By Christian Meyer zu Natrup
Aid budgets are unlikely to come back. The organisations that accept this, and build a second leg to stand on, will keep their impact and their standing. Those that wait will lose both.
For decades the development and humanitarian sector operated on an assumption that now looks naive: that public money, however it fluctuated, would broadly hold. That assumption is gone. Oxfam’s analysis of G7 commitments points to aid spending roughly 28 percent below 2024 levels, the sharpest fall since the group was formed in 1975. The OECD lists nearly a dozen major donors, among them Germany, France, the Netherlands, Sweden, Switzerland and the United Kingdom, cutting official development assistance through 2027. In the United States, USAID has been dismantled and foreign assistance roughly halved in a single year. This is not a dip in a cycle. It is a resetting of the baseline.
The instinct of many boards and management is to treat the shortfall as a gap to be bridged: trim, draw on reserves, wait for the pendulum to swing. But one can rarely “save oneself into saving” especially when the pendulum won’t swing back any time soon.
Fiscal pressure, defence spending and domestic politics across the donor world all point the same way. Waiting for this to change is not a neutral act. It is the quiet consumption of an organisation’s runway while the world it serves moves on. For me at least, that world is the point. Behind every line in a donor budget are people: the child in a rural preschool, the refugee trying to rebuild a livelihood, the amputee waiting for a rehabilitation centre to reopen. I personally met hundreds of smart, driven people, who just need a single change to succeed. And I met hundreds who depend on services that development and humanitarian actors deliver, and for many there is no other provider. That opportunity and dependence is precisely why leaders cannot afford paralysis. The purpose of adapting is not institutional survival for its own sake. It is to keep the promise made to the people who are counting on us.
Of course this may require fundamental change and change is hard. It asks people to question models that once worked, to have difficult conversations with new funders, learn an unfamiliar language. But the alternative is harder. An organisation that cannot change does not merely shrink. It slides toward irrelevance, and in this sector irrelevance is measured in lives not reached.
So what should leaders build? Not a replacement for grants. I do not think that the grant system is dead, and the claim that it is does a disservice to the concessional and philanthropic capital providers that still funds the highest-risk, least-commercial work no other money will touch.
The task is to add a second leg: a complementary stream of income tied to measured outcomes, so that an organisation no longer stands on grants alone. Blended finance, which uses concessional or philanthropic money to absorb early risk and draw in private capital, is a central part of that second leg. It is not the whole of it, and it is certainly not a silver bullet.
The evidence that it can work is now substantial, and much of it comes from our own sister firm. Human Planet, the private-sector counterpart to MzN International, designs and structures exactly these instruments. Its Refugee Development Impact Bond in Lebanon, a €9.8 million programme, trained over 4,380 people and created 2,560 microenterprises, raising household consumption by 17 percent while paying investors a modest return tied to those results. It is one of many.
In the ICRC Humanitarian Impact Bond, spanning the Democratic Republic of Congo, Mali and Nigeria, CHF 26 million of private investment funded rehabilitation centres that reached more than 3,600 people during the bond and are expected to serve some 40,000 over their lifetimes, lifting efficiency by 80 percent and returning up to 7 percent to investors. In Uzbekistan, a 10 million US dollar Preschool Social Impact Bond reached over 14,000 children across roughly 140 schools, with the government itself paying for verified enrolment and quality. Different countries, different problems, one structure: capital raised against outcomes, and outcomes independently measured. Many more sit alongside them.
That last point matters more than the finance. What these instruments share is rigorous impact measurement. The second leg is not only new money. It is the discipline of proving what the money achieves. As the impact investing market matures it is shifting, in the words of one recent market analysis, from intent to evidence, and evidence is what unlocks the next round of capital.
There is a second, less obvious reason to move now. Talk to impact investors, as we regularly do, and a curious complaint surfaces: there is not enough to invest in. Not a shortage of capital, but a shortage of investable projects, structured, evidenced and ready to receive money, rather than promising ideas or strong past track records. The mismatch runs both ways. While programmes mourn the grant funding they have lost, private capital is quietly frustrated by the projects it cannot find. The organisations that close that gap, by making their work investment-ready, will discover the money is already looking for them.
Caution is equally important. Blended finance remains, in the OECD’s own assessment, closer to a cottage industry than a mature market, dwarfed by the trillions in annual climate and development needs. But it is growing. Fast. Then again, it suits some projects and not others. Deployed badly, it distracts and disappoints. Deployed well, in one or two deliberate moves rather than ten scattered ones, it changes what an organisation can deliver, and to whom.
The organisations that emerge from this contraction stronger are already visible. They have accepted that the cuts are permanent, named the threat plainly to their people and their partners, and begun to build the second leg while they still hold the reserves to do it thoughtfully.
At the end of the day, I think that the aid cuts are not a reason to lower our ambition for the people we serve. They are the reason to raise them. If you would like to chat more on this topic, please send me an email chris@mzninternational.com.
