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LGD 2001 (1) - Sitharamam Kakarala


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Building Civil Society and Direct Funding of Southern NGOs: A Review of Recent Literature

Sitharamam Kakarala
Associate Professor
National Law School of India, Bangalore, India,
and Visiting Fellow, School of Law,
University of Warwick, UK


Direct funding of Southern NGOs by multilateral and bilateral donors is not a new practice. However, the practice has acquired a new meaning and significance with all most all the donor agencies linking it to a larger process of 'civil society building'. The present paper reviews the most recent literature available, both of the donor agencies and their evaluation studies as well as the scholarly studies, on the claims and the practice of donor agencies. The review identifies three major purposes for which funding is taking place and the concerns related them emerged from the early studies. It also reviews the modest literature available on the macro ideological changes in the context of the new developmental agenda of the late 1990s and their potential linkages with civil society building process. Given the centrality of civil society building in the new developmental agenda and virtual absence of serious micro/empirical studies, barring few exceptions, the review concludes with the observation that such studies are likely to attract more scholarship.

Civil society has a crucial role to play in India's future development including by developing innovative approaches to tackling poverty, advocating pro-poor reforms and policies, providing services to poor people in areas which government cannot reach and empowering the poor to make demands on government. DFID will therefore work with civil society on a range of issues including: stimulating demand for improved essential services; empowerment of poor communities and groups; better accountability; and advocacy of pro-poor policies (DFID, India Country Strategy Paper, 1999).

Keywords: Civil Society, NGO, Multilateral, Bilateral, Funding, DFID, World Bank, USAID, Donor Agency, Policy Shift, Washington Consensus, Post-Washington Consensus.

This is a Commentary published on 21 June 2001.

Citation: Kakarala S, 'Building Civil Society and Direct Funding of Southern NGOs: A Review of Recent Literature', 2001 (1) Law, Social Justice and Global Development (LGD). <>. New citation as at 1/1/04: <>

1. Introduction

The decade of 1990s witnessed the emergence of a new set of development rhetoric—most prominent being 'good governance' 'social capital' 'civil society building' and 'partnerships' with NGOs. Along with the changes in the rhetoric, the policies and practice of donor agencies seems to have undergone a significant process of transformation (DFID, 1999, 2000, World Bank, 1999, 2000, USAID, 1995, 1996). Most significant of these changes has been the increasing emphasis on 'direct partnership' with, or 'direct funding' of, 'Southern Civil Society (SCS).' Besides those changes, development aid has been and continues to be a 'big business'. According to the figures of OECD, the average net flow of Official Development Assistance (ODA) during 1990s was $55 billion. It is therefore not surprising that the area has attracted the attention of significant number of policy makers, academics and even NGOs—both northern and southern. However, bulk of the literature tends to focus on the macro policy dimensions and impact assessment (Boone, 1995, Burnell, 1997, 1998, Cassen, 1994, Hewitt, 1994, Grant & Nijman, 1998, Zimmerman, 1994). Notwithstanding the high visibility and audibility of the rhetoric of 1990s mentioned above, comparatively there are far fewer studies on those themes. Still worse, the number of studies, which engaged in serious empirical or conceptual analysis is still smaller. Lack of high volumes of literature may indicate, though superficially, relative insignificance of the area. However, I would submit that on the contrary that it adds to the overall significance of the area further for the following reasons:

First, the very fact that all the major multilateral and bilateral donors repeatedly highlighted the significance of partnership with SCS as a core strategy of improving the performance of the development aid, makes it unequivocally clear about its importance in the aid policy in 1990s.

Second, the growing significance of fund channelling through NGOs (or Private Voluntary Organisations, in the language of USAID) does indeed enhance its significance.

And third, the intended achievements through these interventions are so vital for the improvement of conditions in the South that their study cannot be ignored. The present note therefore aims to provide a brief review of the available literature on this crucial subject.

2. Brief Overview of the Trends in Direct Funding

Strictly speaking the channelling of ODA through NGOs is not a new practice. Germany claims to be the originator of the idea by initiating the practice of 'private funding' (DAC, 1998, p.24). The World Bank and USAID began to practice the idea from the beginning of 1970s. However, the idea had acquired a definitive status when the Bank Board of Directors adopted a policy to forge partnerships with NGOs in 1981 (World Bank, 2000). The USAID followed the lead and adopted its own policy on similar lines (USAID, 1995). By 1985, 143 PVOs were registered with USAID. By 1989 nearly 20 percent of World Bank's project funds were being channelled through NGOs (World Bank, 2000). 1990s witnessed rapid expansion in this practice, again, soon after the World Bank adopted its 'Mainstreaming Participatory Initiative' in 1995 and the USAID following with its own policy 'New Partnership Initiative' in 1995. By 1999, nearly 52 percent of the World Bank's project funds were being channelled through NGOs. The figures for USAID were 30 percent for the same year, though it has commitment to increase it to 40 percent. The number of NGOs registered with USAID trebled by 1995 reaching 434. The data about the European donors is however a little confusing. The confusion is mainly due to the complex and plural nature of the ODA systems in some countries, eg., Germany and Netherlands, and secondly, due to lack of transparency of in the figures of some of those agencies. But within the available data, Sweden has the largest share with 33 percent of its aid being channelled through NGOs, while Germany (7-8 percent), Netherlands (8-10 percent) and UK (about 5 percent) seem to be way behind the other DAC members. Notwithstanding the differences in the magnitude of partnerships with NGOs, virtually all the donors adopted policies that clearly emphasize their priority of civil society building.

