The future of development cooperation and foreign assistance appear increasingly precarious in an ever-challenging political context, where financial instability has significantly destabilised an already fragmented civil society landscape. The funding freeze and subsequent dismantling of the United States Agency for International Development (USAID), and the significant decrease in ODA (Official Development Assistance)*, has urged organisations to rethink their strategic priorities and prompted larger discussions on the future of development and humanitarian sectors.

The decline of longer-term funding across the sector has de facto eroded critical parts of the civil society ecosystem, impacting efficacy and ultimately curtailing innovation. As donor priorities shift and more organisations experience challenges in regard to longer term operational planning due to funding shortages; international civil society organisations (ICSOs), are called to reimagine their business models to promote financial sustainability and sustainable programming. Furthermore, organisations are increasingly called on to adjust and adapt their strategies to better address intersecting crises and deliver their missions. Aid has become increasingly politicised and influenced by geopolitics and opportunities for private investment. This has led to its focus to shift from human development and solidarity to political ideology, which, combined with rising authoritarianism and disinformation, has left civil society organisations reeling and in dire need of strategic reframing of their work.

Civil society is now called to review not just their operational models but also to rethink the values of systems and narratives underpinning their work. These times of turbulence could become a terrain of exploration to develop new narratives of foreign assistance as a value-add to a globalised interconnected society and to call on governments to ensure that aid is not conditional on geopolitical interests. 

Exploring alternative financing models and localisation 

A pivotal element of the discussions around crisis response has been the exploration of alternative economic models and their potential impact on durability and organisational sustainability. While the sector aims to improve financial stability due to the decrease in traditional funding and the instrumentalisation of aid to advance foreign policy, the staggering lack of blueprints for new funding models has been hindering progress on these initiatives, stifling conditions for new funding flows be developed further.  

Crucially, the reimagining of funding models is aligned with concrete efforts and commitments that the sector has taken forward in recent years to shift the power to local actors in the Global South and make localisation a reality. Findings from our benchmarking study on-power shift, released in 2022, signaled that financing remained a significant challenge for organisations that aim to shift power, as they struggled with shifting resources and meaningfully couple their aspirations for localisation with adequate resourcing. While in recent years some progress has been made across the sector, resourcing and investment in institutional capacity for local actors, lags compared to other localisation commitments – as analysed by Publish What You Fund. 

Moving away from traditional aid

The funding crisis has brought at the forefront debates on how crisis response can help accelerate power shift ambitions and help address the blockages that prevent true localisation. During the Centre’s Power Shift Lab – held in Nairobi last June, we discussed how the crisis may help generate opportunities to reshape foreign aid as a system that concretely promotes the empowerment of local communities and addresses the drivers of financial inequality. Further discussions in the systems change realm have energised commitments towards the strengthening of local philanthropy systems and NGO-government collaboration initiatives in the Global South. Civil society organisations should seize the moment and resolve to shift away from traditional aid toward intentional funding and operations that prioritise the support and fostering of local ecosystems. Concurrently, the sector should endeavour to embrace multiple truths and address how – in certain contexts, localisation has been instrumentalised by bilateral funders to justify funding cuts and disempower politically contrasting civil society. 

Developing future-fit financing models  

At the Centre, we are committed to engaging our communities working on localisation and power shift, to explore how ICSOs can challenge themselves to develop alternative and more future-fit financing models. Through our Curated Conversations, an online space for the exchange of best practices, we cultivated a space for a diverse set of voices to share lessons learned from their approaches to innovative finance with contributions from Save the Children Global Ventures and the British Asian Trust. 

During the conversation, participants reflected on opportunities and challenges to adopting impact investing and outcome-based financing as funding models and fostering enabling conditions to facilitate the adoption of alternative systems. 

During the discussions, some of following insights emerged:

  • In face of funding disruptions, organisations need to increase donor diversification with all-encompassing strategies and improve upon communicating an organisation’s value proposition. Operational models need to be adjusted for new funding models – and for the models to function; they need to encompass senior leadership buy-in and find the sufficient time to pilot and learn from them.  
  • Blended finance and outcome-based financing are made challenging by the lack of replicable models, often leading to different partners not knowing what to ask of each of each other.  Additionally, traditional donors are not always receptive to these types of funding approaches – or how to engage with blended finance.  
  • Innovation finance – as part of an NGO structure, allows access to internal expertise, and in-country presence to help with transactional costs, further helping with fostering trust with partners. Innovation in financing does not necessarily come from the Global North – organisations should learn from Global South models and approaches to fostering alternative financing models.   

Addressing the crisis head-on

The Centre’s Leave No One Behind partnership and the Solidarity Action Network convened a joint virtual event in May, addressing the mounting crisis facing civil society. Against a backdrop of shrinking civic space, mounting political pressure and severe funding cuts, the event offered an opportunity for participants to share their reflections and strategies. Participants exchanged insights on navigating a ‘post-aid world’, strengthening local partnerships and fostering solidarity in restrictive contexts. The discussions focused on funding challenges, localisation, and pressure on civic space – emphasising the need for renewed collaboration, inclusive approaches and shifts in power towards locally led solutions. 

Building on such conversations, the Centre has been collecting good practices, insights and guidance from its community of ICSOs, to develop a series of convenings to explore how international, national and local CSOs navigate the increasing financial pressure and need for innovative and alternative financing models. 

The rethinking of business models further facilitates the experimentation and testing of financial mechanisms which could reinforce localisations efforts, build capacity to anticipate challenges, and foster futures literacy. Some organisations are already employing funding models that invest in multiple streams, engaging with diverse stakeholders – from social enterprises, to governments and banks. How can we address the gaps in the adoption of new business models? What could the sector do to move the needle and create opportunities to de-risk innovation and promote more intentional funding? These are some of the questions we will address through our convening series – and in our next insight, to be published soon. Through the Centre’s convening and resource sharing, we aim to drive a sector-wide conversation that can empower international and national civil society organisations to adopt alternative funding models and resources-based solidarity mechanisms to remain fit for the future, supporting the people and marginalised communities they serve.

*OECD (2025), Preliminary official development assistance levels in 2024: Detailed Summary Note, https://one.oecd.org/document/DCD(2025)6/en/pdf.

Stay tuned for more insights on alternative financing models and localisation, as the Centre continues to work closely with its communities and networks to address these poignant issues affecting the sector at large.