The Trap (and Paradox) of Large Development Funding

Official development assistance in 2005 (Source: Wikipedia)

By George Stetson, Ph.D.

During the last decade many of the major development players (the World Bank, USAID, the Swedish International Development Corporation) have embraced participatory development as a critical part of any successful development endeavor. One might even say that “participation” is now an essential part of the mainstream development discourse. In many respects, this is a good thing and, undoubtedly, the result of the tireless work of grassroots advocates, local NGOs, and the many peoples throughout the world that have struggled against the exclusionary and unjust practices of dominant society (governments, cultures, corporations, etc.).

But is it enough for the grassroots to “participate” in the development process? Leaving aside the profound ethnocentric (and Eurocentric) connotations of the entire conceptualization of modern “development,” even in the best case scenarios I would argue that the way that large development is currently structured makes it incapable of delivering development from the bottom up; it is inherently a top down game where big development dictates, controls and decides the content of development. Why? One of the reasons (and there are many) is related to what I would describe as the “trap of large development funding.”

Most philanthropic development (this excludes military aid) is funded and delivered through large development agencies and NGOs that work as subcontractors for these same agencies. In general, these development agencies, in spite of their rhetoric about “participatory development,” are structured around a preconceived development agenda. Take the case of Latin America. According to a recent study on the “Main Philanthropy Trends in Latin America,” more than 45% of funding to the region came from large development agencies, followed by NGOs (30%), foundations (15%), and private companies (9%). USAID was the largest contributor in 2008 to Latin America and gave approximately $1.5 Billion in philanthropy to the region. On the USAID website they explicitly state that most of their funding is reserved for development priorities already established.”1 USAID makes it painstakingly clear that they will only accept applicants (or NGO partners) that “are focused on projects with clear objectives that fit within program priorities.” In other words, if NGOs want to obtain USAID funding, they must adhere to USAID’s development agenda, which as we know is based on the strategic interest of the US. Currently there are some 592 NGOs that are registered with USAID.

Moreover, most NGOs and PVOs are focused on single sector issues (environment, health, education, poverty, etc,) which, in a sense, structure development around the specific issues and concerns that these organizations have decided to embrace. Therefore, if grassroots practitioners coming from the “developing” world want any sort of financial assistance, they must somehow try to fit within the project scope of these NGOs.2 The Bill and Melinda Gates Foundation, for instance, focuses on improving health, reducing extreme poverty in the development world and improving high school education in the United States. These are all worthy goals. However, think briefly about how this model is funded. A financially solvent foundation establishes what they consider to be the most pressing, urgent problems in the world, they market the foundation, and are even able to attract individuals to donate to what are no doubt worthy causes. If local people from the developing world want to be beneficiaries, they must become part of this model. First, they are forced to conceive of their project from the perspective of the foundation (or NGO, or development agency) and, second, they either must develop quite sophisticated grant-writing skills, be lucky enough to be chosen by project administrators or have excellent contacts with the foundation. In short, not only is it exceedingly difficult to get funding if you are a grassroots organization, but if you are lucky enough to get funding, you must adhere to the “program” or development agenda of the foundation, development agency or organization.

It is important to repeat that many NGOs (including NGOs that work through USAID and other development agencies) embrace participatory, bottom-up development approaches and conduct important work in the field of development. Moreover, NGOs, like Village Earth, clearly need funding to carry out their work. The trap, as we at VE see it, is that funding model is structurally conditioned so that development, even in the best cases, is conceived, organized and implemented from the top. That is, the structures that are currently in place produce a model in which the grassroots must somehow fit into the development scheme of large development agencies or NGOs that are subcontractors or NGOs that work on single sector issues.

The paradox is that the overwhelming majority of giving comes from individuals. According to Giving USA’s Annual Report on Philanthropy, in 2009, of the $304 billion in charitable giving in the US, 75% ($227 billion) came from individuals, followed by foundations (13%), bequests (8%), and corporations (4%).3 In other words, even though individuals are by far the largest contributors (at least in terms of philanthropy) to development, most development work is funneled through large development organizations. Again, this means that NGOs, foundations and development agencies, most based in the US, are the main orchestrators of philanthropic resources. This does not mean that all single sector development work is negative, nor should it imply that individuals should refrain from giving to philanthropic organizations located in the US. However, given the structural constraints of this funding model, we argue that it is important to re-think the issue of funding for development.