3. 'Building Civil Society'

As mentioned, the focus of all the donor agencies in the second half of the 1990s is to actively contribute to the 'building of civil society' (DAC, 1997a, 1997b, 1998a, 1998b, 1998c , 1999, DFID, 2000, USAID, 1995, World Bank, 2000). As an inherently Eurocentric idea, conceptualised in the context of emergence of modern Nation-State in the 18th and 19th centuries, and interpreted as essentially 'progressive' for it is the source of opposition to the monstrous concentration of power called state, has been increasingly recognised of the superficiality, particularly when applied to third world locations. There are attempts both widening the idea of civil society (Janoski, 1998) as well as rethinking of its relevance to third world locations ( Hearn, 1999). The donors emphasis, perhaps conspicuously loud at times, on civil society building is to be analysed in this background of tremendous lack of clarity on the concept.

Elaborating on the core objective of the policy of New Partnership Initiative USAID held that:

'The goal of NPI is to stimulate lasting economic, social and political development by building local institutional capacity, thereby accelerating host country 'graduation' from U.S. government assistance. Development efforts must work not only to eradicate poverty, but to leave countries with the capacity to sustain their own growth and to become full partners in the global community of free markets and societies. NPI embodies recent advances in development theory — advances that recognize the critical economic and political role of civil values and of the rich variety of voluntary associations that constitute civil society. NPI will focus significant resources on strengthening civil society and helping to restructure the relationships between states and civil societies' (original emphasis).

This view need not any longer be seen as only USAID's, for this is shared by and large by all the DAC member states and the World Bank alike. The emphasised text in the above quotation is sufficient to indicate that at one level the donors tend to perceive 'strengthening' civil society vis-à-vis state is per se a progressive move. No doubt there is a need in any democratic society to have a strong 'civil society' that is vigilant on state. This however is different from the deeper inequalities—political, economic, social and cultural alike—in civil societies and the consequent undemocratic dimensions of it. A further scrutiny of donor literature indicates that they acknowledge, at least in words if not deeds, that the civil societies in third world are 'complex' and their policies must be formulated carefully. But a closer look at their actual funding practice, about which unfortunately there is not much evidence as of now, wherever available suggests that it has three major streams of funding. The first is a focus on the 'empowerment' of the weaker or disempowered sections of people—eg., women, poor, caste in the case of India—and such other processes which eventually help enhance the 'voice of the civil society'. The second is the enhancement of the position of civil society vis-à-vis state (Hearn, 1999). The latter has been done through supporting such initiatives as advocacy organisations, human rights groups and academic and research establishments engaged in such activities. This seems to be the most 'successful' are of activity in civil society building, largely due to the location and nature of organisations, which are urban-based, professional and elite NGOs and their focus being scrutinising the activities of the state (Hearn, 1999, 2000a, Moen Mathiot, 1998). However, on the former, which has to operate in the realm of deeper inequalities and subtle oppressions of the social realm, there is very little evidence of success[1]. An important question that haunts any one who engaged in this area of civil society building analysis is whether 'empowerment' of the disempowered could happen without addressing the issues of fundamental inequalities and sources of oppression within civil society. Notwithstanding the high sounding rhetoric of the donor policy statements such a 'making globalisation work for the poor', any one seriously concerned about the true democratisation of the third world societies and following the developments cannot be sure whether the donor are interested, or will ever be interested in raising those fundamental issues without which it is unlikely that the rhetoric could ever move in the direction of realisation.

Finally, there is a third dimension of strengthening civil society funding process, which has been referred to more widely in the last decade then ever before, though rarely critically analysed by academia. That is, supporting individuals, institutions and programmes that subtly as well as loudly work for the realisation of a 'free market' economy. Here it is worth mentioning that the focus on 'free marketisation' is not new. All the major donors had commercial interests, which some times were mentioned in unequivocal terms and some other times wrapped in the language of moral altruism. The most direct form of such linkage—'tied aid'—has always been controversial and widely debated (Tarnoff and Nowels, 1993). The commercial pressure groups in the North were never hesitant to articulate their demand for greater access to Southern markets be tied to the process of ODA[2]. Due to its controversial nature, while tied aid has been kept to a minimum by donors, their overall commercial interests have been subtly linked to the aid process in various ways. The flow of commercial capital from the donor countries, for example, always exceeded the ODA[3]. The donor agencies always emphasised on the development of private enterprise as part of their AID policy (USAID, 1982). These ideas continue to shape the current policy as well. For instance, the DFID White Paper articulates these feelings.

