Bilateral and multilateral funds are a real maze. Yet they can be an important source of funding for many organisations. But how do you conduct an analysis of government funds to define whether or not they are a priority target for your fundraising activities?
The three types of government funding
Bilateral aid occurs when one government transfers money to a recipient country. The transfer can be direct when done from Development Finance Institutions (DFIs – specialised national development banks) or it can go through implementing partners, such as NGOs or civil society.
Bilateral aid can sometimes be considered by certain organisations as a tool to promote the strategic and commercial interests of the respective donor countries. The volume of dedicated funds depends largely on the economic capacity of the country, the most generous being often the United States, the United Kingdom, Sweden, Norway, France and Germany.
Multilateral funding goes through multilateral organisations, such as the UN agencies, the European Union or specialised international development banks, that rely on the financial contributions of their members to function and carry out their operations.
Multilateral aid that is generally seen as a less political form of aid than bilateral aid, encouraging international cooperation. Moreover, multilateral aid enables the implementation of large-scale programs that are beyond the capacity of individual donor countries through bilateral aid.
A pooled fund collects money from multiple donors, sometimes governments, sometimes private donors, and puts it in one managed portfolio created to address a specific topic. Pooled funds are mainly country-based and more often created for humanitarian affairs and fragile and conflict-affected states.
Moreover, pooled funds rarely dominate aid flows at country level. The literature highlights their potential advantages, but it also notes that their performance frequently falls short of expectations: slow disbursement; dissatisfaction with results often leads donors to pursue alternative or parallel channels of funding.
Analysing the potential of government funds
Benchmarking similar organisations
If your sector of activity is somewhat sensitive, such as human rights, crime or cybersecurity, it may be interesting to start your analysis by benchmarking organisations similar to yours or working on related topics in order to assess which of them are getting government funding.
To do this, search and list all the interesting organisations and create a table that will gather all your research, remembering to take into account the following elements:
- Name, country, mission, geographical reach and website
- Funded by government funds? If yes, which ones? How much (percentage of annual budget)?
- Type of projects supported by government funds
- Public policy or position regarding government funds
- Risk management / ethical charter
- Other types of donors
Lots of information is available on their website, just take the time to search. Sometimes certain information will not be available, but researching 15-20 organizations will give you a good overview of the situation and whether your organisation should consider applying for government funds.
This first step already allows you to decide whether or not it is useful to continue your analysis.
Prospection and qualification of government funding
If, in view of the benchmarking, government funds seem to you to be a potentially interesting source of funding, you should push your research a little further.
The second phase consists of gathering all the necessary information by donor in your database or your CRM by considering the following points:
- What are the priority themes covered? Is yours one of them?
- What geographical areas of intervention are preferred?
- What are the inclusion/exclusion criteria? For example, do you need to be headquartered in the country to apply?
- What is the funding capacity of the donor?
- What are the procedures for submitting a request?
This in-depth research will allow you to have a very good overview of the financial potential of this target for your organization.
A last step in order to finalise the analysis consists in giving a score to the various donors sought to definitively validate or not your interest in pursuing this track. A matrix can be developed according to different criteria that are essential for you. Here are some ideas:
- Probability of success;
- Alignment with your mission and activities;
- Funding capacity;
- Requirements / criteria.
These scores will allow you to rank your prospects in order of priority (high, medium or low), or even exclude certain donors from your list.
How to mitigate the risk?
For some organizations, receiving government funds represents a real ethical question, particularly for independence concerns. Managing the risk then becomes an essential aspect to take into account.
A more thorough verification process can be put in place by your organization to verify that the State in question is not involved in affairs or scandals that could tarnish the notoriety of your structure and weaken the confidence of your other donors. Think about the key criteria for you and develop a reliable internal process to ensure you have enough evidence before deciding to engage with one government or another.
A funding policy
Generally in fundraising, having a funding policy or ethical charter is almost essential. This allows you to clearly position your organization on accepted or rejected funds, but also to control and manage potential risks. The ethics charter generally covers the following elements:
- Your values;
- Accepted or rejected financial contributions;
- How do you ensure your independence;
- Your engagement towards financial transparency;
- And an overview of your due-diligence process.
Each case will be unique, but this document will allow you to know what to do, to make informed decisions, and above all to be able to defend your position in the event of a problem.
This blog was originally published on E.C. Consulting