We Need To Think Beyond USAID

Let’s be brutally honest – changes in the political landscape have challenged the status quo worldwide, with organizations relying largely on foreign aid being one of the first to feel the burn. The new U.S. government decision to shut down all programs ran by USAID, the U.S. development agency, has come as a cold shower for all those working in the philanthropy and impact investing space.

It’s hard to quantify the extent of the consequences. In an editorial for Pioneers Post, Laura Joffre reminisces about the gap that the withdrawn funding could cause:

No other agency will be able to do that as well as USAID did: the programmes, the networks, the knowledge of each field built over 60 years of operations are irreplaceable. In 2022-23 alone, it was involved in blended finance transactions that mobilised a total of US$2bn; if USAID no longer exists, this is no longer going to happen. Several billion dollars, every year, will not be invested in meeting the world's challenges.

Moreover, the U.S. are not the only party looking to slashing foreign aid budgets. Many European countries are rethinking their investments in this space, with the U.K. being the most recent to drastically cut down spending. It begs the question – what comes next? And how can we, if not avoid, at least diminish the dependence of local communities on singular sources of funding?

It’s a question that touches on the heart of what catalytic capital can be, and should aspire to be. The current uncertainty about funding, be it through USAID or through other international development streams is painful, but not entirely unexpected. It shows the vulnerabilities of a system based around international funding that can be taken away at any point, as opposed to actual investment, creating sustainable solutions and empowering local communities in building a better future. The money provided for organisations on the ground is at its heart, political funding—a tool of control and power. The reality is that replacing it will take time, but that doesn’t mean we shouldn’t actively work toward it.

A different approach

Impact investing in its truest sense, with the objective of being additional, intentional and empowering, is uniquely placed to provide a more sustainable way of structuring access to finance in the region. We can see the effects of this approach through the work done in the frame of the EU-funded market building program, Impact Together!, managed by Impact Europe.

Through the project, happy smala has been supporting impact entrepreneurs and local capital providers to adapt their approaches. Last year's Blended Impact Finance Bootcamp was designed to provide facilitating opportunities for social entrepreneurs by mobilizing Moroccan business angels, foundations, banks, and crowdfunding platforms. Over the course of 3 days, the Bootcamp put all of the parties around the same table to co-construct funding deals tailored to the needs and strengths of each entrepreneur and capital provider. By cultivating that kind of complementarity between local investors, happy smala is in effect building a pipeline of investment that doesn't require large foreign donors as a lynchpin. The first round of funding is currently closing, and two more bootcamps are planned for 2025.

At Alfanar, serving the extended MENA-region, we have spent the past two decades working with social enterprises to gain independence from donor funding, with a focus on growing their financial sustainability and impact. Investing in regional innovators is key to building an impact economy that disrupts existing development models and moves us towards a more localised, tailored, "Arabs for Arabs" approach.

By providing funding, as well as non-financial support, directly to impact-driven SME’s in the region, Alfanar provides reliability in the most uncertain phase of setting up operations. It’s an approach that has resulted in a 34% income generation growth rate across their portfolio, with 40% of supported social enterprises expanding their operations across country borders. 

It is part of a larger domino effect. By enabling the work of the Future Eve Foundation, for instance, Alfanar has been co-responsible for the training of 427 widows throughout Egypt, with an estimated 3.900 female breadwinners opening or growing their business through the support of the organisation. Most critically, they regain their independence from continued support through charitable funding.

This, of course, leaves open the question of how enablers like Alfanar should find and sustain their own funding. It is a question that both Build Palestine and Happy Smala take to heart. By actively working to shift the existing paradigm by promoting crowdfunding, trust-based philanthropy, and fostering a culture of giving back within the private sector and diaspora, they aim for more structural independence when it comes to their own funding.

While any move towards different funding models will be difficult, and the gap to fill large, there are hopeful examples of how to tackle this challenge, like the most recent fundraising efforts by Build Palestine.

Under the Olive Tree, launched in December 2023, fits several boxes. It is a membership space, but goes way beyond that goal. It’s effectively a sustainable support network for Palestine-based impact projects. Through a $12/month membership, we mobilize Palestinians and allies to go beyond funding by mentoring social entrepreneurs, volunteering skills, and helping initiatives access external markets. By leveraging our collective expertise, we reduce reliance on grants and empower grassroots initiatives with the resources, knowledge, and connections needed to thrive long-term. It is a model that embodies Palestinian resourcefulness and solidarity, ensuring impact-driven projects gain the support they need—beyond just financial aid.

The same holds true for Nourishing Hope for Gaza. This fundraising action was created precisely because traditional funding mechanisms failed Gaza. Institutional funding proved nearly impossible to channel, burdened by bureaucratic restrictions, delays, and rigid reporting requirements that simply do not fit in times of crisis—when maximum flexibility and rapid response are needed most. By all accounts, Gaza was abandoned by the international world, leaving grassroots efforts as the primary lifeline for survival.

From June to December 2024, BuildPalestine helped mobilize approximately $25,000 USD to support four Palestinian-led initiatives in Gaza

• Colors for Gaza – Providing children with a space to play, create, and express themselves. Led by Wisam Abualnaja.
• Gaza Education Hub – Establishing infrastructure for displaced students to continue their studies online. Led by Mohammed Hajjaj.
• Haifa Association for Children with Diabetes – Distributing insulin to children with diabetes. Led by Abu Kareem.
• Scholarships for Ghazza – Connecting students with global mentors to complete scholarship applications. Led by Ahmed Issa.

These initiatives highlight how crowdfunding and trust-based philanthropy allow resources to reach Palestinians directly, without restrictions or political interference—something institutional funding often fails to do.

Beyond Gaza, we’ve seen the same impact through initiatives like Hakini, a 2021 BuildPalestine Fellow. Hakini is an online Arabic therapy platform that increases access to mental health care through self-help guidance, teletherapy, and AI. In response to the ongoing aggression, Hakini launched a crowdfunding campaign—supported by BuildPalestine—that raised over $100,000 USD. This funding enabled them to install a toll-free hotline, provide on-ground mental health support, and build capacity for long-term impact.

Had Hakini relied solely on institutional funding, it would have taken months—if not years—to secure resources, with limitations on how funds could be spent. Instead, crowdfunding gave them the agility to respond in real time, proving that community-driven models are not just an alternative but a necessity for resilience, sovereignty, and self-determination.

The above efforts serve as a reminder that catalytic funding in emerging and developing regions is as important as it is effective. While select institutional players are looking to diminish or cut their exposure to different aid programmes, the reality is that the time to invest for impact is now. A diligent approach can yield amazing results, but continued and stable funding is vital in making this impact sustainable.

Impact investing, and its community of solution-seekers, have an important role to play in this regard. Not by lamenting the funding that has been withdrawn, but by doing what we do best: coming up with innovative solutions, and acting upon them.

Are you interested in contributing? Our EU-funded market building program Impact Together! supports local players in building the investing for impact ecosystem in the MENA-region. Do reach out to us to open a conversation!

This editorial was co-drafted with our partners at BuildPalestine, Happy Smala and Alfanar and contains contributions from their hand.