'Making globalisation work more effectively for the world's poor is a moral imperative. It is also in our common interest. Many of the world's contemporary challenges—war and conflict, refugee movements…terrorism…—are caused or exacerbated by poverty and inequality' (Emphasis added DFID, 2000, p.14).

And goes on to emphasise:

'Effective governments and efficient markets are both essential if developing countries are to reap the benefits of globalisation and to make that process work for the poor people. While the market fundamentalism of the 1980s and early 1990s has been thoroughly discredited, it is now almost universally accepted that efficient markets are indispensable for effective development. But equally important are effective governments—which are both competent in carrying out their basic functions, and more accountable, responsive and democratic…' (DFID, 2000, p.23).

The oscillation between common (self) interest and moral imperative is clear. But the donor economic interests do not stop only at such direct linkages. An important direction of funding emerging in this area seems to be providing support for NGOs and 'think tanks' that work towards creating opinion / consensus in favour of economic liberalisation. This is relatively more clear in the experience of Africa (Hearn, 1998, 1999, 2000, Pearce, 2000, Moore, 1999, 2000 , Tjonneland, 1998), though there is some evidence to suggest that it is not uncommon elsewhere as well (Biekart, 1998, Van Rooy, 1998). Hearn's work on different countries in Sub-Saharan Africa indicates that significant proportions of aid has been channelled to NGOs that engage in sustaining and legitimising the broad agenda of market liberalisation process. What is crucial as well as interesting in this process is, first, there is significant donor interest convergence in this process, demonstrated by the fact of multiple donors funding the same NGOs/research establishments, and second, the dependence of these 'civil society' establishments on the continuing support from those donors, for they 'would cease operating without such external assistance' (Hearn, 1999, p.22). At a macro level it acquires further significance in the light of the recent trend of declining state/public support for educational and research establishments in most third world locations and hence is likely to attract further research, particularly of close empirical studies of establishments engaged in the generation of knowledge and their linkages with the process of development aid.

In this background, it is worth listening to Jenny Pearce (2000) observations on the vulnerability of NGOs to the neo-liberal pressures.

'To what extent have development NGOs succumbed to the pressures and incentives to pick up the social cost of neo-liberal restructuring, and thus enabled multilateral and governmental institutions to avoid breaking with their neo-liberal faith by re-creating welfare states? While the discourse of these institutions has become notably more socially aware and 'human'-oriented, and less 'anti-state' in an ideological sense, the underlying philosophy of market-led globalisation has not been questioned. Yet many progressive and well-intentioned NGOs of North and South — as well as the opportunistic ones — accepted funding from these institutions for carrying out community development, post-conflict reconstruction and more ambitiously, democracy-building, putting aside any residual doubts about neo-liberalism as such'.

These observations bring more scepticism than confidence about a process, which the DFID White Paper eloquently referred to, viz., 'thorough discrediting' of neo-liberal market fundamentalism of 1980s and early 1990s, particularly when the proponents of neoclassical liberalism assert its 'correctness' with amazing statistical accuracy. For example, it is interesting to read Fukuyama's assertions.

'Over the past generation, economic thought has been dominated by neoclassical or free market economists, associated with names like Milton Friedman, Gary Becker, and George Stigler. The rise of the neoclassical perspective constitutes a vast improvement from earlier decades in this century, when Marxists and Keynesians held sway. We can think of neoclassical economics as being, say, eighty percent correct : it has uncovered important truths about the nature of money and markets because its fundamental model of rational, self-interested human behaviour is correct about eighty percent of the time' (Fukuyama, 1996, p.13, as cited in Fine, 1999, p. 9. Emphasis added).

It is in this background of growing evidence of scepticism at the ground level that one would feel frustrated about lack of scholarly literature on the macro policy changes addressing the crucial question as to why and how such overwhelming convergence of donor ideologies on civil society building in the second half of 1990s.

A major exception to this lack of macro ideological analysis is the recent work of Ben Fine (1999 ,2001), which focuses on the emergence and spread of a central concept that is central to the ideological shift, but also caught the imagination of a wide variety of social scientists, namely 'Social Capital'. He identifies, by citing the most recent propositions of the World Bank policy makers, a shift in the macro ideology of the development aid—a shift from Washington Consensus[4] to post-Washington consensus[5], and suggests that at the core there is a changed perception of state:

'From anti-market, through market-comforting, to market-friendly, the state is now seen more positively if cautiously so' (1999, p.1),

which, according to him, is the facilitating factor of the new development agenda of late 1990s. Fine has three fundamental propositions.

