How is development cooperation funded?

The Netherlands provides development aid in a number of ways. For example, through World Bank and European Union (EU) programmes. Or by encouraging the private sectors in developing countries.

Development cooperation through the EU, World Bank and UN

International cooperation is essential for global peace, prosperity and justice. Some problems – environmental pollution, climate change and wars – cannot be solved by one country alone.

That is why the Dutch government gives international organisations support in the form of money, manpower and ideas. We call this multilateral cooperation. More than 35% of the Netherlands’ development budget goes to programmes run by:

Development cooperation through civil society organisations (NGOs)

Many development cooperation activities are not carried out directly by governments, but by non-governmental organisations (NGOs). Examples of NGOs include Oxfam Novib, ICCO and Hivos. NGOs often work with local partner organisations, which understand the needs of the local population.

In 2012, the 80 largest Dutch development organisations spent a total of €1.05 billion. Not all of this was government money. At least 25% came from the organisations’ own income, for example money from members and donors. The Democratic Republic of the Congo, South Sudan and Kenya received the most money. The NGO database compiled by the Centre for International Development Issues Nijmegen (CIDIN) and the Ministry of Foreign Affairs (BZ) records funding given to all recipient countries.

Grants for development organisations

For the period 2011 to 2015, 67 Dutch development organisations have been awarded grants totalling €1.9 billion through the cofinancing system MFS II. MFS II funding enables these development organisations to work with 4,000 partner organisations in developing countries. The partner organisations in turn are involved in some 30,000 to 100,000 local initiatives. Ultimately, MFS II funding reaches an estimated 65 million people.

MFS II is not the only source of grants. For more information, see Development cooperation grant programmes.

Development cooperation via the private sector

Promoting economic growth is an important way of combating poverty. A flourishing private sector means more jobs. And more jobs mean more people with an independent income who are able to look after themselves. That is why the Netherlands wants to stimulate private sector growth in developing countries.

A poor business climate and limited access to global markets can create problems for the private sector in developing countries. The main barriers to business include:

  • insufficient access to financial services such as loans and insurance;
  • poor infrastructure: roads, ports, electricity and computer networks;
  • insufficient market access: European import duties make products expensive;
  • inadequate legislation, such as expensive, bureaucratic licensing procedures.

The government believes partnerships with businesses and other partners are an effective way of facilitating development. These are known as public-private partnerships (PPPs). For example, the water supply company Vitens is working with the Mozambican government’s FIPAG Fund. Laying pipes and advising local management have resulted in a quarter of a million people having access to clean drinking water.

Dutch Good Growth Fund

The revolving Dutch Good Growth Fund (DGGF) will be launched on 1 July 2014 with a budget of €750 million. The DGGF encourages Dutch companies to do more business with emerging markets in Asia, Latin America and Africa. Dutch know-how will give local economies a major boost.

For more information about how the Netherlands is supporting the private sector in poor countries, see Doing business in developing countries.