Passing the Buck: The Economics of Localizing International Aid

Passing the Buck: The Economics Of Localizing Aid

A study by the Share Trust and the Warande Advisory Centre estimates the economic implications of shifting 25% of Official Development Assistance (ODA) - aligned with Grand Bargain and USAID commitments - from international to local intermediary structures.

The analysis estimates that local intermediaries could deliver programming that is 32% more cost efficient than international intermediaries, by stripping out inflated international overhead and salary costs. Applied to the ODA funding flows allocated to UN/INGOs in 2018 ($54bn), this would equate to US$4.3bn annually. The shift in funding is modeled using equitable rates, rather than business-as-usual rates which currently impede local actors from meeting the needs of their communities, resulting in an additional redeployment of $680m per year in salary and overhead costs to local actors.

The report also outlines a possible transition fund to help with this 25% shift over the course of 8 years.

Passing the Buck: Case Study of a Pooled Fund in the Middle East

The Share Trust completed a detailed analysis of a $60 million Alternative Pooled Fund model in the Middle East, applying the same cost-efficiency analysis model from Passing the Buck. This analysis finds that redeploying funds from an international partner to a local partner would result in cost efficiencies of 13.6% on salaries and overheads alone, realizing $545,000 in savings that can be used to deliver against unmet humanitarian needs.