Global Policy Forum

By J Wagona Makoba*

The phenomenal growth of nongovernmental organizations (NGOs) at both international and national levels is due to the changing attitude of donor agencies about development assistance and the increased demand for NGO services in Third World countries.1 NGOs are non-membership support organizations involved in relief, rehabilitation, or community development work in developed and, especially, developing or Third World countries.2 Considered part of the civil arena in society which also includes trade unions, people's associations and membership organizations, cooperatives and religious-based charities, NGOs provide a third approach to development between market-led and state-led strategies.3 In the post-Cold War era, governments in Third World countries are experiencing a steady decline in both fiscal support and public credibility.4 On the other hand, markets globally are on the ascent in terms of ideological and resource support, while those in the Third World are still nascent or in decline.

As I argue later, the prevalence of weak states and declining markets in the Third World inevitably leave development-oriented NGOs as the only alternative to promote grassroots development. Hence development-oriented NGOs are not simply located somewhere between the state and market in terms of institutional space, but are emerging as a critical "third or middle sector" fostering the development of marginalized segments of the population. As one observer recently pointed out, developmental NGOs are "needed to cater for those groups whose place at the state or market table is not reserved."5

All NGOs share several characteristics including dependency on donor funding; the need for self-financing, transparency or accountability to donors and clients; and targeting the needy or marginalized segments of the population or operating in various sectors of society depending on the needs to be met as well as resources available in the local community.6

This paper is organized in three sections. The first section discusses the major reasons behind the changing attitude of the international donor community towards development assistance and its impact on NGO growth or expansion. The second critically examines how the failure of both governments and markets in Third World countries to deliver economic development has led to an increasing reliance on the NGOs to fill the "void" created. The final section analyzes the emerging significance of NGOs as an alternative approach to grassroots development in the Third World.

THE CHANGING ATTITUDE OF THE INTERNATIONAL DONOR COMMUNITY AND NGO GROWTH

The phenomenal growth of NGOs on the world scene has been aptly described as "a global associational revolution."7 The number of development-- oriented NGOs registered in countries of the industrialized North "grew from 1,600 in 1980 to 2,970 in 1993".8 It is also reported that "over the same period, the total spending of these NGOs rose from US$2.8 billion to US$5.7 billion in current prices . . . "9 By 1993 there were an estimated 28,900 international NGOs worldwide, with approximately 20,000 of these in Third World countries.10 The growth of the NGOs on the global scene is associated with the changing attitude of the international donor community about development assistance. Such a change of attitude has been influenced by the end of the Cold War, the dwindling development aid from leading industrialized countries, and a new emphasis on targeting aid to benefit marginalized segments of society.

With the end of the Cold War, "development policy and aid transfers have come to be dominated by . . . a new policy agenda.11 Such a policy agenda "is driven by . . . liberal economics and liberal democratic theory."12 Also, recent developments in economic and political thinking about roles of markets and states in promoting economic development have been heavily influenced by neoliberal economic and democratic theory. As a result of such thinking, markets and private sector initiatives are considered the most efficient mechanisms for achieving economic growth and providing most services, including social services (via privatization) to most people. In contrast, governments whose role within the economy is being reduced, are expected to create an "enabling environment" or a legal and policy framework for the private sector provision of goods and services. Under the New Policy Agenda, NGOs are seen as vehicles for democratization as well as for providing goods and services in Third World countries where markets are inaccessible to the poor or where governments lack capacity or resources to reach them. In the eyes of the international donor community, NGOs are both cost-effective in reaching the poor and are considered "the preferred channel for service provision, in deliberate substitution for the state."13 For most Western industrialized countries including the United States, the end of the Cold War has meant an end to using foreign aid to "buy" allies in the Third World to support it against the former Soviet Union. As a result, the strategic and military importance of development aid has diminished.

