4. Invest in people and institutions in Global Majority countries.
Vast reductions in global organizations delivering development assistance created a vacuum. It should be filled by organizations in Global Majority countries whenever possible. To make those organizations optimally successful, we must invest heavily in the human capital needed to make organizations and the people who power them effective. This support should go beyond trainings and include cohorts and peer-learning communities, as well as education and leadership coaching. Without that human capability development, the most brilliant new development paradigms will never get off the ground. An ambitious example of investing in human capital at scale comes from the Mastercard Foundation, whose Young Africa Works strategy aspires to help 30 million young Africans find dignified and fulfilling work by 2030. In Uganda alone, the Foundation has helped over 3.8 million young people to acquire skills and access finance to start or grow their enterprises. Of these, 1.3 million have successfully transitioned into work, started businesses, or achieved expanded economic opportunities. Another example is Emerging Public Leaders, which has trained more than 700 young professionals for public service in Liberia, Ghana, Kenya, and Malawi. An impact evaluation of EPL’s programs in Liberia and Ghana found that 78 percent of alumni there are employed in the public sector. Seventy-two percent of alumni reported rapid or steady career progression – a sign of their contributions and capabilities. A mid-term evaluation in Malawi showed that 55 percent of partner-employers reported that the presence of these fellows led to significant or moderate institutional change.
These investments help stimulate the growth of the private sector, which is a catalyst for innovation and economic stability in any country. When coupled with pro-poor safeguards, market-driven solutions to development challenges help stimulate macro-economic growth and reduce governments’ dependence on external development assistance as domestic economic activity and tax collection increase. This sets the stage for larger scaling efforts alongside governments.
5. Invest directly in governments while rediscovering the importance of “good governance.”
Most long-term development successes come from the public sector ultimately footing the bill for nationwide scaling efforts, as Rakesh Rajani and Tim Hanstad reminded us recently: “the NGO sector and its philanthropic supporters often overlook the most effective pathway to scale solutions to our planet’s biggest challenges—partnering with government.” By investing directly in governments and building their capacity to scale proven services to constituents (including programs and services initially supported by the more risk tolerant private capital of philanthropists and investors), impact investors and donors can build long-term public sector capabilities to sustain and improve core services over time. But this sort of “on-budget support” will be most effective in contexts where citizens and communities can participate in the setting of spending priorities while also holding governments accountable for outcomes without fear of retribution. By helping public sector institutions deliver services effectively, donors are also helping to build trust among citizens in their own institutions, which in turn can lead to improved citizen participation, payment of taxes, and other significant macro-economic benefits.
The Way Forward
Philanthropists and impact investors are understandably worried that they will make the wrong choices in this era of change. Our advice is to accept the discomfort and act anyway. Act fast. Act small. Learn intentionally. Convene people to learn from each other. Refine and scale, and ultimately plan for governments and markets, not non-profit organizations, to fund and lead last-mile adoption. It is tempting to hire one more consultant or invest in another strategy refresh before taking the plunge. But there is a cost. Every day that passes leads to more human suffering and deprivation – a fact that must always be weighed against delays. Around the world we see bravery, as people take a stand and contribute to improving their neighbor’s lives. Philanthropists and investors too can be brave, by deploying capital boldly, with humility, and with an open mindset that embraces imperfection while still seeking a new and better future.