How to fund refugee-led aid

‘We have a responsibility to push for change in the system.’

Two people walking up a staircase towards money that's hanging from strings. Illustration made with the artificial intelligence image generator Midjourney.

Refugee-led organisations (RLOs) have garnered growing attention in recent years as key first-responders to humanitarian needs in the communities they are a part of and that they serve. But RLOs received just $26.4 million in traceable humanitarian and development funding in 2022, a recent study found. 

The Hilton Foundation, a private philanthropy, was responsible for providing 46% of that funding, according to the study, conducted by the global affairs think tank ODI and the data research organisation Development Initiatives (DI)

The New Humanitarian recently spoke with Sarah Smith, who leads the Hilton Foundation’s refugee programme as its director of legacy initiatives. “If your strategy is focused on refugees and supporting refugee and host communities, then you should be funding refugee-led organisations. There's really no reason not to,” Smith said.   

However, widespread perceptions in the aid sector that RLOs are too risky to fund, lack capacity to receive grants and conduct due diligence, or that they don’t perform an essential role in refugee responses have led to them being overlooked by donors, according to the ODI-DI report. 

In contrast, the UN’s refugee agency, UNHCR, has said that supporting RLOs increases the effectiveness and cost efficiency of refugee responses. Additionally, the ODI-DI report argues that RLOs are uniquely positioned to provide national and international NGOs insights into the needs of refugee communities, that they overcome barriers to accessing vulnerable populations stemming from cultural and linguistic differences, and that they have a strong track record on accountability. 

The failure to fund RLOs is a part of the aid sector’s broader lack of progress on implementing the localisation agenda laid out in the 2016 Grand Bargain, which aimed to see 25% of funding going to local organisations by 2020. In 2022, just 1.2% of humanitarian funding went to local actors – with only a small fraction of that going to RLOs. 

In this interview, edited for length and clarity, we spoke to Smith about why and how the Hilton Foundation has become a major funder of RLOs, how the failure to fund these organisations relates to aid sector discussions about localisation and decolonisation, what she’s learned along the way about the justifications for not funding RLOs, the role of philanthropies in paving the way for other donors, and more. 

The New Humanitarian: There are lots of conversations in the aid sector right now about localisation and decolonisation. How does funding for RLOs fit into those conversations?

Smith: I think refugee-led organisations are surprisingly left out of the conversations about localisation and decolonising aid. 

Refugee-led organisations are a part of the local organisational landscape. In any country where there is a large refugee presence, there are going to be refugee-led organisations. So naturally, you would think that refugee-led organisations would be included in the conversation. But I think refugee-led organisations are often thought of as just a subset of the local organisational landscape, despite facing unique barriers both to getting funding and to implementing programmes. 

Refugees often have a hard time getting registered and forming organisations themselves in a way that's formal and approved by their host governments. They have a harder time hiring their staff, paying their staff, or even opening bank accounts. These kinds of barriers prevent them from functioning as an organisation, and they certainly make it more difficult for them to secure funding from outside donors. So they have to be treated differently than the organisations that they work alongside. 

The New Humanitarian: When and why did the Hilton Foundation decide to start prioritising funding RLOs?

Smith: The Hilton Foundation started our refugees initiative in 2021, and we decided to fund RLOs from the very beginning. We started out by consulting refugee-led organisations on the strategy. We wanted to get input from refugees themselves and decided that the most practical and easiest way to do that was to do a series of consultations with leaders of refugee-led organisations. So we asked them what their needs were, we asked them about our draft strategy, and got their feedback on that.

The second thing we did was we set a target for funding. It was originally a target for funding to local organisations, including refugee-led organisations. In line with the Grand Bargain, we set it at 25% of our funding to go to local organisations, but realised quickly that we were going to be able to exceed that. Then, we set about identifying organisations that we were going to fund. 

The last thing is we created almost a directory of local organisations in each of the four countries where our initiative is focused – Colombia, Ecuador, Uganda, and Ethiopia. We hired consultants in each of those four countries. And they helped us map the NGO landscape and identify the local organisations, including refugee-led organisations, who were providing services that aligned with our strategy. 

So, right from the beginning, we had this as a focus and were very deliberate about how we were going to achieve the goal of providing as much funding as possible directly to local organisations, including refugee-led organisations. 

The New Humanitarian: What are some of the justifications or reasons often given for why more funding is not being directed towards refugee-led organisations?

Smith: The reason we hear most often is that refugee-led organisations are somehow riskier. I think this perception applies to local organisations as well. Funders often say that there is some kind of risk. They don’t necessarily name what the risk is, but they say that there are some risks associated with funding local organisations and refugee-led organisations, whether it's financial risk or other kinds of risks.

The second reason, which I think is becoming more popular, is that they can't absorb funding. There's this idea that larger funders don't have the capacity to give out a lot of small grants and that refugee-led organisations and local organisations are small and, therefore, require small grants. So there's a kind of misperception or assumption that the large donors can't give grants to refugee-led organisations because those organisations won't be able to absorb a larger grant and that funders don't have the technical and operational capacity to give out a lot of smaller grants.

The other reason that I hear is that local organisations and refugee-led organisations aren't able to demonstrate impact or provide the kinds of metrics that donors require. And then there’s this kind of chicken and egg problem where funders say that these organisations can’t scale their operations and yet funders are unwilling to fund the operational support that would enable them to scale their operations. 

The New Humanitarian: What is your view on those justifications based on your experience funding refugee-led organisations? 

