By John Asafu-Adjaye, Senior Visiting Fellow, Institute of Economic Affairs, Ghana
An ambitious plan as the Sustainable Development Goals, requires new ways to achieve it. Private philanthropy should be given prominent attention in a new model to finance the Agenda 2030. The traditional funding model has been for the donor countries to channel the funds to the recipient countries directly through bilateral aid agreements or indirectly through multilateral agencies. For many countries these resources are still crucial sources to finance many social programs. But these financial flows are volatile due to political and economic reasons. For example, the Syrian refugee crisis has changed the countries’ priorities. Current OECD data suggest that countries such as Sweden, Italy and the Netherlands now invest more foreign aid within their own borders than in any single developing nation. Furthermore, there is a new administration in the US, which has already proposed deep cuts to foreign aid. Despite a commitment to maintain Official Development Assistance, it is foreseeable that these flows to developing countries will continue to decline in the future.
There is little doubt that despite some concerns – such as inefficient disbursement, graft and corruption – ODA has played a significant role in achieving the outcomes we see in the developing world today. The recent developments concerning ODA therefore come at an inopportune time because many developing countries rely on it to keep on track with their Sustainable Development Goals (SDGs), particularly the first five. Now is therefore the time for alternative funding models.
What are the prospects for philanthropic support to development? A less well known fact is that ODA is not the biggest source of finance for developing countries. According to the Hudson Institute, 84% of all donors’ total engagement with the developing world was through private financial flows. A recent survey found that 90% of respondents in France, Germany and Great Britain, and 84% in the US agreed that rich countries have a moral responsibility to help poor countries develop. However, only 45-51% of these respondents felt that the World Bank, the largest multilateral aid agency, has a positive role to play. On the other hand, over 64% of the respondents approved the role of Non-Governmental Organizations (NGOs) in development efforts. These results indicate that there is not much support for the idea that rich country governments or multilateral agencies are the best means for channeling development aid.
In 2014, total private financial flows to developing countries were US$801 billion, whereas total ODA based on World Bank data was US$161 billion. The private financial flows were for various purposes including capital investment and remittances. However, assuming conservatively that about a third of the total amount went to development projects and programs, it can be implied that development assistance from private sources was about US$240 billion in 2014, which would be more than 1.5 times the level of ODA.
So what is next?
I would like to propose that NGOs, developing countries and other stakeholders meet as a matter of urgency to deliberate on how best to tap into the potentially vast pool of philanthropy as a way to mobilise funds for development purposes. I believe this is necessary in order to present a well organized and coordinated front required to effectively project the needs of the developing world. This would clearly be a logistical challenge given the large and diverse numbers of NGOs operating independently around the world. There would be a need to bring those involved in overseas development under one umbrella. The agenda could include deliberations on aspects of the marketing campaign and how to efficiently collect and disburse the funds to accelerate development in order to achieve the SDGs. The multilateral agencies could assist with setting up this new body but I suggest they should not be involved in the distribution and disbursement of the funds.
 Hudson Institute (2016) The Index of Global Philanthropy and Remittances, The Hudson Institute, Washington, D.C. accessed at https://www.hudson.org/research/13314-index-of-global-philanthropy-and-remittances-2016.