At Village Earth we are engaged in the creation of an alternative funding model that is designed to crack (and eventually break through) these existing barriers and structures. The overall objective is to create a model in which people from the grassroots are able to access funding in the US (or anywhere else), without having to depend on large donors, development agencies or somebody else’s development agenda. There are two fundamental aspects to our approach:

1) While we will always continue to support grassroots actors, we are actively developing relationships with what are often called “intermediary organizations.” These are organizations, usually located in the developing world (or Global South), that work directly with grassroots actors, have years of experience, and a wealth of knowledge and, perhaps most importantly, are fully immersed in the local context. Rather than “parachuting” NGOs into a foreign country, with plenty of funding (sometimes too much) but without a deep understanding of the local context, we would rather partner with intermediary organizations that often have everything but the resources to carry out their work.

2) We are developing a comprehensive support network designed to help grassroots and intermediary organizations access the critical resources needed to carry out their mission and vision. First, we are working to help these organizations build their own individual donor base, which offers more flexibility in terms of any sort of preconceived development agenda. At Village Earth, our work on Pine Ridge and in Peru has been successful precisely because of the individual donor bases that we have been able to create to support these projects. Second, we are helping these organizations establish the fiscal and legal status to obtain funds directly from philanthropic organizations and development NGOs. This includes establishing a “fiscal sponsorship” to provide the 501(c)(3) status to utilize funds from a grant or to provide a tax-free exemption for interested individual sponsors. Third, to promote their projects and ideas and enhance their image, we are providing these organizations with training on new social media and web-based technologies. Forth, we are assisting these organizations to locate key strategic allies in the US and abroad. This includes locating social and political advocates that support their cause and legal and political experts that provide critical information on relevant issues. It also includes connecting these organizations with organizations in the US that have similar experiences or compatible interests. For example, Latin American indigenous organization might develop alliances with Native American organizations in the US that have shared experiences of colonization and marginalization.

The overarching goal is to create a network of support such that grassroots and intermediate organizations are able to effectively pursue their own development agenda and to take the leading role in their own development process. The trap of large development funding is, in reality, the lack of mechanisms in place that allow intermediate organizations to access the vast amount of resources (both financial and non-financial) that exist in the US. In fact, by not directly supporting these organizations, we are wasting some of the most precious resources that already exist in the Global South. Paradoxically, the current model also prevents individual donors from having the freedom to choose from a vast array of capable organizations with a wealth of knowledge and experience in grassroots development.

1 “Guide to USAID’s Assistance Application Process and to Submitting Unsolicited Assistance Applications.” Go to

2 Indigenous peoples, for example, have had serious conflicts with environmental organizations when indigenous and conservation interests collide. See Mac Chapin, “A Challenge to Conservationists,” World Watch, November/December 2004.

3 “Giving USA 2010: The Annual Report on Philanthropy for the Year 2009, Executive Summary,” Giving USA Foundation, The Center on Philanthropy at Indiana University. Go to

Topics discussed in this post are also discussed in the following Village Earth online courses: Approaches to Community Development, & Development and the Politics of Empowerment


  1. This article makes some sweeping critiques of the aid system, which no doubt are warranted in many cases (in my limited knowledge, I can think of loans for large dam projects, that leave the county in debt; “slum improvement” projects that lack mechanisms and local government capacity for ongoing maintenance; or the damaging import of free U.S. food and used clothing that destroys local industries.) But I am curious specifcially what the author sees as the USAID Agenda that is not in keeping with local interests these days?

    And what of the foundations’ agenda? Or is it more that the grassroots groups lack the sophistication to access funds; that onerous reporting requirements consume too much time; and that home-grown intermediaries that can adminsiter and distribute funds to the local grassroots groups are lacking?

