In Foreign Aid, Nonprofits Could Use Some Disruption

Counterpoint to “Everything Old Is New Again and Nonprofits Should Stay That Way” by Kelly Kleiman

In her May, 3 op-ed, not-for-profit consultant Kelly Kleiman challenged a new initiative led by Silicon Valley business leaders to “disrupt the nonprofit space” to make the sector more effective. As my colleagues and I working at a DC-based international charity read her article, we were left troubled, for in her effort to affirm the capabilities of nonprofit leaders, Kleiman dismisses the need for reinvention. On the contrary—in the field of foreign assistance, it is exactly the failure to reinvent and adapt to changes in technology and the social landscape that is diminishing nonprofits’ ability to serve their intended beneficiaries and that is threatening to render them irrelevant.

For fifty years, international nonprofits have operated according to a model of foreign assistance that was established by President JFK in 1961 under the Foreign Assistance Act. Built on the assumption that we as Americans knew best how to raise citizens of the “third world” up from lives of poverty and out of conflict, U.S. citizens made donations to intermediary aid agencies, who in turn utilized those resources to carry out their missions overseas. Over the decades, these agencies have amassed layers of bureaucracy, ballooning to a size warranting the title “mega charities.”

Today’s mega charities operate across multiple continents by utilizing local manpower to implement projects designed by PhD’s in Washington, according to U.S. federal and private grant-maker regulations. As my colleagues and I have witnessed, these practices have not just failed to “cure cancer or end poverty,” but more damagingly have wasted billions of dollars in citizen funds spent on programs that often dissolve due to lack of local ownership, and that have both perpetuated beneficiary dependency and denied American citizens the opportunity to engage directly with their counterparts around the globe. Although there has been a recent push for charities to minimize the cost of their overhead, in worst cases, as little as 40 cents to the dollar reaches beneficiaries.

So, Kleiman asks, “Do nonprofits that are trying to serve their clients really need disruption in their management?”

Absolutely.

Better international charity is not about more dollars—the solution lies in greater citizen-to-citizen engagement, whereby American donors can give directly to local groups and activists overseas that are driving real change in their communities. In the 50 years since the 1961 Foreign Assistance Act was created, emerging civil society organizations overseas have become ubiquitous and capable, and more importantly, owners of their own national development. This does not render international charities obsolete, but re-envisions their role as facilitators, advocates, and suppliers of technical assistance that can ensure the compliance and transparency of those local groups who are the agents of change.

Thanks to today’s information and communications technologies (ICT), cutting out the intermediary—termed “disintermediation” by Janet Bumpas, CEO of GoodStep Enterprises—is now possible on a global scale. Over the last 20 years, ICT has taken root across the developing world and allowed people from around the world to connect in spite of geographic, cultural, and social divisions. Already it has redefined other for-profit industries with the rise of enterprises such as eBay, iTunes, and Amazon, and has begun to make headway in the nonprofit sector as well through “new giving” charities such as GlobalGiving, Kiva, and DonorsChoose. That Kiva was able to raise over $100 million from private donors in its first four years from 2006 to 2010—and is expected to reach $1 billion by 2015—is testament to the potential for this model to enhance the ability of international charities to attract consistent funding and amplify their impact overseas.

The benefits of direct citizen-to-citizen foreign assistance are multi-fold: Funds can be transferred directly to local groups through secure online systems, eliminating costs lost through multiple transfers; local groups will be able to gain support for projects of their design that will be more sustainable because they will be locally-owned; and donors will have the opportunity to build more direct relationships with the people and groups they are supporting and become more aware of global issues. In the words of Kiva Founder, Matt Flannery: “When understanding increases, so does generosity. People are inherently more generous towards people and causes they understand.”

Will the Palo Alto business crowd transform American mega charities as they so intend, by sitting with them on the board? Not if the talk circles around blanket management and marketing strategies without producing fundamental change to the way American citizens give overseas. But, whether it comes from outside or within, American mega charities are in need of “disruption” that will dismantle the attitude that “everything old is new again, and nonprofits should stay that way,” and create the space for a new model based on citizen empowerment and connectivity that will ultimately benefit donor, nonprofits, and the people they serve. Perhaps it will be the for-profit sector that provides that force.

What is certain is that business leaders do have an important role to play in broadening citizen participation in foreign assistance, whether it’s by building awareness among employees and consumers and encouraging their participation, or by entering into collaborative relationships with their counterparts in the developing world. In this light, nonprofits should not only welcome but seek out allies in the for-profit sector who are interested and invested in their causes—even if they don’t walk into the first meeting with a signed check.

Read more stories by Jessica Majno.