In addition to the post-Cold War considerations, the declining aid levels to the Third World have forced the donor community "to ensure that the developmental impact of scarce aid resources is maximized."14 According to the 1998 World Bank Report: "Net official development finance, consisting of loans and grants from government agencies and multilateral institutions, has declined by almost 50 percent in real ( ...) terms since the early 1990s."15 The decline in aid has been due to several factors including "the pressing need for fiscal consolidation in most [industrialized] countries, the declining strategic and military importance of development aid since the end of the Cold War, and weak public support for aid in some major donor countries, due in part to skepticism about its effectiveness."16 Increasingly, many donors "want to fund projects and programs that have a greater chance of being sustainable and of standing on their own."17 As a result, capacity building and sustainability are now the watchwords for donor-supported development projects.

In order to maximize the impact of scarce development aid, many donors are channeling an increasing share of their overseas development aid (ODA) through NGOs. For example, in 1980, funding from the international donor community "accounted for less than 10 percent of NGO budgets, [but] by the 1990s their share had risen to 35 percent."18 As a result of increased donor funding, NGOs in some African countries "now provide or implement more than a fifth of total aid flows, compared with less than one percent fifteen years ago."19 Increasingly, a large number of NGOs in the Third World are funded by a small number of donors such as the World Bank, the United States Agency for International Development (USAID), and the United Nations Development Program (UNDP). The World Bank not only encourages member governments to work with NGOs on development projects, but also directly funds the NGO projects. It is reported that, "from 1973 to 1988, NGOs were involved in about 15 [World] Bank projects a year. By 1990 that number had jumped to 89, or 40 percent of all new projects approved."20 And in 1997, approved World Bank projects in Third World countries involving NGOs were: 84 percent in South Asia, 61 percent in Africa, and 60 percent in Latin America and the Caribbean.21 USAID is said to funnel 20 percent of its funds through NGOs.

The Inter-American Foundation Survey of North and Latin America "revealed that most of the multilateral banks, the United Nations, USAID, and advocacy organizations in the United States and Europe favored a restructuring of aid away from traditional government-to-government approaches toward people-to-people programs."22 Furthermore, the public sentiment in the United States and Europe seems to be "in favor of NGO participation in the development process and against governmental foreign aid."23

The shift toward people-oriented programs and NGO participation in the development process is a result of declining foreign aid and the failure of many large-scale development projects funded by multilateral agencies and Third World governments. Major donors now view NGOs as potentially effective agents of development assistance, especially aid targeted to benefit the poor, women, and children. The donor community's concern with people-centered development projects has led to considerable rethinking about cost-effectiveness and impact on the beneficiaries.

As a result, donor agencies now favor new and innovative development strategies such as the "minimalist cost-effective approach" (used by microfinance institutions), "assisted self-reliance" or "participatory development." NGOs appear well suited to adapt the use of new and innovative strategies because of their small scale, flexibility and wide-ranging capacity to mobilize resources and to organize people to solve their own problems. The new development strategies, which are considered to be "people-friendly" engage grassroots energies, resources and talents and perceive people as active participants of their own development. Finally, the objectives of the new development models can be achieved much more cost-effectively through NGOs. This is primarily because NGOs tend to be flexible vehicles for meeting a variety of human needs including: self-expression or empowerment, promoting equity, self-help, participation and mutual assistance. Increasingly, donors believe that many of their aid priorities in the post-debt and post-Cold War era can be effectively implemented through a variety of NGOs found in virtually all Third World countries. The aid priorities of the international donor community include: " . . . developing the private sector, alleviating poverty, encouraging more equitable income distribution, supporting women, and promoting participatory development approaches and modalities that stress individual action and collective initiatives."24

Despite donor interest in channeling development aid through NGOs, critics contend that funds from such powerful donors as the World Bank or USAID are likely "to compromise the independence and effectiveness of NGOs in achieving their social goals."25

FAILURE OF ECONOMIC DEVELOPMENT IN THE THIRD WORLD AND NGO GROWTH

As noted in the previous section, donor agencies increasingly support NGOs in providing services to the poor in Third World countries where markets are inaccessible and where governments lack capacity or resources to reach the poor. In most Third World countries including those in Africa, both states and markets are weak or in decline. In Africa, the persistence of the dual crises of weak states and nascent or declining markets pose a classic dilemma for proponents of either market- or state-led economic development. The failure of both markets and governments in Africa to deliver economic development has contributed to the rapid growth and expansion of NGOs on the continent.

