Sustainable Finance for Development Activities: A Matter of Creativity and Skill

Sustainable development finance has become a major concern in both the North and the South. The OECD has indicated that overall official development assistance (ODA) is not likely to increase under present circumstances. Aid effectiveness studies conclude that the sustainability of development interventions appears to be highly related to the ability of local institutions to generate local revenue. Criticism of traditional development programmes increasingly focuses on so-called aid addiction and dependency syndromes among governmental and non-governmental agencies. Donors are pressing recipient organisations to generate alternative forms of finance that can sustain their activities in the longer term. This brief provides some lessons from non-governmental organisations (NGOs) and governmental organisations that have tried alternative financing arrangements. The score is mixed at best. Euphoric reporting about thriving initiatives hides the fact that most efforts by NGOs to establish alternative financing mechanisms have not been totally successful. The success rate is estimated to be between 10 and 20 per cent only. Where there have been successes, it took creativity and careful management, and resulted in drastic changes in traditional donor-recipient relations. In particular, access to alternative funding resources enabled NGOs to strengthen their independence from donor institutions and to become more responsive to local priorities. Read Policy Management Brief 10