Smith: Well, I certainly haven't found that RLOs are riskier than other organisations. The way I think about it is, every organisation has risks, and international organisations are just built to mitigate those risks or to respond if they have a problem. They have the infrastructure, the funding, the resources, and the connections, honestly, to either respond to the risk or respond to the donors if a donor is asking about certain kinds of risks.

We have not found the local organisations or the refugee-led organisations that we fund to be any riskier. We have found, of course, refugee-led organisations have a very unique advantage: Being from the communities that they're serving, and representing leaders from those communities, they are best equipped to deliver services to those communities.

We also have been able to give fairly large grants to refugee-led organisations, and, especially if the grants include operational support and adequate support for overhead, that those organisations are able to grow very quickly and absorb the resources so that they can deliver services to their communities. 

Not every refugee-lead organisation wants to grow, or wants to scale their operations. Many of them want to continue operating in their very specific communities. But the ones that want to and are able to absorb additional resources have been able to. I think it's been especially important to give longer-term grants – grants that are longer than a year or two. It's especially important in a humanitarian crisis to give a longer-term grant so that organisations can really continue operating, because crises don't end quickly.

The New Humanitarian: As you said, one of the barriers that donors often cite is the idea that RLOs lack the ability to demonstrate impact. On the other hand, refugee leaders say their organisations are so much more effective at serving their communities. What has your experience shown? 

Smith: I think the assumption, perhaps, is that they're not able to measure the impact and provide metrics in a way that an international organisation might be able to, although I've found that a lot of international organisations struggle to demonstrate their impact as well.

In my experience, refugee-led organisations are just as able to both demonstrate and achieve impact as any organisation. Demonstrating impact is not easy in any environment. And what usually holds organisations back is funding for measurement and funding for an infrastructure that will allow for good quality data collection. These organisations need that kind of resource, and if they're provided with funding to measure impact, they'll be able to do it.

The New Humanitarian: If many of the reasons donors give for not funding RLOs are more perceived than real, what actual challenges have you encountered? 

Smith: The first one relates to the challenge that RLOs face in the countries where they're operating around getting registered, opening bank accounts, and hiring staff. Oftentimes, the time it takes for them to ramp up operations is not due to anything related to the services that they provide or the relationships they have in their communities, it has to do with the bureaucracy in the host countries that they're living in. So, in some cases, we've seen refugee-led organisations take longer to get their operations started, if they're new in a country or in a context, because they're facing those bureaucratic barriers.

The other challenge that we've found is, because there aren't other funders funding them, or institutional donors funding them, they don't have the funding for their overheads and their basic operating costs in the way that bigger international organisations do. So they're really hand-to-mouth in a sense in terms of how their funding model works, and they're constantly having to look for additional funding. 

The last challenge we've seen is, oftentimes, the best refugee-led organisations are sub-grantees to international organisations. They are often used by other organisations for their relationships in communities and to provide data and information and stories to larger organisations instead of being used to provide the services that they have established themselves to provide. So a lot of their time is spent servicing those larger organisations and their funders, instead of providing services.

The New Humanitarian: Another barrier that is often cited is concerns around transparency, accountability, and trust. How do you address those concerns?

Smith: Trust is about building relationships. And, often, the relationship between a donor and an implementer is based on the power dynamic between the two: The donor has the power and they can make requests of the implementing organisation because of that power. Inherently, with that power dynamic, it’s difficult to build trust.

The first thing, as a funder, is relinquishing some of that power, acknowledging that there is a power dynamic, and creating a relationship that is about open dialogue and truly giving the organisation funding for what they're saying they need, allowing them to design the programme that they want to design, and putting the resources that you have available to the things that are most important. 

Different funders obviously have different constraints. But, for us, being able to be flexible has been crucial in building trust with RLOs, and being good listeners and starting out our initiative by asking them what they needed and what they thought of our approach. We reported back to them how it influenced our strategy, and we heard from them that that builds a lot of trust in the relationships. 

Not every donor can do this. But as foundations, we have that flexibility, and I think it's upon philanthropy to model that kind of trust building. 

The New Humanitarian: How does being a private foundation, rather than a government funding agency, for example, affect your ability to work with RLOs?

Smith: Foundations are certainly more flexible than bilateral and public funders. We aren't accountable to taxpayers; we're accountable to our board. That allows us to push boundaries and to provide funding to things that public donors can't fund as easily. We can experiment, we can find innovations, and we can fund things that public donors say that they can't. 

I think this is why it's so important for foundations to fund refugee-led organisations. Because once they start doing that, then these refugee-led organisations will prove themselves, and then public funders will be able to come in and fund them much more easily.

The New Humanitarian: What advice do you have for other donors who are interested in working with RLOs?

Smith: We have a responsibility to fund refugee-led organisations and to push for change in the system. That is what philanthropy does best. 

For public funders, bilateral funders, and also UN funders, I would say – especially those whose whole mission is to fund and to support refugees – they should be funding refugee-led organisations. They can set up funding mechanisms within their organisations that make it easier for them to overcome whatever bureaucratic challenges they face in funding RLOs.

If they can't fund them directly, I would say, focus on two things: One, if you're going to fund an international NGO and have that international NGO then sub-grant to a refugee-led organisation, set parameters around that; ensure that the international NGO is building in overhead and operations support for the refugee-led organisation. And expect that international NGOs should be hiring refugees themselves so that they are more representative of the refugee community.

Also, there are different kinds of intermediaries. There are intermediaries that really build that trusting partnership with refugee-led organisations, and then there are those that are extractive and simply fund the refugee-led organisation in order to win public funding. I think that the big public funders can set expectations and prevent that kind of extractive relationship if they want to. 

The Hilton Foundation is one of The New Humanitarian's donors. It had no role in creating this article. Edited by Irwin Loy.

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