First, Social Capital forms the core of the new developmental agenda, for it

'…builds up from the micro to the macro from notions of civil, as opposed to market, imperfections and with the potential for non-market improvements with impact upon the market' (1999, p.10).

Second, that Social Capital has provided an opportunity to World Bank (which has broadly been playing the role of the institutional ideologue of new development agenda) to propose new agenda:

'without having to come to terms in any serious or substantive way with the critical literature of the old consensus, especially that around the developmental state' (1999, p.12).

And third, that Social Capital symbolically represents a situation of mainstream economics colonizing other disciplines (1999, p.15).

4. Concluding Observations

The process of 'civil society building' and direct funding of NGOs and other voluntary establishments in the third world, which began with varied ideological orientations and intended purposes in the decades of 1970s and 1980s, is, therefore, being drawn into the new developmental agenda of late 1990s and is going to be a crucial arena of ideological battles. Last two decades of structural adjustment, liberalisation-globalisation has been successful in creating powerful elite interest groups across the third world and thereby facilitating a state level consensus on the broad neo-liberal development agenda. Whether the post-Washington consensus and its prized concept of Social Capital could achieve the same effect in the realm of 'civil society' would not just only be a 'moot question' but a source of stimulus for scholarly research and ideological confrontation in the first decade of 21st century. Total Net Resource Flows to Aid Recipients (US $ Billions).










(i) ODF





































(ii) Export Credits










(iii) Private Flows










Total Resource Flows (i+ii+iii)










Interest Paid by Aid Recipients









Table 1: Total Net Resource Flows to Aid Recipients (US $ Billions),
Source: OECD, Development Cooperation 2000, at 178-179.


1. As such there are very few serious studies available this area other than donor 'evaluations', which are often done with scant time and hence less rigours in their analysis. An important departure from that process is a recent study undertaken by the Dutch Government on Civil Society Building in India, but independently organised and coordinated by Centre for Studies in Developing Societies in Delhi. This is a study of 20 select partner NGOs of the Dutch Co-financing Agencies (CFAs) across the country and analysed with reasonable rigour. Though the findings in this study cannot be sufficient evidence to generalise on the theme, the results are more sceptical than what one would like to be. The effects of CSB were more tangible in the short-term activity of the partner organisations and there is a clear sense of disappointment with regard to the sustainability of the same in the long run. However, the English summary does not throw any light on why the performance was such a disappointing one. This will remain as a major challenge for all the scholars engaged in understanding the third world civil society processes. For the English summary of the Dutch Government study see at: <>.

2. Commenting on the linkage between the British business interests and the ODA policy community, Anuradha Bose (Bose and Burnell, 1991, p. 131) suggested that they form a significant pressure group that have potential to influence the ODA policy. More importantly the intentions of the pressure group are clear. 'CBI's [Confederation of British Industry] view on aid is that it should be increasingly devoted to projects of benefit to British Trading interests. In particular it should be increasingly tied, switched to non-Commonwealth countries, where there are 'commercial and investment opportunities' and concentrated more in infrastructure projects in countries which are 'rich in natural resources but lacking in communications' (Bose and Burnell, 1991, p.135).

3. The average figures for the decade of 1990s were: Average ODA $ 55 billion per year. Average commercial flows: $ 246 billion. See table 1 for more details of the fund flow.

4. Washington Consensus is generally referred to an ideological position of the Washington based institutions, World Bank, IMF and the USAID that market deregulation and liberalisation are preconditions for development. This was not fully supported by European Donors and the United Nations, who emphasised on Economic and Social rights and human development approach. Thus the development aid policy during 1980s and the early 1990s, though coordinated by DAC of OECD, had competing, though subtle, ideological positions that brought in different approaches. Biekart, (1998) provides an analysis of these differences in donor approaches during that period in the experience of Central America.

5. Stiglitz, the former Senior Vice President of World Bank until last year, elaborates the core of post-Washington Consensus in the following way.

'The Washington consensus advocated use of a small set of instruments (including macroeconomic stability, liberalized trade, and privatization) to achieve a relatively narrow goal (economic growth). The post - Washington consensus recognizes both that a broader set of instruments is necessary and that our goals are also much broader. We seek increases in living standards - including improved health and education - not just increases in measured GDP. We seek sustainable development, which includes preserving natural resources and maintaining a healthy environment. We seek equitable development, which ensures that all groups in society, not just those at the top, enjoy the fruits of development. And we seek democratic development, in which citizens participate in a variety of ways in making the decisions that affect their lives' (1998, p.30, emphasis added).


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