Opinion
SILVER LININGS
USAID funding was a golden cage
The human cost of the U.S. Agency for International Development (USAID) closure is staggering. Abruptly ending thousands of life-saving aid programs with no warning and no alternative in place has been harmful to communities around the globe and left the humanitarian world reeling. The wake of the Myanmar earthquake last month is just one example of the crippling effect we are seeing on the international humanitarian aid system.
At the same time, the USAID closure may force a desperately needed reset of the humanitarian funding ecosystem. The shutdown exposed the sheer impossibility of depending on a single donor and the inefficiency and inequalities that have been quietly present for decades. While plans circulate for the future of USAID, the real opportunity here goes far beyond one agency. To create a truly more efficient and equitable system we need to include non-governmental organizations (NGOs), donors and communities in the conversation.

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Ironically, the mid-sized international NGO I work for has been desperate to get USAID funding for as long as I can remember. We danced around the office when we finally succeeded last year, receiving a relatively small grant from a third-party organization supported by the U.S. agency. It was one of our best days as development professionals. Just a few months later, that program was terminated along with thousands of other grants.
Now, our long-term failure has become one of our greatest assets. That failure forced us to diversify our funding and learn to work with a myriad of donors. Unlike some of our peer organizations, which receive 70-80% of their funding from USAID — a fact we once looked upon with envy — losing any one donor cannot shutter our operations. We have been devastated to see incredible, impactful organizations forced to freeze their programming.
For small to mid-sized organizations like ours, USAID and other institutional funding has always been difficult to penetrate. The calls for proposals are jargon-filled, 80-plus page affairs. They require expert, dedicated professionals just to decipher. Many local and grassroots groups simply do not have the resources to do so. As a result, a crew of “usual suspects” receives the bulk of funding: primarily large multinational NGOs with enormous bureaucracies.
For organizations that do succeed, USAID funding is a golden cage. While the enormous grants can fund a full budget, they keep organizations from diversifying and stifle creativity with onerous compliance requirements that favor quantity over sustainability. With the bars blown open, we must not be afraid to step out and use this opportunity to create a more equitable, effective and resilient system.
There is no single, straightforward solution. No one entity can fill a $65 billion funding gap, nor should we look to maintain the status quo. We have an opportunity here to do things differently. Funders, philanthropic advisors, NGOs and communities should ideally all have an active voice in creating a path forward. While I don’t claim to have all the answers, here are several ways a more equitable system could look.
Humanitarian organizations must diversify their funding. Organizations cannot continue to rely on one or two core donors. Organizations will need to evaluate their options on a wider scale, turning to a mix of institutional, private and corporate donors.
Instead of competing for limited funds, we need more collaboration among NGOs. Alliances and networks for NGOs can work together to allocate shared resources and strategize from the ground up, putting each organization’s specialties to best use. We’ve already seen impressive models like Start Network or Alliance 2015, showing the kinds of impact that can be achieved by collaborating, rather than competing.
Donors will need to understand the fragility of this moment as well. With fewer funding sources available, we must do our best to eliminate bureaucracy and barriers to entry that bog organizations down. To take advantage of this change we need more equity for local and grassroots organizations. Communities are the experts on their own needs and context. Funding smaller, grassroots organizations can open a more direct line to them. To make that happen, the system must be more accessible and easier to navigate.
Trust-based philanthropy models like Mackenzie Scott’s Yield Giving are already putting more power in the hands of communities. This may be the key to making a real impact in such a difficult environment. Multi-year, flexible giving that also funds more core costs allow organizations to build programs that last — to think strategically about how money is spent and adapt to changing realities on the ground.
As humanitarians, we adapt to impossible circumstances. It’s the heart of what we do. Despite mounting odds against us — dwindling funds and fickle media attention amid accelerating climate catastrophes, global conflict and migration — our job is to continue supporting the most vulnerable.
We are all still reeling from this earthquake. Dismantling USAID will have violent and harmful repercussions for years to come. However, let’s not pretend the system wasn’t in need of a shakeup. If this change has been forced upon us, as devastating as it has been, let’s come together and rebuild in a way that doesn’t just replace what was lost but creates something entirely more hopeful.
Tamar Kosky Lazarus is the head of communications and development at IsraAid.