Evidence accumulated over the past three decades shows "the inability of the African State to deliver on its development promise."26 In fact, the African State is now perceived as "the inhibitor of social, economic, and political development."27 The demise of the African State has inevitably given rise to the ascendancy of NGOs to fill up the "development vacuum" that has been created. The expansion of the NGO sector in Africa is most clearly reflected at the country level. For example, in Kenya there are about 500 NGOs and in Uganda there are more than 1,000 registered foreign and indigenous NGOs. Similarly, other African countries have a large number of active NGOs. These countries include: "Zambia with 128, Tanzania with 130, Zimbabwe with 300, and Namibia with over 55."28 The growing role of NGOs in all sectors of development is an indication of the decreasing capacity of the African state to undertake meaningful development. Besides increases in NGO numbers, the amount of development resources they receive or handle for development purposes has grown over the years. It is estimated that "official aid to Kenyan NGOs amounts to about US$35 million a year, which is about 18 percent of all official aid received by Kenya annually [and] . . . in Uganda, NGOs disburse an estimated 25 percent of all official aid to Uganda."29

The weakening financial situation of Uganda and Kenya, like that of other African countries, is due to a combination of huge external debts, corruption and the effects of structural adjustment programs imposed by the International Monetary Fund (IMF). In particular, the structural adjustment programs have "strained the ability of the African states to provide services and has attracted more NGOs to cushion the adverse short-term effects of adjustment programs, such as by providing affordable healthcare services."30 Given the prevailing political and economic conditions in Uganda and Kenya, as well as elsewhere in Africa, the role and contribution of NGOs to the development process is expected to increase.

Donor agencies increasingly funnel development assistance through NGOs and other non-state institutions because the states in Sub-Saharan Africa are considered both inefficient and corrupt. As Dicklich observes, the "failure of the [African] state to provide for basic services has led to many official donors to use NGOs rather than the local state to provide services."31 In Uganda, a succession of inefficient, violent and corrupt regimes since 1971 has contributed to the emergence of over 1,000 indigenous NGOs to provide self-help solutions to the poor. Most "ordinary Ugandans have had to fend for themselves, relying on organizations outside of the state rather than on the state itself to provide basic necessities."32 In general, most service-oriented NGOs have generally "moved into service provision where the state has moved out."33 No doubt, NGOs have been necessary in Uganda and other African countries to fill up the "developmental gaps" caused by the weak post-independence state.

While African States have become increasingly weak, formal markets have steadily declined and in some cases have been replaced by informal or parallel markets. According to Callaghy, most African economies are faced with

"declining or negative rates and stagnating or falling per capita income figures; balance of payments and debt problems (which have become more severe (since) the 1980s, requiring IMF and the World Bank programs with their attendant conditionality packages and consequences. Many (export) commodity prices remain low while most import prices remain high. In many countries, agricultural production is falling while aid levels stagnate. Health and nutrition levels are falling while informal or magendo economies (have) become more important as states weaken and formal markets decline. 'Socialist' states have performed poorly and 'capitalist' ones are not significantly better. Hopes for economic growth and development have shriveled on all sides."34

