Rising global humanitarian needs - from the Syrian crisis to the conflicts in the Central African Republic and South Sudan - have provided challenges for aid funding and highlight the growing significance of private donations in terms of diversity and flexibility in relief response, UK-based think tank Development Initiatives’ Global Humanitarian Assistance programme said in a 29 April report.
In 2012, private aid donations (private sector/company and individual donations, as well as those from foundations and corporations, in other words, non-state donations) accounted for almost a quarter of all humanitarian aid. Some US$4.1 billion came from private, non-state sources, a 26 percent drop from a 2010 high of $5.6 billion, underscoring the volatility of private aid funding which tends to respond better to natural disasters and less so to complex emergencies.
Traditional humanitarian funding has also been outpaced by growing needs. Last year, the UN saw the highest level in a decade of unmet financial needs in response to its appeals, the report said.
“When we look at humanitarian assistance, and development assistance more generally, private donations actually now account for quite a big amount,” said Chloe Stirk, advocacy officer at Development Initiatives and author of the report.
“Unfortunately, there is no real database [for this type of funding], so what we attempted to do was quantify the overall levels of humanitarian funding from individuals, foundations, and companies and corporations.”
The report, which studied funding data from 75 NGOs and six UN agencies, found that the majority of private donations (82 percent) come from individuals. Foundations, such as the Bill and Melinda Gates Foundation, account for around 7 percent of private humanitarian funding. Private companies and national societies each account for about 5 percent.
“Individual donors opening up their wallets and contributing $10 or $10,000 is beginning to comprise a major source of humanitarian funding, especially for several international NGOs,” said Steven A. Zyck, a research fellow with the Overseas Development Institute's (ODI) Humanitarian Policy Group.
“Today, around one in four humanitarian aid dollars comes directly from the pocket of individual contributors, and this amount will continue to grow.”
Zyck said one of the reasons private funding is increasing is that businesses, especially mobile phone and credit card companies, have made it easier to donate money when a crisis hits. Donating is now as easy as sending a text message. During last year’s cyclone in the Philippines, the Disasters Emergency Committee (DEC), which raises emergency appeal funds for 13 UK-based international NGOs, was able to raise nearly $155 million in donations - almost entirely from the private sector.
“Overwhelmingly our money has and continues to come from gifts from ordinary members of public who are individually and collectively extremely generous in their response to high profile overseas emergencies,” said Brendan Paddy, DEC’s head of communications. UN aid agencies have also become more reliant on non-state donors, as government and institutional budgets (such as those of multilateral institutions) have overall been on the decline, in part due to constrained budgets.
Institutional funding fell 7 percent between 2010 and 2012, and while private funding from companies contributed less than 1 percent of total UN aid in 2008, this figure jumped to nearly 15 percent in 2012, according to the report.
NGOs increasing their share of non-state funding
Even NGOs, who have always tends to rely more on private donations than the UN, have been increasing their share of funding from private sources. Between 2010 and 2012, the percentage of private funding coming from individuals to NGOs rose from 78 percent to 88 percent, according to Development Initiatives.
Médecins Sans Frontières (MSF) was in 2012 the biggest fundraiser of private donations among the NGOs studied, with private money accounting for about 90 percent of its funding.
“For us at MSF, it has always been important, but throughout the last few years, we’ve seen a growing proportion of our income come from private individuals,” said Jordi Passola, fundraising coordinator for MSF International. “I think the key element was that we began to prioritize private funding over institutional funding, because we found that it gives us much more reactivity to respond to emergencies and allows us to do so in an independent way.”
Benefits compared to state donors
Unlike state funding, which tend to come with tight restrictions on how, when and where the money is spent, private donations tend to be more flexible, reliable and longer lasting. This means that agencies can prioritize certain needs, which may no longer be recognized by governments, and respond within hours or days, as opposed to the weeks or months or it can take to secure a state grant.
“The time frames are much looser, so organizations are freer to use privately donated funds for up to three years after a crisis, where institutional grants are usually 12 months at a time,” Stirk said. “They [private donations] can also be used to plug gaps in sectors that may have not gotten enough funding from governments and therefore have a greater amount of unmet need.”
Following the 2010 earthquake in Haiti for example, only 46 percent of the Consolidated Appeals Process (CAP) was funded by state donors in 2012, compared to 73 percent in 2011. Comparatively, Haiti was the top recipient of private firms and individual donations in 2012.
Aid agencies say that one of the downsides of private sector funding is that it tends to be more volatile. “Private funds increase more quickly during what we call a mega disaster, but they also decrease much more quickly after a mega disaster,” Stirk said.
She said private donors are also three times less likely to give money to chronic or conflict-related disasters, as compared to when a natural disaster strikes.
“It’s certainly much less difficult to raise funds for, say, an earthquake… and can really be a challenge to explain to people that we need money for both types of crises [natural disasters and complex emergencies],” MSF’s Passola said.
“But in our case, the advantage that we have is that 90 percent of our income mainly comes from private individuals… who give [to a general fund] on a recurring basis. So this is the money that also allows us today to have big operations in, say, the CAR.”
Need for transparency
Experts say that as private funding continues to grow, it is vital that organizations publish all private donations to the International Aid Transparency Initiative (IATI) as state donors do. This will help strengthen accountability, as well as improve humanitarian aid coordination efforts and increase the efficiency with which funds are used. The lack of consistent reporting makes it hard to gauge just how much is being giving by private donors, where exactly the money is going to and how much impact it is having.
“Truth be told,” Zyck said, “systematic and real-time data collection remains weak in the humanitarian community, and this has held up empirical learning about what works and which approaches are more or less cost effective in saving lives and alleviating suffering.”
Looking towards the future, experts say that emerging markets are likely to become more important as a source of private funding, particularly in the BRIC and MINT [Mexico, Indonesia, Nigeria, Turkey] countries. Besides some major philanthropists in the Gulf, most private donors are currently based in Western countries, Zyck said. He added that the humanitarian sector must learn to work better with the private sector, particularly businesses, and build strong relationships with them - before a conflict or disaster strikes.
“While some in the humanitarian community have misgivings about the role of the private sector, they are missing out on a phenomenal opportunity and limiting their own effectiveness,” said Zyck.