Why we need to rethink business models for development assistance

By Devaprakash Ramakrishnan

Devaprakash is a banker-turned-development professional with a deep interest in development finance, CSR and making markets work for the poor with a strong orientation on private sector participation.


At a time when the world is racing to catch up with the Sustainable Development Goals (SDGs), it is facing many volatilities driven by political and economic considerations, accentuated by prolonged refugee crises compelling to use resources within their own countries. The World Bank estimates Jordon spending a quarter of annual revenue to address Syrian refugee crisis.

This has put enormous strain on the traditional funding model, increasing the role of private sector in a very big way, unusually. Increasingly, donors are demanding aid effectiveness through better Return on Investment (RoI) and value for money in order to be more accountable to their constituencies, with bi-laterals obligated to explain back to well-informed stakeholder ecosystems demanding results and changes. Extremes of both human actions and climate reactions further acerbate sufferings and crises. With the size of the donor basket shrinking, the global aid conversation is shifting from ‘what’ to the ‘how’ part of it, with volumes taking a back seat with a stress on quality, measurement and learning, forcing charities to do ‘more’ with ‘less’. The traditional idea of ‘handouts’ is gradually giving way to processes which can transfer skills, capacities and building institutions in the community through an alternative funding model. 

Financing model: Blended finance model works better

Philanthropic capital should move towards a hybrid financing approach involving grants, debt and equity funding to overcome the challenge of growth, scale and sustainability bogging the traditional grant-based approach. This will overcome the challenges encountered in particular funding model by taking advantages of each of them if they are bunched together cumulatively or in part depending on the situation. There are pieces of evidence of post-emergency long-term development programs following a market-based approach creating results with contribution from the community, involving a fair share of bank loans repaid by the community. There is considerable alignment in thinking within the humanitarian community to integrate local market systems while recouping from disasters. 

Delivery Model: Adopting cash transfers and encouraging local actors

With growing body of evidence piling up on cash transfers globally, there is curious interest to take cash transfers much beyond humanitarian assistance to long-term programs when there is a functioning local market infrastructure.

The objections to cash transfer programs are rooted more in myth than empirical evidence as there is no evidence of misuse of resources such as additional consumption of temptation goods such as alcohol, casino, and tobacco. There is almost no impact on any significant decrease in labour participation with an increase in other quality-of-life bene?t (health and education outcomes, parenting and reduced criminal activity). Cash transfers have the potential to increase the self-worth and respect of individuals besides arresting leakages, reducing logistics and ensuring reach of more beneficiaries, besides strengthening local markets which was successfully tested by The Better Than Cash Alliance, a UN-housed body pf partnership of Governments, international Organisations and private sector companies that promote the use of digital payments using e-cards. 

In 2016, the World Food Program (WFP) supported more than 14 million people globally with cash-based transfers for food, with 95 operations across 60 countries amounting to US$ 880 million, moving on from an outreach of only 3 million people in 2010, with a quarter of WFP’s aid accounting for cash-based assistance. Leveraging technology like blockchain this can further scale down security problem, corruptibility, mismanagement of funds and identity fraud and escape from up to 3.5% transaction cost charged by banks as in WFP’s case, which can re-ploughed for reaching more clients. In 2012, former Secretary-General Ban Ki-moon said 30 percent of all U.N. development assistance was lost to corruption. It is pertinent to recollect the commitment of the Humanitarian summit in 2016 in Istanbul to channel 25 percent of aid through local groups, up from less than 1.6 %. With 60% of the aid going towards supply chain management, travelling through a convoluted journey, from the perspective of aid effectiveness and value for the money for donors, a cash-based aid and local partners work wonders. 

Program logic model: Bring women empowerment into design thinking

Women empowerment is often misunderstood as results achieved out of merely targeting women in development programs. And sometimes it is also misconstrued as adequately capacitating and increasing capabilities of women will take care of itself. Women empowerment goes beyond in working with women at ‘agency’ level in building her aspirations and capabilities but as well building the environment that surrounds her and the power relations through which she negotiates her path. In a nutshell, women empowerment is the sum total of changes which require her full human potential realised as a human being. Influencing power relations through which she negotiates her path is an important domain which can bring changes in power dynamics both within the household and outside. Men engagement through creating a cadre of role models from amongst men who exhibit positive vibes on gender, joint-counselling for couples and engaging with service providers and other stakeholders on gender and its importance will address gender by shifting power inequities. Women’s representation both in civil and political spaces and enforcement of rights is realised through creating a cadre of change leaders from amongst women, collectivising women for networking, supporting network to talk to service providers and sensitising stakeholders to treat women as clients. Thus, influencing the environment that surrounds women also matter much. 

While aid as a hand-out is a bare necessity for a limited period till the community is comfortable and markets behave positively with survivors especially during and post-emergencies, grants need to be spun-off creatively by keeping sustainability in focus, so that the community is able to take on, on its own, once aid phases out.


Featured Image Source: Synergos Institute on Visual hunt / CC BY