In Uganda and other African countries, authoritarian regimes "induced an 'exit' from the formal economy [as well as] a general avoidance of state institutions by a wide range of groups and occupations."35 Furthermore, economic restructuring due to structural adjustment programs and privatization contributed to the retreat of African states from their responsibilities of promoting economic development and providing "basic social services such as health care, education, sanitation and basic security,. . . "36 Given the weak private sector and the state withdrawal from the provision of basic economic necessities and social services, "many NGOs are being pressurized into dealing with poverty alleviation (not eradication), and the provision of basic social services . . ."37 Thus, NGOs increasingly fill in social and economic spaces created by weak markets or retreating states. As a result, "NGOs have been heralded as . . . new agents with the capacity and commitment to make up for the shortcomings of the state and market in reducing poverty."38 Some critics of NGO participation in economic development contend that such involvement provides legitimacy and support to governments that have failed to deliver economic development or provide basic social services to their citizens. Other critics charge that NGOs save "donors money and allow them to avoid addressing implementation difficulties, while also allowing them [the donors] to retain ultimate control over activities."39

The absence of viable states or markets in most Third World countries including African states has left NGOs as the most important alternative for promoting economic development. Thus, the failure or inability of both states and markets to meet the basic needs of the majority of the people in the Third World has given rise to the growing importance of the NGO sector in the development process.40 Such inability has also exposed the inherent limitations of the state or private sector as major agents of promoting economic development in the Third World.

NGOS AS AN ALTERNATIVE APPROACH TO DEVELOPMENT IN THE THIRD WORLD

The rapid growth and expansion of NGOs worldwide attest to their growing critical role in the development process. At the international level, NGOs are perceived as vehicles for providing democratization and economic growth in Third World countries. Within Third World countries, NGOs are increasingly considered good substitutes for weak states and markets in the promotion of economic development and the provision of basic services to most people.

NGOs are seen by their proponents as a catalyst for societal change because they are responsive to the needs and problems of their clients, usually the poor, women and children. Because of targeting and being responsive to marginalized groups in society, NGOs are being heralded as "important vehicles for empowerment, democratization and economic development."41 In fact, some NGOs are "driven by strong values and . . . interests . . . , geared toward empowering communities that have been traditionally disempowered."42 International donor agencies see NGOs as "having the capacity and commitment to make up for the shortcomings of the state and market in reducing poverty."43 Perhaps the greatest potential NGOs have is to generate self-help solutions to problems of poverty and powerlessness in society. This is based on the view of NGOs as independent, "efficient, less bureaucratic, grassroots oriented, participatory and contributing to sustainable development in grassroots communities."44 But for NGOs to remain independent of donor or elite control and achieve their social and economic goals, they have to work diligently toward capacity building and financial sustainability.45

NGOs are increasingly playing an important role in the development process of most Third World countries as discussed in section three of this paper. The growing importance of NGOs in the development process is attributed to the fact that they are considered suitable for promoting participatory grassroots development and self-reliance, especially among marginalized segments of society-namely, the poor, women and children. In fact, some NGOs seek to organize and involve the marginalized groups in their own development. And sometimes, they try to link their clients to the powerful segments of society by providing access to resources that are normally out of reach to the poor. For example, within development-oriented NGOs, microfinance institutions (MFIs) try to contribute to the economic improvement of the poor by: "bringing in new income from outside the community, preventing income from leaving the community, providing new [self] employment opportunities and stimulating backward and forward linkages to other community enterprises."46

As stated earlier, most development-oriented NGOs in the Third World use new and innovative development strategies such as the "minimalist costeffective approach (favored by microfinance institutions/poverty lending programs), "assisted self-reliance" or "participatory development." Overall, NGOs appear well suited to adapt the use of such innovative strategies because of their small-scale of operations, flexibility and great capacity to mobilize resources and to organize people to solve their own problems. The new development strategies perceive people as active participants of their own development. These "bottom-up" development strategies stand in sharp contrast to the "topdown" capitalist and state socialist models of development. Both the capitalist model based on "trickle-down" and the state socialist model of "egalitarian development" based on central/state planning of economic activity have failed to meet basic needs of the poor, women and children and have not helped these marginalized groups to solve their own problems. Both models offer no real choice to the poor about immediate local problems faced or needs. Both forms of institutionalized "top-down" directed development discourage popular citizen participation and de-emphasize people-centered development activity. And finally, both models stress large-scale, capital intensive projects that are susceptible to elite control, corruption, and inefficiency.