  2. As a USAID contractor in Afghanistan, I have witnessed a valiant effort on USAIDs behalf to implement the philosophy of “Afghans First” with the goal of using local contractors, resources, and man power. However, just as it is explained in this article, we (USAID) have pre-established goals and methods for acheiving “development” that rarely (if ever) include the most powerful local resource: knowledge. I doubt the long term sustainability of these projects because we havent used grassroots organizations and knowledge to create our development models. My hope is that prior to the US withdrawal from Afghanistan, large development groups such as USAID can stimulate local input and empower the people of Afghanistan to ignite their own positive change.

  3. Thanks for the insightful article. I have been often surprised when I listen to people about what they preceive their needs to be. They are sometimes needs I would never have thought of. I am deeply convinced that the goal of development should be to help empower people to achieve their own dreams and goals. Our strategy is to find out what people need, and then serve as brokers to bring existing NGOS to provide the needed services. And thank you for your good work. Please know that we are willing to work with you in any way we can.

    John H. Brown, President
    International Community Partners

  4. This is great that the article is bringing on so much needed debate. I agree that the development models are “Eurocentric” and/or “ethnocentric”. These terms however run the risk—at least to me—of suggesting a merely cultural rather than economic agenda. What is apparent in large development projects is that there is two “North Atlantic/European” political/economic cultures at play: a very aggressive “Anglo-Saxon capitalist model,” supporting orthodox neoliberalism and the moral primacy of the individual at all levels of policy (USAID) vs. a “European Continental Capitalist Agenda” that may have more room for socialists ideals as contained in their Social Democratic tradition (e.g. the E.U.’s development agenda). Keen analysts on the ground might note the difference and obviously cater to their agendas: if they are Americans use the word “freedom” a lot, if they are European use the word “equality” a little more. So in the end, we are dealing with the windfall of two revolutionary agendas of the 17th and 18th century… the French and American revolutions, and the myriad others that have framed our Western way of thinking. I guess that what I am saying is that the Eurocentric agenda is not as homogeneous, and gets packaged by political elites in convenient ways that go against the original, liberating models that their forefathers fought for.

    • George Stetson says:

      Thanks for your comments on the article. As always I really appreciate your thoughtful insights and observations. The point I was trying to make about “Eurocentric and/or Ethnocentric” development models was simply that I acknowledge that the entire development enterprise is rift with contradictions, complications, problems of discourse, etc. (the list goes on), much of which is the result of the way that the dominant powers have structured development to meet their own interests more than really deal with the problems of the world. I agree that the Eurocentric model is not homogeneous and the difference between the French and US models are real. But couldn’t one argue that both of these models, different in some ways, are the product of European thinking and, to a large extent, have left the non-European Other out of the conversation. The fact that we still talk about French versus US model, to me anyhow, suggests that “we” are still thinking from a Eurocentric vantage point. Its still Keynes (or Marx) versus Friedman, just like after WWII. I would love to learn more about how these terms suggests a cultural versus economic argument/agenda, since much of my work is based on teasing out the underlying Eurocentric connotations of modernity and development. Again thanks a ton Marcela for your comments.

  5. Well done, George.
    I’m a big fan of the Village Earth model and philosophy of development.
    The parts of the article that I find most salient to our situation, given WAVES for Development’s status as a grassroots organization or ‘intermediary organization’ in Peru as well as having legit 501c3 funding/support agencies in the US and Switzerland (for Peruvian organization), is the importance of multi-sector development work and the difficulty in finding funding. At WAVES, the pillars of our programs include: Cultural Exchange & Understanding, Healthy Living/Life Skills, Environmental Conservation, Social Entrepreneurship and Sustainable Tourism. In the last few years, this combination seems to fit quite well in coastal communities with unrealized surf tourism potential and unmet educational needs – where our focus lies. For us, what’s worked hasn’t been at all Large Development Funding, but rather ‘earned income’ through individual volunteer contributions that come visit and participate directly in the programs while on a ‘volunteer vacation’. Yes, we’re small and relatively new; however, I believe this combination of ‘internal’ (intermediary org) and ‘external activators’ (surf voluntourists) is working. Similarly, I credit the founding fathers of Village Earth with the maxim ‘participation is the key to motivation’. Thanks for the inspiration.

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