Axesfin

Examining the ‘Local’ in the Localization Agenda

Examining the ‘Local’ in the Localization Agenda

In recent years, there has been increased momentum in the international development sector on the localization agenda, which aims to empower local organizations and communities with more resources and power to drive sustainable change. The agenda gained further traction in 2021 when Samantha Power, the Administrator of the United States Agency for International Development (USAID), announced that 25% of USAID's funding should go to local organizations by 2025. While this is an important step forward, there are still challenges to overcome.

One major challenge lies in defining what constitutes a local partner. USAID has indicated that an entity will be considered local if it:

  1. Is legally organized under the laws of a country that is receiving assistance from USAID;
  2. Has its principal place of business or operations in a country receiving assistance from USAID;
  3. Is majority-owned by individuals who are citizens or lawful permanent residents of a country receiving assistance from USAID; and
  4. Is managed by a governing body, the majority of whom are citizens or lawful permanent residents of a country receiving assistance from USAID.

This definition, however, allows international firms to structure their local subsidiaries in such a way to be counted as local. In fact, USAID’s recent progress report on local funding reported that the agency provided $1.6 billion of direct funding to local organizations in the fiscal year to the end of September 2022 — around 10.2% of all eligible funding; however, this figure included national subsidiaries of international firms. This suggests that the actual percentage of funding allocated to genuinely local firms in 2022 likely remained in the single digits.

Despite these challenges, progress is evident. According to analysis from Devex, in the fiscal year ending 2022, USAID awarded contracts worth $5.9 billion, according to data from USASpending.gov. About 4.7% of this went to local contractors. African-based organizations garnered the most money from these contracts at about $228.8 million — a jump from $50.4 million that went to the region in the previous year. We hope that this trend continues.

As an African-led international social enterprise, Axesfin is an example of a local partner that is well poised to support the localization agenda. We believe Africa's toughest development challenges require African solutions, and we’re dedicated to driving sustainable impact across the African continent by empowering local changemakers with funding, technical expertise, and networks. To learn how we're supporting social investors, African social enterprises, and African NGOs in achieving localization goals, please visit our services page.