Principle: Jensen & Meckling (1976), Fama & Jensen (1983) – Analyzes the contractual relationship between a “Principal” (who delegates a task and provides resources, e.g., a donor) and an “Agent” (who carries out the task, e.g., an NGO). Due to potentially divergent objectives and information asymmetry (the Agent knows more about the action and the local context than the Principal), the Principal fears that the Agent will not act in its best interest (risk of “moral hazard” or “adverse selection”). To overcome this, the Principal puts in place control and incentive mechanisms (detailed contracts, frequent reporting, audits, earmarked funding).
APPLICATION TO AFRICAN NGOs: #
- The relationship between international donors (Principals) and African NGOs (Agents) is often characterized by a strong asymmetry of information and perceived or real mistrust.
- Donors are implementing demanding control systems (complex procedures, numerous quantitative indicators, strict conditionalities, preference for financing specific projects rather than institutional/core funding) to ensure that funds are used in accordance with their expectations.
- These mechanisms, although aimed at ensuring accountability to the donor, generate high transaction costs for NGOs and considerably limit their flexibility and strategic autonomy to respond to emerging local needs or to innovate.
Case Study / Evidence: The overwhelming predominance of project funding (earmarked, short-term) over institutional funding (unearmarked, multi-year) in aid to African NGOs is a clear manifestation of this agency logic, where control takes precedence over supporting autonomy. Onerous reporting requirements are consistently cited by NGOs as a major obstacle.
Critique / African Nuance: Agency theory can present an overly cynical or simplistic view, reducing NGOs to purely opportunistic actors. It often ignores the “missionary” dimension or the intrinsic motivations of NGO actors. It also struggles to integrate the complexity of “multiple Principals” (an NGO must be accountable to donors, but also to its beneficiaries, the State, its members, etc.), creating accountability dilemmas (“upward vs. downward accountability”). Finally, it sometimes underestimates the possibility of building trusting relationships and more balanced partnerships that transcend the simple Principal-Agent contractual logic. NGOs are also developing strategies to manage or “turn” information asymmetry to their advantage.
