The Trump administration last week moved to formally abolish USAID. For philanthropic funders, the gap left by the 64-year-old agency and its $40 billion annual budget for overseas assistance and humanitarian relief is more than daunting.
“I keep asking myself, how do you eat an elephant? And it’s one bite at a time,” says Caroline Bressan of Open Road.
Bressan’s Open Road is one of the organizations stepping up with new funding solutions. The Washington, DC-based nonprofit, which for more than a dozen years has made bridge loans to social enterprises to get them through unexpected setbacks, has raised $9 million in philanthropic funds to extend zero-interest loans to certain USAID grant awardees that have already completed work. An an additional $4 million earmarked for milestone-based grants to continue some of DIV’s most urgent work.
Bressan hopes to raise an additional $30 million for the pooled donor fund. Rethinking aid and “soft power” is a prominent topic at the Skoll World Forum kicking off this week in Oxford.
Bressan’s path to payback: The Trump administration is required to pay for some $2 billion in foreign aid work already completed, after the Supreme Court this month affirmed a lower court decision. The administration’s compliance with that order has been spotty, and it has ignored other such court orders. If the US government does not make good on the payments it owes, Open Road’s loans will convert to grants.
Open Road is clear eyed about the prospects. “We expect most loans to ultimately convert to grants,” a document describing the fund states.
First steps
Open Road is focusing on recipients of USAID’s Development Innovation Ventures program, a 15-year old grant initiative that supports organizations testing new ideas, building evidence of what works, and scaling cost-effective solutions. Projects in DIV’s $65 million portfolio range from testing the cost effectiveness of low-cost Continuous Positive Airway Pressure machines for pre-term babies to interventions to counter gang recruitment of youths in Colombia.
The rigorous data collection and analysis required by DIV to identify high-impact interventions makes it the antithesis of “waste” the Trump administration rails against — and all the more critical to fund, says Bressan. A 2021 analysis found that that DIV generated $17 in social benefits for each dollar spent.
Open Road has partnered former DIV staffers to identify the most high-impact projects at risk of failure without additional funding.
Bressan acknowledges that Open Road’s Development Innovation Ventures Emergency Fund is just a first step to help staunch the bleeding as longer term solutions are worked out. “We think eventually an independent DIV could be stood up,” she tells ImpactAlpha.
On Friday, as an earthquake rocked Myanmar, the Trump administration said it would axe “non-statutory” spending at USAID and subsume the rest into the State Department. “We are reorienting our foreign assistance programs to align directly with what is best for the United States and our citizens,” said Secretary of State Marco Rubio. All but 15 or so USAID’s employees will be let go. Like other efforts by the administration to eliminate agencies, the move is expected to face legal challenges.
