Briefing Paper

Complementarity in development: bringing private foundations on board

Lundsgaarde, Erik
Briefing Paper (10/2013)

Bonn: German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

One key challenge facing OECD-DAC donors at present is how to enlarge the community of actors committed to principles of effective aid delivery. The recently established Global Partnership for Effective Development Cooperation signals that global efforts to promote development goals will increasingly involve managing diversity by exploiting the relative strengths of OECDDAC donors, public development cooperation providers beyond the OECD-DAC community, and a multitude of private actors, whether civil society organisations, firms, or private foundations.
In the context of stagnant official development assistance (ODA) flows, private foundations have been considered an important alternative source of development finance and a category of actors contributing to the transformation of the development cooperation landscape. While foundation funding for development remains miniscule in comparison to global ODA, it has significant future growth potential. This briefing paper outlines the main characteristics of foundations as development actors and identifies key areas where OECD-DAC donors and foundations can create a basis for complementary action.
The additional financing that foundations provide can add value in development cooperation if it is directed towards underfunded areas in partner countries. Identifying neglected areas of investment and compensating for funding gaps from other actors can nevertheless be difficult due to deficits in information management systems in partner countries as well as the limited scope of reporting on development activities funded by governments, donors, and a diverse array of non-state actors. In addition to supporting country systems for information management, foundations and OECD-DAC donors need to establish a firmer basis for complementary action by:

• promoting incremental reporting standards that encourage small organisations to increase the availability of information about their investments;
• systematizing data on investments from diverse aid providers to a greater degree. Transparency about giving from individual organisations that report in a dispersed manner is not sufficient in and of itself to assist governments, partners, and other aid providers in identifying neglected funding areas and fruitful options for cooperation. Greater use of existing aid management platforms can help to improve systematization.

Foundations are also considered to add value to global development by supporting innovations in development practice. Due to their small scale, however, foundationsupported initiatives may not translate into broad development success stories if exchange on best practice and cooperation with other aid providers is not promoted. To improve the visibility of innovative approaches and enable knowledge transfer, foundations should therefore commit to strengthening peer networks at different levels: in platforms specific to the regions and countries where investments are disbursed, within OECD-DAC donor countries, and at the global level. National and global foundation platforms offer useful interfaces for bilateral and multilateral donors to exchange information with foundations and explore possibilities for cooperation.