Philanthropy, blended finance, and the evolving role of NGOs

The development sector is facing a funding crisis: USAID has been dismantled, there are cuts to donor aid across Europe, and budgets are tightening all across the sector. Organizations that have long relied on traditional grants must now rethink their financing models. The good news: Blended finance and philanthropic investments offer promising alternatives — but accessing these opportunities remains a challenge for many implementing organizations. Crucially, it is likely to involve a shift in role — from delivering programs to offering advice and support. In a recent Devex webinar on funding diversification, experts Chris Clubb, managing director at Convergence, and Naina Subberwal Batra, CEO of the Asian Venture Philanthropy Network, or AVPN, broke down practical ways for development organizations to engage with these new forms of finance. Here are the key takeaways: Blended finance demystified: What you need to know Blended finance has long been a buzzword in development circles, yet many INGOs still find it theoretical and inaccessible. Clubb argued that it’s actually quite simple: “Blended finance is about using concessional public or philanthropic capital to attract private investment into development and climate projects that wouldn’t otherwise get funded.” Right now, global financial markets hold hundreds of trillions in assets, yet only a small percentage flows into low- and middle-income countries. The challenge isn’t a lack of money — it’s the perceived risk of investing in these regions. For implementing organizations exploring blended finance, the biggest question is often: Where do we fit in? While private capital is increasingly flowing into development, most organizations aren’t the ones receiving the investment — they’re the ones helping to make these deals happen. Blended finance structures typically bring together investors looking for returns, grant funders covering financial gaps, and businesses or infrastructure projects receiving capital. NGOs and implementing organizations, however, play a different but essential role. They provide technical expertise, structure deals, and help reduce risk — ensuring that investments generate real impact. Clubb said that while some organizations, like Women’s World Banking, have successfully moved into fund management, most organizations will find the greatest opportunity as advisers and impact partners rather than direct investees. Rather than trying to become financial experts overnight, organizations should lean into their strengths — deep contextual knowledge, technical assistance, and risk mitigation — and partner with financial institutions that understand structuring deals. The 95% opportunity: How philanthropy can do more Philanthropy has long been framed as a catalytic tool for development, yet Batra argued that most funders still play it safe. “We’ve talked for years about philanthropy’s potential to be catalytic, yet many funders are still hesitant to take on risk,” she said. “This needs to change.” “We spend so much time focusing on the 5% of annual giving that foundations are required to distribute, but no one talks about the other 95% … Imagine if even a fraction of that were deployed with an impact lens.” --— Naina Subberwal Batra, CEO of the Asian Venture Philanthropy Network While philanthropy plays a critical role in de-risking investments, many philanthropists remain risk-averse when it comes to their own grantmaking. However, shifts are happening — particularly in Asia, she said, where new wealth creation and generational transfers are leading to fresh approaches in impact investing. One of the most underutilized opportunities in philanthropy, Batra noted, is the massive pool of endowment capital that foundations control. “We spend so much time focusing on the 5% of annual giving that foundations are required to distribute, but no one talks about the other 95% — the capital that’s being invested to grow their endowment. Imagine if even a fraction of that were deployed with an impact lens.” Some leading foundations, such as Ford Foundation and MacArthur Foundation, have begun investing portions of their endowments into impact funds in the United States. But this remains the exception, not the rule. For development organizations, engaging with this kind of philanthropic investment requires a shift in approach — from simply seeking grants to educating funders on innovative finance and once again moving from grantee to adviser. Organizations also need to expand their advocacy beyond grant officers and engage with asset managers and financial advisers — the people who influence how philanthropic endowments are invested. Your new role: From fundraiser to capital mobilizer One of the biggest barriers to accessing blended finance or engaging with philanthropists is the perceived complexity of these funding models. But Clubb and Batra agreed: The real challenge is a lack of strategic partnerships. "You don’t need to be a financial expert — just find the right partners," Clubb advised. Philanthropists, for instance, may be hesitant to engage with blended finance because they lack the technical knowledge. Development organizations, on the other hand, have the local expertise but may lack access to financial networks. This is where collaboration is key. For those just starting out, Clubb advised looking at past blended finance deals in their sector, identifying who was involved, and how they structured partnerships. From there, it’s about finding the right entry point — whether through technical assistance, advocacy, or risk mitigation. So, what should development organizations do next? 1. Research what blended finance and philanthropic investment models exist in their sector. 2. Form partnerships with financial institutions, impact investors, or pooled funding networks. 3. Advocate for systemic change — shifting philanthropy from short-term grants to real capital mobilization. The funding landscape is evolving rapidly. Organizations that adapt to these changes and position themselves as strategic capital mobilizers — not just grant recipients — will be best positioned for long-term sustainability and impact. Want more insights on funding trends? Stay updated with Devex Pro Funding for the latest intelligence on funding opportunities, donor trends, and innovative financing models.