The Democratization of Aid

Graphic from the World Bank's EVOKE game

This piece on Mari and the inspiration for GlobalGiving is great. It explains accurately and concisely the rationale Mari and I had when contemplating leaving the World Bank to start GlobalGiving.

The article explains, “But Kuraishi had spent years working to change the world with a top-down approach and saw its shortcomings as clearly as its strengths. The idea of top-down is that if you can effect change in governments and economies, then you’ll naturally reduce poverty and improve lives. And while that approach works, Kuraishi decided there was also room for a bottom-up approach—especially in countries with weak or corrupt governments. ”

Indeed, when we left, that was the idea–an alternative model that would grant access to funding and markets to people and communities that were otherwise left out, whether because their government was too corrupt or they weren’t established enough to acquire high-level grants with big institutions like the World Bank or USAID.

That was and is our vision. But, as the article documents, our vision is also expanding with our success.

Tara Swords writes in the article, “Eight years later, the organization has raised US$29 million for grassroots charity projects in more than 100 countries. Perhaps Kuraishi’s former World Bank colleagues should reconsider.”

I won’t lie. I smile every time I wrap my mind around the extent of our growth and success (2,800 projects now funded, in fact). And you might wonder what thoughts cross my mind when I read thoughts like “Perhaps Kuraishi’s former World Bank colleagues should reconsider.”

What runs through my mind is hope.

Because our success indicates that this model is working, and will continue to work.

But what makes me even more hopeful is that as I realize the effectiveness, potential, and power of our model–now tested for eight years–I’m increasingly aware of the possibility that GlobalGiving will not only serve as an add-on to traditional aid structures, but actually can serve as a model on which to base their work.

My hope is grounded in reality.

The World Bank’s Urgent Evoke project, for example, is a brilliant concept that puts development entrepreneurship into the hands of, well, anyone. And next month, they’ll be working with us to launch the funding component where the best, brightest ideas will have a shot at the GlobalGiving marketplace.

But the impetus and the seed money for this huge undertaking came from the World Bank.

This initiative is new, innovative, and smart. Not your standard World Bank funding fodder. I commend them for this type of open-access initiative.

I also admire their documentation of best practices and lessons learned, including what hasn’t worked. That’s brave and serves as powerful learning for the entire development community–exactly how it should work.

There are other hopeful signs out there of a shift in aid–that’s it’s moving, albeit slowly, to recognize that the true potential for change lies within the people and communities who are affected by the world’s problems, and not necessarily the people who write the most effective grant proposals.

So, when I hear others comment on our success, I’m hopeful. We no longer want to just be the guys who left the World Bank. We want to be part of a larger community of people dedicated to the democratization of the aid process. And it’s happening!

Let's buy the World Bank

David Rubenstein of the Carlyle group gave an interview to the Financial Times recently in which he described how good private equity funds make money. Equity funds look for companies that have assets that are being poorly used. Often the existing managers and workers know what needs to be done, but there is something keeping them from doing it - lack of capital or permission from the board. So the equity fund buys these companies and helps them better leverage their assets to exploit market opportunities. The profits and therefore the value of the companies rise, which means that the equity fund can sell the companies, make money, and start the whole process over again.

Although there have been mistakes and excesses, overall Rubenstein argues that private equity funds have driven substantial productivity increases, especially in the US.

I worked at the World Bank for over 14 years, and it is hard to imagine many organizations that have a greater abundance of underutilized assets. The Bank has thousands of extraordinary experts in an amazing range of subjects. The Bank has billions of dollars of financial assets and lending power. The Bank has an unparalled global network of access to top policy makers. And yet, and yet...

The Bank as a whole is far less than the sum of its parts. It achieves far less impact than it could, and its influence is declining as it fails to adapt to the new era of globalisation and the rising influence of civil society and the private sector. Despite some significant reforms, especially under Jim Wolfensohn from 1995-2005, the Bank remains constrained by its post-WWII structure and has an exceedingly risk-averse culture and board of directors.

So here is a crazy idea: What if a group of folks got together and launched a leveraged buyout of the World Bank? Though this is likely infeasible politically, in theory it is not only possible but desirable. There is plenty of both philanthropic and private money available to finance the deal, and the amount of expertise that could be brought to bear in running the place better has never been higher. These excellent people come from all sectors - many are from top-notch NGOs, others from private companies, some from government agencies, and many from within the World Bank itself.

I am starting to compile a list of my own dream team of colleagues at such a revitalized institution. If you have suggestions, please send them to me at dennis at globalgiving.com.

[GlobalGiving]