How to reform NGO funding so we can deal with threats like COVID-19

We all know that this pandemic is unprecedented in scale and need. Almost every household, community, organization, sector and nation is reeling from its impacts on health, the economy and society. Our world has fundamentally changed.

We also know that populations affected by conflict and those trapped in states of fragility and protracted crises, such as Yemen, Syria and the Democratic Republic of Congo, will be especially vulnerable to the pandemic’s impact: health and economic effects certainly, but also risks to social order and cohesion.

The global humanitarian NGO community stands ready to respond to the extraordinary needs that this crisis is generating. Organizations, including Mercy Corps and many others – especially local NGOs most connected to the communities where they work – are already scaling up our responses, and preparing to do so much more.

We are acutely aware of our role and responsibility in continuing to meet the needs of the millions of people who rely on us. The humanitarian community has a huge part to play, both responding to immediate needs and in helping with recovery in the medium to longer term. In 2008/9, I was working in Ethiopia and saw first-hand the deep, devastating impact of the global financial crisis on food security and livelihoods there and the need for longer-term market systems and economic recovery programmes.

And yet the international humanitarian and development sector is itself rapidly facing a critical threat from this pandemic, due to funding constraints which risk forcing us to downsize and lay off staff at the precise moment when our work has become vitally important.

To be clear, this is not a fundraising attempt by one NGO. While many generous people are already contributing in many different ways to this global response, and no doubt many more will, what we really need is nothing short of a new, innovative humanitarian financing model.

We urgently need your brightest ideas, your networks and power to bring people together, to help us innovate our way through this crisis.

The reality is that there has been an immediate and significant reduction in our organizations’ liquidity. Our business model is structured around our ability to pay team members centrally and in country programmes around the world, for delivering measurable, pre-agreed upon impact through programmes that we have designed and our funders have agreed to. It is not adequately structured to anticipate and adapt to a large-scale change in context.

With the changed context of the COVID-19 pandemic, our programmes need to pivot rapidly to respond to different and additional needs, while coping with restrictions on travel, lockdown requirements and health concerns. This requires a massive amount of flexibility, as the parameters and cost structures of our work shift, with the duration of these shifts entirely unknown. The implications of this for cash flow and liquidity are critical and acutely time sensitive for both international and local organizations across the NGO community.

We are starting to see some flexibility from several institutional donors to help us manage this, but we urgently need a sector-wide approach to address the following challenges:

Reducing capacity now would be catastrophic to NGOs’ ability to respond to both the immediate and longer-term needs we will see escalating all over the world as a result of this pandemic.

Many of our institutional donors pay in arrears and often only after long delays and audits. This differs from the for-profit business sector which, when faced with an anticipated large surge in orders, might either require significant payment upfront, or raise finance for the surge. The private market has to date not offered the types of short-term financing facilities for NGOs that businesses access to fund surges in capacity. We do not have conditional grants or anticipatory financing mechanisms in place that can be triggered when pre-defined conditions are met. With few exceptions, somehow donors have been unable to establish these terms for their recipients and instead expect organizations to be able to maintain cash on hand to front the surge in capacity needed to respond to a crisis.

To help us address these challenges, we need new ideas and innovative solutions. Never have we been so in need of cross-sector collaboration, harnessing our respective areas of expertise and capacities across the private sector, governments and civil society. The Forum’s COVID-19 Action Platform provides us with this opportunity for collaboration and a rapid mobilization and sharing of innovative ideas and identification of creative solutions.

Potential solutions might include:

The global humanitarian community must be at the forefront of responding to the rapidly escalating humanitarian needs around the globe – saving lives and so much more, through this pandemic and beyond. And, as with any crisis, there’s opportunity. Opportunity here to design and develop new financing solutions, which could help to find new and better ways to tackle global challenges together. This has never been more needed than now.