Foreign funding cuts put 2,200 NGOs at risk

Around 2,200 small and medium-sized NGOs in Bangladesh could be particularly vulnerable as foreign funding declines, with grant-reliant organisations providing social services facing the greatest risk, according to a study by the Bangladesh Institute of Development Studies (BIDS).

Unlike NGOs with microcredit operations, these organisations have no lending income to fall back on when foreign funding declines.

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The study says the growth of NGOs without a lending arm is significant because they have no lending surplus to cushion a contraction in foreign grants.

A BIDS survey found that two-thirds of grant-dependent organisations reported significant damage from funding cuts

A BIDS survey found that two-thirds of grant-dependent organisations reported significant damage from funding cuts, with their budgets falling by an average of 40 percent. Among NGOs with microcredit operations, the average decline was 12 percent.

The findings were presented at a seminar titled “Beyond Foreign Dependence: The Future of NGO Financing in Bangladesh” at BIDS yesterday.

Finance and Planning Minister Amir Khosru Mahmud Chowdhury called for stronger institutional partnerships among the government, NGOs and the private sector to create sustainable financing for the sector.

He urged time-bound measures to help NGOs secure alternative funding as development assistance declines worldwide.

“We do not just want to listen; we want to provide an effective response,” he said, stressing the need for an integrated framework covering human development, local culture and private-sector participation.

He said NGOs play an important role in taking government services to grassroots communities and that their contribution in areas such as the creative economy should receive stronger institutional and policy support.

The BIDS study says the decline in foreign aid is likely to be gradual but lasting. Development assistance from wealthy countries fell 23 percent in real terms in 2025, the biggest annual decline on record.

The full impact has not yet reached Bangladesh as funds for previously approved projects are still being released. Around Tk 10,143 crore in foreign grants was released in 2025-26.

Foreign grant releases peaked at $955 million in 2018-19, fell 31 percent to $655 million, and recovered to $838 million in 2025-26. However, new project approvals fell from 2,061 in 2021-22 to 1,654 in 2025-26, indicating a weakening pipeline.

As funding shrinks, organisations are likely to cut staff and programmes first, potentially causing essential social services to disappear.

The study also warns that grant cuts could push NGOs towards “mission drift”, as they shift towards microcredit to generate income while schools, clinics and community programmes are cut.

It argues that the solution is not simply to find new donors. Instead, the government should contract NGOs to deliver services where they can do so more effectively.

NGOs can reach remote households and understand local needs, while the government can provide financing, regulation and infrastructure. Joint delivery could therefore reduce the cost of providing services.

The Public Procurement Rules 2025 allow NGOs to participate in public service delivery, but the provision is rarely used. The study recommends clear guidelines, an open list of qualified NGOs eligible for government procurement and CSR funds, dedicated financing windows through organisations such as the Palli Karma-Sahayak Foundation, clearer CSR rules, and legal recognition and tax benefits for social businesses.

However, alternative financing is unlikely to fully replace foreign grants. Bank CSR spending fell to Tk 345 crore in 2025, while social businesses may cover only 15-25 percent of an NGO’s budget. Innovative financing such as bonds is also difficult for smaller NGOs because it generally requires loan portfolios, collateral or strong balance sheets.

At the seminar, the minister also stressed developing local products, saying traditional crafts such as shital pati need modern design, value addition and better marketing to reach international markets.

He also said projects should meet four conditions -- value for money, return on investment, employment or entrepreneurship creation, and environmental protection.

“No project will be approved if these four conditions are not met,” he said.

Among others, Zonayed Abdur Rahim Saki, state minister for planning; SM Shakil Akhter, secretary of the Planning Division; AK Enamul Haque, director general of BIDS; and Asif Saleh, executive director of BRAC, also addressed the seminar.