CONCLUSION

As we start the 21st century, NGOs hold a great promise to provide self-help solutions to problems of poverty and powerlessness in many Third World societies. They are increasingly making up for the shortcomings of the state and market in reducing poverty in Third World countries. Furthermore, their future role in development is expected to increase precisely because of favorable international donor support. In fact, since the launching of the Structural Adjustment Participatory Review Initiative (SAPRI) in 1997, NGOs are increasingly influencing economic and social development policy in Third World countries. SAPRI provides a framework for joint evaluation of economic reform by the World Bank, Third World governments, and one thousand civil society organizations including NGOs.47 But despite their growing role and expected contribution to Third World development, NGOs should neither be considered a panacea nor the "magic bullet" for solving the problems of development.

NOTES

1. Michael Edwards and David Hume (eds.). Beyond the Magic Bullet: NGO Performance and Accountability in the Post-Cold War World (Westford, CT: Kumarian Press, 1996), pp. 2-4.

2. Anthony Bebbington and John Farrington, "Governments, NGOs and Agricultural Development: Perspectives on Changing Inter-Organizational Relationships," The Journal of Development Studies, 29:2, January 1993, p. 201.

3. In this paper, NGOs are considered part of the "third or middle sector," wedged between the state/public and the market/private sectors. In this sense, NGOs are neither part of the public nor private sector--even though they may receive resource or ideological support from either or both. This view of NGOs contrasts sharply with that expressed by Norman Uphoff (1996: 23-27) who contends that "NGOs are best considered a sub-sector of the private sector [as] this is implied by the synonym used for [northern] NGOs-Private Voluntary Organizations (PVOs)."

4. Norman Uphoff, "Why NGOs are not a Third Sector: A Sectoral Analysis with Some Thoughts on Accountability, Sustainability, and Evaluation," Chapter One, pp. 23-29, in Michael Edwards and David Hume, Beyond the Magic Bullet: NGO Performance and Accountability in the Post-Cold War World, p. 23.

5. Goran Hyden, "Civil Society, Social Capital and Development: Dissection of a Complex Discourse," in Studies in Comparative International Development, 32:7, Spring 1997, p. 27.

6. E. A. Brett, "Rebuilding Survival Structures for the Ugandan Poor: Organizational Options for Reconstruction and Development in the '90s, Institute of Development Studies, Brighton, United Kingdom, December, 1990, pp. 7-8.

7. Lester M. Salamon, "The Rise of the Nonprofit Sector:' Foreign Affairs, 73:4, July/August, 1994, p. 109.

8. Michael Edwards and David Hume (eds.). Beyond the Magic Bullet: NGO Performance and Accountability in the Post-Cold War World, p. 1.

9. Ibid.

10. Salamon, "The Rise of the Nonprofit Sector," p. 10.

11. Edwards and Hume, Beyond the Magic Bullet: NGO Performance and Accountability in the Post-Cold War World, p. 2.

12. Ibid

13. Ibid., and Anthony Bebbington and John Farrington, "Governments, NGOs and Agricultural Development: Perspectives on Changing Inter-Organizational Relationships," p. 202.

14. OECD, Development Assistance Committee, New Directions in Donor Assistance to Microenterprises, OECD/OCDE, Paris, 1993, p. 8.

15. World Bank, Global Development Finance Report (Washington, D.C.), p. 49.

16. Ibid.

17. Roger C. Riddell, "The End of Foreign Aid to Africa? Concerns About Donor Policies," African Affairs, 98, 1999, p. 321.

