Incentives from donor funding mechanisms for civil society organisations

Question

What is the evidence on how different donor funding instruments incentivise CSOs? Focus on CSO investments in knowledge, learning, partnerships, collaboration and innovation; priorities and objectives of CSOs; and the expansion of different types of CSOs.

Summary

This review examines the evidence on some of the outcomes of donor funding to civil society organisations (CSOs). However, it is difficult to attribute causality to specific funding mechanisms, and few evaluations look directly at this issue.

Scattered evidence in donor evaluations does reveal some commonalities and lessons:

  • The literature presents a strong message from CSOs that they would prefer core, unrestricted funding under almost all circumstances.
  • Tied funding (project funding or contracting) stifles innovation and skews agendas towards short-term, easily measureable results, which correlate with donor agendas.
  • Longer-term, untied funding (core funding) encourages innovation and flexibility, and allows organisations to invest and grow long-term.
  • Donor administrative requirements severely hamper CSOs’ ability to operate. While they may encourage better financial management and reporting, on the whole, the increased administrative burden prevents CSO effectiveness.

The main findings on the specific areas of interest for this report are:

  • Core funding might be the most effective funding strategy to encourage investments in organisational development, including learning and knowledge processes. The literature consistently states that core funding is preferred, for investments in internal capacity and growth.
  • There is mixed evidence on how to support partnerships and collaboration between CSOs and others. There is no clear message about which funding instrument might best stimulate collaborations.
  • The literature is clear that core funding and unrestricted funding are the best mechanisms to support innovation. Funding tied to results or specific projects discourages risk-taking. The aid effectiveness agenda may have inadvertently had a negative effect on experimentation.
  • There is mixed evidence on whether donor funding affects CSO’s objectives. Some CSOs will change their strategies to fit donor models, while others will refuse donor funding if they foresee conflicts.
  • A mix of funding modalities is likely to support a strong and diverse civil society, as different kinds of organisations experience positives and negatives from different funding streams. There are no clear lessons on which funding instruments will best support a CSO marketplace more broadly.

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Suggested citation

Browne, E. (2015). Incentives from donor funding mechanisms for civil society organisations (GSDRC Helpdesk Research Report 1257). Birmingham, UK: GSDRC, University of Birmingham.