Do foreign aid organizations hurt the startups they claim to help?
Do foreign aid organizations hurt the startups they claim to help?
Often constituting the only funding source in nascent startup ecosystems, foreign aid organizations' involvement in the startup world also comes with significant downsides.
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A recent switch
The actual impact foreign aid has had on countries receiving vast sums of it has been a hotly debated topic for decades. In recent years, prominent thinkers such as Dambisa Moyo and William Easterly went even further by stating that not only did foreign aid not help, but it made the situation worse.
One of their main arguments lies in the fact that aid traps recipient countries in cycles of dependency. The focus on non-profits makes the model unsustainable and causes recipients to be forever attached to external aid money. Other points of contention surround the fact that material donations severely hurt local producers, stunting growth, or that aid decreases government accountability and increases corruption.
Foreign aid organizations were forced to take note of these critics, as they severely damaged support for their actions and their subsequent capacity to get funding back home. The sector had to reinvent itself, breaking away from the donation and grant model that had failed to prove its efficacy. This impetus to adapt was also bolstered by new actors entering the development/philanthropy space.