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Making grant programmes more effective

How can donors play their strengths to make grant programmes more effective? Palladium's Director of Grants, Defrim Dedej, explores 3 steps to better grant-making.

Grants are a flexible and effective tool in donors’ aid arsenal, but statutory donors such as DFID, USAID and DFAT can make better use of grant-making mechanisms by playing more to their unique strengths.

Better awareness and appreciation of their position
Many statutory donors use grants to try to address issues that would be better tackled by private donors (including private philanthropic donors and independent grant-making organisations, whose income derives mainly from private sources). The key weakness to this approach is that the differences between private and statutory donors are not taken into consideration.

For example, private donors operate under a different legal framework, have different stakeholders, have smaller budgets and more narrow interests, and focus on smaller geographic areas. These factors allow them to take greater risks than statutory donors when using grant-making mechanisms. While there are benefits to taking more risks, the benefits would be greater if statutory donors embraced the position that they are in, and instead of trying to act like other types of donors played to their strengths. After all, there are merits to funds coming from taxes and key stakeholders being the taxpayers. These include:

  • Long term planning and commitment - Statutory donors have the most secure funding available. This means that statutory donors are able to plan and commit to tackling an issue on a long-term basis. The ability to plan long-term is a key component to achieving a positive sustainable impact as the issues that grant programmes tackle are too complex to be solved quickly.
  • Transparency and increased aid effectiveness - Having taxpayers as a main stakeholder has led to a great level of transparency on how statutory donors’ money is spent and what impact it achieves. In turn, the greater level of transparency has meant that developing countries have access to up-to-date information about aid, development, and humanitarian flows – information that they need to plan and manage those resources effectively. The information is also useful to other private and statutory donors who can coordinate their aid more efficiently by knowing where the money is needed most and where they can join forces with other donors to tackle an issue of shared interest.

More funds and greater influence
Statutory donors have more funds and greater influence than private donors.

  • Larger amounts of funds – Statutory donors have at their disposal funds that allow them to tackle more issues, cover larger geographical areas and partner with various organisations, including the private sector, governments and NGOs. By being able to bring together multiple players to tackle the same issues, statutory donors are able to better address complex problems that have many root causes and that require a multi-faceted, multi-stakeholder approach.
  • Greater influence – By making use of their funds and due to their standing as government entities, statutory donors can sometimes influence policy in target countries so that that policy helps the grant programme achieve its aims. There are pros and cons to being in the position of influencer, including the risk of being accused of interfering with local politics. But encouraging governments to focus on areas such as education, health or clean water, which donors often do through their grant programmes, is rarely wrong.

Make use of the right grant-making mechanism
Grant-making mechanisms come in many modalities - including, challenge funds, pooled funds, and matching-grants. Statutory donors should give greater consideration to which modality is best suited when addressing a particular issue. Challenge funds, for example, have been adopted by many statutory donors. But this mechanism doesn’t fit well with the constraints these donors operate under. Whereas challenge funds are all about taking risks and trying new untested approaches, statutory donors’ risk appetite is relatively low, and rightly so as they are guardians of taxpayers’ money and should take extra precautions to ensure the funds achieve maximum impact.

Statutory donors should take advantage of the flexibility the grant-making mechanism can offer and shouldn’t be constrained by following the same format as other donors. For example, in their drive for transparency and fairness, statutory donors tend to opt for an open competition application processes for their grant programme. However, this shouldn’t be a default - they should also consider direct solicitation as well as accepting unsolicited applications. Because when designing grant programme processes and procedures, the key should always be how the process or procedure will help achieve the intended goal. The same argument goes for deciding on the types of grantees - statutory donors should consider having a wider range of grantees for the same grant programme instead of restricting the eligibility criteria to one group (such as CSOs or SMEs).

Conclusion
Two major advantages that statutory donors have over private donors is that they have a larger amount of funds and the political clout needed to bring about policy change. As such, statutory donors shouldn’t follow or try to be like other donors since they operate under different constraints and answer to a different set of stakeholders. While the majority of innovative solutions to tackling issues such as disease, poverty and corruption have come as a result of grant programmes funded by private donors, without the funds and the clout that statutory donors bring, the large-scale social impact achieved would have never been what it is today.

The article was originally published on Centre for Development Results.