18. World Bank, Global Development Finance Report, p. 51.

19. Nicolas Van de Walle, "Aids Crisis of Legitimacy: Current Proposals and Future Prospects;' African Affairs, 98, 1999, p. 345.

20. Marguerite Michaels, "Retreat from Africa:' Foreign Affairs, 72:1, 1993, p. 103.

21. World Bank, Progress Report, (Washington, D.C., 1997), p. 49.

22. Stephen G. Vetter, "The Business of Grassroots Development," Grassroots Development, 19:2, 1995, p. 6.

23. Ibid.

24. OECD, Development Assistance Committee, p. 7.

25. Marguerite Michaels, "Retreat from Africa:' p. 103 and Nicolas Van de Walle, "Aids Crisis of Legitimacy: Current Proposals and Future Prospects," p. 346. 26. Stephen N. Ndegwa, The Two Faces of Civil Society: NGOs and Politics in Africa, (Westford, CT: Kumarian Press, 1996), p. 15

27. Ibid

28. Ibid., p. 20.

29. See Ibid. and Susan Dicklich, "Indigenous NGOs and Political Participation," in Holdger B. Hansen and Michael Tweedle (eds.), Developing Uganda, (Oxford: James Curry, 1998) p. 148. The 25 percent in Uganda represents the annual average expenditure by NGOs. During particular fiscal years, NGO expenditures may be higher. For example, it is reported that during the 1992/93 fiscal year, the expenditure of foreign and indigenous NGOs "was US$125 million, . . . almost equal to the expected World Bank contribution to the Rehabilitation and Development Plan for the same year," (Dicklich, 1998a: 148).

30. Stephen N. Ndegwa, The Two Faces of Civil Society: NGOs and Politics in Africa, p. 2.

31. Susan Dicklich, The Elusive Promise of NGOs in Africa: Lessons from Uganda, (New York: St. Martins's Press, 1998b), p. 6.

32. Ibid., pp. 22-3. 33. Ibid., p. 6.

34. Thomas M. Callaghy, "State, Choice and Context: Comparative Reflections on Reform and Intractability," in David E. Apter and Carl G. Rosberg (eds.), Political Development and The New Realism in Sub-Saharan Africa, (Charlottesville and London: University Press of Virginia, 1994), p. 201.

35. Dicklich, The Elusive Promise of NGOs in Africa: Lessons from Uganda, p. 145.

36. Ibid.

37. Ibid., p. 149.

38. Dicklich, The Elusive Promise of NGOs in Africa: Lessons from Uganda, p. 3. 39. Nicolas Van de Walle, "Aids Crisis of Legitimacy: Current Proposals and Future Prospects," p. 346.

40. Daniel C. Levy, Building the Third Sector, (Pittsburgh, PA: University of Pittsburgh Press, 1996), pp. 1-3; Vetter, "The Business of Grassroots Development, P.2; and Salamon, "The Rise of the Nonprofit Sector," p. 116.

41, Dicklich, The Elusive Promise of NGOs in Africa: Lessons from Uganda, p. 2. 42. Ibid., p. 8.

43. Ibid., p. 3.

44. Ndegwa, The Two Faces of Civil Society: NGOs and Politics in Africa, p, 20. 45. Van de Walle, "Aids Crisis of Legitimacy: Current Proposals and Future Prospects," p. 346.

46. Management Systems International Report, "Assessing the Impact of Microenterprise Interventions: A Framework for Analysis:' March 1995, p. ii.

47. World Bank, Progress Report, 1997, pp. 49-50.

About the Author: Associate Professor of Sociology at the University of Nevada, Reno. He is the author of Government Policy and Public Enterprise Performance in Sub-Saharan Africa: The Case Studies of Tanzania and Zambia, 1964-1984. (Lewiston: The Edwin Mellen Press, 1998) and several articles on political and economic reform in Sub-Saharan Africa.