The withdrawal or scaling down of funding by agencies like USAID, FCDO, the Dutch MFA, and Germany’s BMZ raises critical questions about the future of development finance and the feasibility of locally-led development. Credit: WFP/Desire Joseph Ouedraogo
By Tafadzwa Munyaka
HARARE, Jul 24 2025 – In recent years, major international donors such as the European Union (EU), the Foreign, Commonwealth & Development Office (FCDO), USAID, and other bilaterals (such as BMZ, Sida, the Netherlands among others) have significantly reduced development funding to global majority countries.
These shifts are occurring in the midst of rhetorical commitments to localization and ‘shifting the power’ to local civil society organizations. This article looks at the paradox of decreasing official development assistance (ODA) alongside the growing emphasis on localization.
It explores the rise of remittances as an alternative flow of capital, asking whether this signals a structural transformation in global development finance or reinforces already existing inequalities.
The Grand Bargain committed donors and aid organizations to channel 25% of funding to local actors by 2020, a target that remains unmet five years past the initial deadline. In practice, only 1.2% of total humanitarian funding went directly to local organizations in 2022
Drawing on academic literature, donor trend analyses, and policy discourse, this article argues that while localization remains a compelling imperative, the reduction in traditional aid risks hollowing out the resourcing base necessary to realise it meaningfully.
The international development sector is witnessing a contradictory moment. On one hand, the calls for localization – the transfer of resources, decision-making power, and leadership to local actors – have grown louder, particularly after the Grand Bargain of 2016 and more recently through decolonizing aid discourses.
On the other hand, bilateral and multilateral donors that once underwrote the bulk of development financing are retrenching, citing domestic fiscal constraints, geopolitical realignments, and prioritization of emergency spending.
The withdrawal or scaling down of funding by agencies like USAID (in certain regions), FCDO, the Dutch Ministry of Foreign Affairs, and Germany’s BMZ raises critical questions about the future of development finance and the feasibility of locally-led development.
Here, I look at these shifts through a power-sensitive lens, exploring whether the decrease in ODA and the increase in remittances and private flows mark a reordering of global development relations.
1. The decline in traditional donor funding
Traditional donors, particularly from the OECD (DAC), have been reducing long-term development assistance. FCDO has slashed aid to many African countries since 2020, citing Brexit-related restructuring and domestic budget pressures.
The Netherlands announced in 2023 it would refocus its development cooperation on fewer thematic and geographic areas, withdrawing from several African partnerships. USAID has signalled a shift toward more geopolitical objectives under the Indo-Pacific strategy, with programs in Sub-Saharan Africa quietly closing or transitioning to local ownership with fewer resources.
Data from the OECD (2024) indicates that while ODA rose nominally in 2023 (USD 223.7 billion), the increase was largely due to in-donor refugee costs and Ukraine-related support – not sustainable investments in development programming. Long-term, country-programmed ODA has either stagnated or declined in many contexts.
2. Localization: rhetoric vs. resourcing
The localization agenda broadly defined as empowering local actors to lead humanitarian and development efforts remains a policy priority in theory. The Grand Bargain committed donors and aid organizations to channel 25% of funding to local actors by 2020, a target that remains unmet five years past the initial deadline. In practice, only 1.2% of total humanitarian funding went directly to local organizations in 2022.
This discrepancy between rhetoric and resourcing reveals the structural inertia of the international aid system. Large INGOs and UN agencies continue to dominate funding channels due to perceived capacities, fiduciary standards, and donor risk aversion. The result is what Featherstone (2021) calls “localization without power” – where local actors are asked to lead without the corresponding control over financial or strategic resources.
Yet the rhetoric of localization often conceals the lack of structural commitment to resource redistribution. Donors have increasingly placed the burden of localization on intermediaries or local partners without adjusting funding mechanisms to support this transition.
Many local organizations remain trapped in subcontracting arrangements, where they are implementers of externally designed projects, with little influence over priorities, timelines, or metrics of success. This reflects what some scholars have termed the “isomorphic mimicry” of localization – adopting the language of power shift without ceding actual power.
In the absence of core, flexible and multi-year financing, localization becomes performative. Donors must move beyond tokenistic inclusion of local actors in funding chains and instead dismantle the bureaucratic and compliance-heavy models that prevent equitable access to funding. Without financial restructuring, localization risks becoming a vehicle for austerity – a means of exiting aid rather than transforming it.
3. Remittances: a parallel flow?
Remittances to low- and middle-income countries reached an estimated USD669 billion in 2023, up from USD 647 billion in 2022. In countries like Zimbabwe, Nigeria, and Nepal, remittances exceed the value of total ODA, becoming critical for household consumption, healthcare, and education. While remittances are typically private, unprogrammed funds, their increasing scale raises questions about their developmental potential.
Some scholars (Kapur, 2005; Clemens & McKenzie, 2018) argue that remittances offer a more direct, accountable, and less bureaucratic form of development finance. Others warn that remittances reinforce neoliberal withdrawal of the state, transferring responsibility for public services to the diaspora.
Unlike ODA, remittances do not fund systemic change, advocacy, or civic engagement – areas where donor aid is often essential. Thus, the rise of remittances, while cushioning households, does not replace the strategic role of public development financing in promoting rights-based, transformative change.
4. Implications for local organizations and civic space
The contraction of traditional donor funding, especially in civic space, women’s rights, and environmental justice programming, for example, is creating funding vacuums for local organizations.
Simultaneously, the ante is being upped on questions relating to the value-add of intermediary organizations, most of them INGOs on the efficacy of their role when funding can be directed to local NGOs bypassing them. This creates a burden and pressure on local CSOs who must professionalize rapidly while absorbing risk without the necessary core or multi-year funding.
However, it goes without saying that without predictable funding flows, local partners are unable to invest in staff development, financial systems, or advocacy infrastructure. This creates a paradox – localization is promoted without reconfiguring the upstream political economy of aid.
5. Conclusion: toward a just transition in aid
The current moment demands a rethinking of both funding modalities and power structures. Localization, if it is to be transformative, requires more than shifting delivery – it must entail shifting money, mandate, and decision-making authority. The decline in traditional aid funding risks undercutting this agenda unless alternative financing such as pooled funds, solidarity philanthropy, and diaspora engagement among others are explicitly aligned with local ownership.
Development actors must resist the tendency to frame localization as a cost-saving exit strategy. Instead, a just transition in aid must foreground equity, reparative justice, and co-governance between donors and recipients.
Tafadzwa Munyaka is a nonprofit/social change professional with crosscutting expertise in fundraising, business development, grants and compliance management, program management, and child rights advocacy. He is committed to contributing to the African narrative on philanthropy and giving, driving impactful change across the continent.
