A model for philanthropy in uncertain times?

Bridie Layden Aid, General

Meditor Trust recently stepped up to underwrite Oxfam’s life-saving humanitarian work at a time of financial difficulty. Bridie Layden reflects on the benefits of this type of philanthropy and what Oxfam has learnt from the experience.

In February 2018, following criticism of how Oxfam handled past safeguarding cases including sexual misconduct by former staff in Haiti, some institutional donors suspended payments while they reviewed and audited their partnerships.  As institutional donors account for 45% of Oxfam’s income, this had an immediate impact on our work, especially our ability to respond in humanitarian emergencies.

A supporter of our humanitarian work made an unusual offer in an effort to reduce the impact on beneficiaries. Meditor Trust proposed to underwrite a selection of programmes, with no repayment necessary unless donors lifted suspensions. Programmes were chosen which met critical humanitarian need, where the chances of recovering costs were fairly high. Any risk that donors would not lift suspensions was carried by the Trust, resulting in a ground-breaking agreement of £10.6 million in underwriting for Oxfam. To align incentives, the Trust pledged a gift to our emergency fund for monies repaid.

The challenges of implementing an innovative agreement

Both parties faced significant challenges putting this loan agreement into practice and in facilitating take-up of it. Identifying the need during a period of intense organisational uncertainty was far from easy, and the identified contracts changed frequently even as we finalised the agreement.

Secondly, communicating this complex and unprecedented agreement to multiple countries was more difficult than anticipated. Oxfam has not worked with philanthropy at this level before, and the NGO sector is set up to reflect large contracts with institutional donors.

Finally, the agreement was hampered by the time it took to sign a contract. The involvement of a Donor Advised Fund, a mechanism increasingly used by philanthropists to disburse charitable funds, added further delays, as the parties grappled with legal agreement terminology.

Achieving impact and enjoying philanthropy

Despite these challenges, the agreement provided immediate security to some countries and invaluable breathing space to others, who could plan more strategically knowing they had the funding available. The organisation received a boost at a time when funding was extremely volatile and staff morale was deeply hit.

Meditor Trust observed that from a funder perspective the agreement felt very good, as they will have achieved impact whether or not the loan is returned. Programmes can continue, and Oxfam can maintain capacity in-country, avoiding inefficiencies of temporarily scaling down during a period of financial uncertainty.  

Recent research suggests that this acknowledgement of enjoyment derived from achieving impact with their grant-making improves a philanthropist’s appetite for risk.

Interestingly, the Trust also consider morale boost to be a form of impact. This is something rarely articulated by donors, and which shows great sensitivity to the many dedicated staff working around the clock with the people and communities we serve.

Recent research suggests that this acknowledgement of enjoyment derived from achieving impact with their grant-making improves a philanthropist’s appetite for risk. The research further suggests that by investing in continued learning they develop new anchor points for their philanthropy, which optimise the value their life experience brings to their grant-making.

Lessons learnt for all parties

Neither party anticipated the length of time the agreement would take, nor the consequences for the loan’s usage. Meditor Trust feel that they did not act quickly enough, and suggest disbursing a smaller grant could have acted as a buffer fund while the structure was put in place. They also felt that the incentive alignment turned out to be unnecessary, as we proved keen to re-establish trust with our donors and partners.

There is still room for improved agility and appetite for risk, particularly in the climate of rapidly growing Donor Advised Funds, whose role in development-impact bonds is being explored for the first time. Penny Mordant, Secretary of State for International Development, has indicated that the Department for International Development are preparing to underwrite risk in a similar way, as Brexit negotiations begin to affect development contracts.

We, along with other NGOs, are juggling complex funding matrices in emergency responses, balancing contracts, timings, resources and people in changeable circumstances. This makes it difficult to get clarity on what is happening and why without creating a lot of additional work, which can quickly be outdated. As a result, many decisions come down to a good degree of trust.

A detailed briefing of events that were being referred to in the press, in addition to a long-standing relationship built on trust, helped furnish Meditor Trust with the information they needed to respond. If NGOs are to make the most of philanthropy’s potential to play a role in periods of instability, we must break down barriers of language and understanding, and commit to full transparency and accountability to better inform those in a position to help.

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Nick Brooks