Can our development sector sustain without foreign funding?

Illustration: TBS

Shahina (not her real name), a financial analyst, was excited to join Save the Children in Bangladesh this February. After receiving the offer letter in December, she had resigned from her current workplace and started preparing for the move.  

But recently, she received an unexpected email from the organisation, informing her that due to the United States Agency for International Development (USAID) funding halt, her recruitment was on hold until further notice. 

Desperate, she reached out to her previous employer to withdraw her resignation, only to find that her position had already been filled.

"I even rented a place in Cox's Bazar, paid a security deposit, and bought furniture, expecting to start my new job. Now, I'm unemployed," she shared with The Business Standard.

However, it is not only about any particular organisation. Many US-funded NGOs in Bangladesh are grappling with the consequences of US President Donald Trump's decision to halt foreign aid.

For instance, the International Centre for Diarrhoeal Disease Research, Bangladesh (icddr,b) recently laid off over 1,000 employees involved in various research projects funded by the USAID.

The fund halt has made an immediate impact because the US is the largest single donor of aid globally. The country has assisted Bangladesh with $550 million as disbursement in 2023 alone via all its agencies. 

"Such organisations [NGOs] advocate for rights and inclusion, yet they fail to ensure basic job security for their own employees," remarked a frustrated Shahina.

"Trump has been president before, and his policies and ideologies are well known. It was expected that grant-based financing would decrease. Yet, we took no preparation. We should have had a sustainability plan. Even as we transition to a middle-income country, a natural decline in foreign funds is expected. But we have no preparations for that either."

M Zakir Hossain Khan, chief executive, Change Initiative

It does not end with the US though. Switzerland has also announced cutting foreign aid to Bangladesh. The Swiss Agency for Development and Cooperation (SDC) will phase out its bilateral development programmes by the end of 2028.

As of March 2022, Switzerland had invested over $1.3 billion in development assistance to Bangladesh, with significant additional contributions channelled through international financial institutions, according to the then-Swiss president, Ignazio Cassis. 

Apart from the issue of foreign funding, the challenges of NGOs are multifaceted, according to Dr Selim Jahan, former director of the Human Development Report Office and Poverty Division at the United Nations Development Programme in New York.

He highlighted that the development sector is not a monolithic entity, but consists of the government, the private sector, bilateral and multilateral development partners, NGOs, research institutions, etc. 

"Sometimes the government welcomes the NGOs as development partners, sometimes it gives them a cold shoulder. For NGOs, it is a challenge to maintain an optimal balance," he said.  

Against this backdrop, the question arises: Can it sustain itself without foreign funding?

"NGOs being fully dependent on foreign funds is nothing but a suicidal decision. This model is not sustainable at all," said M Zakir Hossain Khan, chief executive of Dhaka-based think tank Change Initiative and an expert on climate finance and governance. 

"Trump has been president before, and his policies and ideologies are well known. It was expected that grant-based financing would decrease. Yet, we took no preparation. We should have had a sustainability plan," he said, adding, "Even as we transition to a middle-income country, a natural decline in foreign funds is expected. But we have no preparations for that either."

Meanwhile, Reuters reported on 1 February that the Trump administration is moving to bring USAID under State Department control. Discussions are ongoing, but no final decision has been made yet.

"It would be a significant overhaul of how Washington allocates foreign aid. Funding will be more of a diplomatic decision if it happens. Our diplomatic policy needs to be stronger," said Innovision Consulting's Managing Director Md Rubaiyath Sarwar, with more than 21 years of experience in international development consultancy.

The suspension of Trump's funding has begun affecting the Rohingya camps, which have been sheltering over a million refugees for years. 

While emergency food aid from the World Food Programme, backed by the US, continues to reach the camps in Ukhia and Teknaf, the health sector, waste management, and site management are already facing significant challenges.

Khan urged that the government should directly engage in discussion with the US about the Rohingya response. How will Bangladesh tackle such a massive humanitarian crisis without foreign funds?

Asked about the job security issue, Zahedul Amin, co-founder and managing director of LightCastle Partners, said, "Honestly, job cuts in the development sector are inevitable. It is because of its model. However, employees in our country are not prepared for this. I would suggest everyone to focus on upskilling."

It is also essential to understand how the development sector works. 

The ultimate goal of an NGO is achieving its mission to the point where its existence is no longer needed, leading to its dissolution. Funding may be suspended, new donors may emerge, and the priority of one program may shift to another. The sector itself operates with a constantly changing agenda.

"But it's not happening. The entire sector is just obsessed with funding," Amin noted.

Due to this obsession, a major challenge in our development sector appears to be that not all areas receive equal attention. Most of the grant funds are directed towards climate and gender-based issues, and as a result, NGOs tend to focus on these same areas only.

Dr Selim Jahan also said we should recognise that the future development path of Bangladesh will not be easy as there will be emerging challenges, lingering challenges and deepening challenges. 

"At this moment, the emerging challenges include overcoming some economic symptoms like high inflation, low growth, fluctuations in foreign exchange reserves etc. and more fundamental issues like economic mismanagement, problems in the financial sector, restoration of a structure of transparency and accountability, reforming the economic institutions etc," he said. 

"The lingering challenges embrace poverty and deprivations, persistent high youth employment, disempowerment of women etc. And deepening challenges would refer to widening inequalities of both outcomes, climate change and deprivations, lack of economic voice and autonomy of the common people," he added.  

The way forward

Dependence on some traditional donors for funding should be reduced, Dr Selim Jahan suggests. Some Gulf states, BRICS countries, non-oil natural resource rich countries can also be explored for funding. 

"Some market orientation for providing products and services of NGOs and research institutions can be thought of. For example, the knowledge products, data collected and surveys carried out by research institutions can be purchased by other entities which may enhance their work. This would generate additional funds," he said. 

According to him, collaboration with other NGOs and research institutions abroad may also help co-financing the work of local NGOs and research institutions. 

Meanwhile, M Zakir Hossain Khan suggests that we should establish a national commission on the development sector. Priority should be given to projects that, if discontinued, would directly impact lives and livelihoods.

He also suggests that small NGOs should be merged, like those in the banking sector, to make the development sector more efficient. On the other hand, large NGOs should be declared as social corporations, allowing income tax to be a funding source.

"There are many ways to source funds locally. CSR [corporate social responsibility] funds from the private sector need to be mobilised, Zakat funds can be utilised in the development sector, while imposing a carbon tax on environmental polluters can be another way."

Zahedul Amin believes that the private sector can step in to fill the funding gap in our development sector. "Impact funding can come not only as investment but also as grants. CSR funds can be directed towards specific development sectors for investment." 

But for that, strict regulations and monitoring is needed. The country needs to become more investment and business-friendly.

Even the government can play a role in supporting NGOs in this regard. Instead of outsourcing local projects to contractors, Khan suggests the government should consider involving NGOs in their execution. This way, local NGOs can also find a finance source and a way to sustain.