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Funding the localization agenda: USAID’s progress

December 5, 2023

This blog first appeared on Publish What You Fund. It is authored by Gary Forster (CEO, Publish What You Fund), Sally Paxton (US Representative, Publish What You Fund) and Daryl Grisgraber (Humanitarian Policy Lead, Oxfam America) highlight[ing] new Oxfam America research which uses Publish What You Fund’s methodology to track the US Agency for International Development’s localization goal.

Oxfam America has just released Funding the Localization Agenda, a new report that challenges USAID’s self-reported progress on its localization goals. Using different definitions and a different data set, the report found that USAID had only given 4% of its funding to local actors, versus USAID’s calculation of 7.3%. One of the report‘s key findings is that definitions – of what is considered a local actor that’s used for the calculation and what constitutes “total funding” – make a significant difference in the resulting figure.

The Oxfam research builds upon Metrics Matter, a report by Publish What You Fund that looks at 10 countries that are recipients of USAID funding, and how much of that funding flows directly to local actors. Using the methodology developed by Publish What You Fund and the same source data, Oxfam analyzed USAID funding to an additional eight countries and compared the results to USAID’s current measurement method.

Why localization?

Local organizations are an essential part of aid interventions. Because they are based in and accountable to the communities they serve, they are the best-placed actors to understand the problems facing communities and to design and manage the most effective solutions. In general, local organizations are from or understand the language and culture of the people, have earned the trust of the people through their long-term presence, and have better access to marginalized groups or individuals than international organizations. Recognizing that investing in local actors is one way to provide more effective, efficient, and sustainable results through its aid programs, USAID has been working to get more of its financial support directly to these organizations.

The definitions debate

In June 2023, USAID published its Localization Progress Report, the first since the commitments were made in November 2021, and calculated that just over 10% of its funding went to local actors in FY22. This measurement is based on the idea that a local partner is, among other criteria, legally organized and operating in a developing country; is providing services in that country; is working internationally, regionally, or nationally; and is managed and governed by nationals of the recipient country or by non-nationals. This allows country-based offices of international NGOs and international for-profit organizations (private contractors) to qualify as local organizations, and thus be counted as local recipients of its funds. USAID also excluded several large categories of recipients of funds – such as the UN, multi-lateral project interventions and implementing partners – out of its definition of “total funding.”

However, this definition – and the resulting figure – raise some important questions. Such a broad definition defeats the purpose of giving ownership and resources to organizations run by nationals of the recipient country and only working in that country and runs counter to the goal of shifting funding – and power. It also sets up a reverse incentive for international organizations to adapt their organizational criteria to meet the USAID definition in order to qualify as local. Compounding this is the denominator question: what is included in the total funding pot? USAID has limited the denominator to only 43% of its total awards in FY2022. This unnecessarily limits the opportunities for direct funding to local organizations. Instead, “total funding” should include all the funds directed by USAID for development.

USAID’s wider definition of what’s considered local, and its narrower definition of what’s included in total funding, leads to a larger numerator and a smaller denominator – allowing USAID to report larger funding percentages to local organizations. These choices make USAID’s progress seem better while also ultimately harming its self-proclaimed localization goals.

Data sources

Like Publish What You Fund’s study, Oxfam’s research utilized USAID’s data from the International Aid Transparency Initiative (IATI), a standardized international database on aid spending. Oxfam also replicated Publish What You Fund’s methodology with respect to the narrower set of criteria to determine which organizations are local. For the time frame used and using its own definition of local, USAID calculated its direct funding to local actors as 7.3%, while Oxfam’s results found only 4%.

Notably, the databases USAID used for its report are not fully accessible to the public. However, the Agency did make as much as possible of its data available to readers of the report. In reviewing the list of organizations counted as local for the 25% measurement, Oxfam noted a number of partners—with a significant amount of funding—that would be excluded under the Oxfam/Publish What You Fund criteria because they appear to be affiliates of international or American organizations.

Data dashboard

The Publish What You Fund approach uses a definition of local based on an aggregate of definitions put forward by a range of credible stakeholders. But the approach also enables others to work with the data to present funding flows in line with their own interpretations of what it means for an organization to be local. Publish What You Fund has created a dashboard which allows users to pick their own local characteristics, individual countries, commitments or disbursements, and to visualize the different outcomes. It includes data for the 18 countries included in the Publish What You Fund and Oxfam America research studies.

What comes next

In the shift to a more locally owned and led aid system, one that is more responsive to global needs and more focused on sustainable results, direct funding to local actors is certainly not the only change needed, but it is one that will have real impact. USAID has taken the important step of committing to more local ownership and leadership of its programs, and measuring its progress in a way that prioritizes local actors will only make that shift more effective. However, if USAID is to realize the vision it has articulated it must both create and adhere to a narrower definition of local that does not include affiliates and offices of international entities, and include all funds directed by USAID for development, including UN projectized funding. Progress might appear slower and international NGOs and contractors might object, but if USAID is to fulfill its localization goals, and “provide development assistance to help partner countries on their own development journey to self-reliance,”[1]this is a better path.

Image credit: Unsplash, published on October 17, 2020

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