Development donors grant billions to local organization to implement their development programs, and often prefer local NGOs to potentially corrupt or ineffective governments. Does this make sense? And what’s the implication?
Marcel Fafchamps and various co-authors have been collecting data in Uganda to understand the effectiveness of the approach. Writing in The World Bank Economic Review, Fafchamps and Trudy Owens say the following:
…the evidence suggests that grants from external donors do not encourage a local charitable sector. Many local NGOs seem to be created simply to obtain grant funding.
This interpretation is reinforced by the numerous Ugandan NGOs that have a shadowy existence when they do not receive an external grant. For instance, of the roughly 1,700 NGOs registered in Kampala at the time of the survey, only a quarter could be located. Grants do not appear to go to NGOs that would raise funds on their own; instead, they go to a few well-educated, well-connected organizations and individuals skilled at writing grant applications.
Observing that grant recipients do not raise local resources does not imply that they deliver services poorly. But it calls into question the assumption that underlies the switch away from government services: if local NGOs are not driven by an altruistic motive, why should they be expected to behave in a less opportunistic manner than civil servants? There may be other reasons why donors prefer private service delivery, such as better control, faster response to emergencies, or the promotion of a specific message or agenda.
But based on the evidence presented here, it would be foolish to rely on altruism to economize on monitoring. Donors seem to understand this well. Survey results indicate that NGOs are subject to extensive donor monitoring.