The 4 Different Types of International Development Funding

As you seek institutional funding for your work around international development, there are four buckets of funding you should be considering. Having a strategy for each will be game-changing.

These four buckets are:

1.   Government/Public
2.   Foundation/Philanthropic
3.   Corporate
4.   Impact Investor-Led (depending on your business model)

Each type of funder has its own unique requirements and preferences, so it's important to research and target the right funders for your organization's needs.

Let's start with Government/Public:

Government grants (like from USAID or the EU) or funding from public development agencies like the IDB, GEF or GCF can be a good source of funding for organizations that align with government priorities and objectives AND that are able to receive large sums of money. 

The proposal development process for government grants can be complex and time-consuming. There are exceptions, of course, so it's worth diving into this bucket to see where you best fit. Additionally, piggy-backing off a partner that has relationships with government funders is a great way to learn about requirements, opportunities, and how to position your organization to receive these larger tranches of funding.

Keep an eye on LinkedIn pages like WorkWithUSAID and consider where your partnerships can help you get more involved in government funded programs. Be prepared to educate yourself on process, rules, and regulations if you don't already know them.

The payoff can be high, but restriction can also be high (i.e. government funders are NOT the ones to look to for unrestricted, flexible funding).

Next is Foundation/Philanthropic:

Private foundation grants, compared to government funds, are more flexible and accessible. They aren't always unrestricted, but requirements are often less onerous.

Foundations often lay out priorities for their giving, with specific areas of focus or geographic restrictions. We always advise our members to study the foundation's website thoroughly to identify the best potential alignment before applying for a foundation grant. The Venn diagram of priorities must be pretty large for you to be a consideration.

Funding levels can be in the multi-million dollar range (and increasingly so with the trends towards big bets) but on average tend to be in the low six figures. Foundation grants are a great opportunity to test out a new program, pilot test a new idea, or help add resources to a program that needs a refresh.

Government grants budgets are detailed and reviewed with a fine-tooth comb; for foundation grants you will need a strong budget that can be easily explained. But priorities are around realistic, transparent, and aligned priorities.

For funders that don't accept unsolicited proposals, utilize our 4 Step Guide to help you navigate this path. There are ways to be seen, and having a facilitated intro is often a great way to get more information on whether you have alignment or not.

If questioning whether to submit a concept note, or letter of inquiry to a foundation, ask yourself first whether you see complete alignment of mission and ideas. If the answer is yes, do send, and see how we can help you move that concept to proposal with the right intro. This is a people business in the end, especially for foundations/philanthropies.

Corporate:

Corporate funding can come in many forms to nonprofits, although most organizations look for CSR or cause marketing as a way to augment unrestricted funds. Some also look for employee engagement funding. 

Instead of seeing the philanthropic dollars as the way in, try and understand a corporate’s business model. Where do they source product from? Where are their operations? What are their impact goals? Do they have an interesting program underway in a geography where you also work that supports local communities? Is there a way your work would help support a tenant of a corporate’s investment strategy in the Global South?

You want to see corporates as collaborators — and understand how their investment in themes or geographies match yours. How can your efforts help the corporate improve their business model, work better in regions where they are operating, source more efficiently or provide more opportunities for its workforce, communities or broader network? CSR and how a business functions are essentially one and the same these days (hallelujah!).

Consider how an outside investment from a corporate can augment an existing funded program you have, and approach the corporate as a leverage partner—not just for a donation.

Corporate funding can be a great unrestricted, flexible funding source, but it takes a good amount of patience, due diligence, and consideration to find the right match for your work.

The last category of funding is impact investment funding (or funding that is invested in an enterprise with the expectation of a financial return on that investment).

Impact investment capital is used by an investor looking to make money off of his/her investment in an organization that is designed to deliver a product or service for a profit of some sort. While impact investors can work with nonprofits, they can do so only if the program they are investing in has some sort of financial churn. This is obviously quite different from a funder that is just investing for a social or environmental outcome.

Most impact investors investing in the Global South do seek to improve on a social or environmental outcome, but seeing a financial return is a priority.

Why? Because investors are priming the development landscape to be more market-driven and to incentivize an economic system that is driven by business creation, not pure philanthropy. The expectation is that these enterprises, when funded properly, can help support local development for the longer term and be self-sustaining, create jobs, and strengthen a local system better than philanthropy can.

Some impact investors will provide venture philanthropy, which is grant funding followed by debt or equity. Others may invest with forgivable debt (i.e. it doesn’t have to be repaid). But most do invest with traditional or blended finance tools like loans, equity, and other forms of debt.

Investments can be small or large depending on the recipient.

As you evolve your fundraising strategy, understanding the full funding landscape gives you a much more focused approach to considering which funders and funder types are most likely to support your organization's work so you can target them effectively. Ask us how we can help you engage funders for a more effective outcome!