Ethics of International Funding

What is International Funding? 

International funding refers to the financial resources that are provided by entities or countries to other nations, organizations, or projects beyond their national borders. This type of funding plays a crucial role in global economic development, humanitarian aid, environmental sustainability, and in addressing various global challenges. However, there are some ethical issues related to international funding. In this article, we will discuss various aspects related to international funding.

Types of Aids

• Military Aid:  It is the worst form of aid as it can destabilise the whole region. The objective of this kind of aid is to garner new military allies or to strengthen the military capability of their respective allies. 

E.g., the US used to give huge Military Assistance to Pakistan.

• Technical Assistance: It aims to provide technical know-how instead of equipment and helps in capacity building. It is the least expensive and has a lot of benefits. For example, India’s Pan African e-Network Project is in Africa.
• Economic Aid: These are economic loans given at very nominal interest rates that are to be repaid over a long period. Such loans can help a nation’s economic development by setting up infrastructure.
• Humanitarian Assistance: Humanitarian aids are the actions designed to save lives, alleviate suffering and maintain and protect human dignity during and in the aftermath of emergencies.
• Bilateral aid: aid by India to Nepal, Bhutan, and Srilanka
• Multilateral aid: aid by WB, IMF, BRICS
• Project aid: Salma Dam/bandh in Afghanistan

Voluntary aid: doctors without borders.

Ethical Importance of Foreign Funding

Philosophical Explanation – Humanitarian Concern: 

We might have drawn artificial boundaries to create a nation-state, but we belong to the Human race. 

• Historical Burden: Past colonial nations like the UK and France developed by exploitation of other nations in Asia, Africa, South America, etc. To compensate for that, they give grants and soft loans to their earlier colonies. 
• Principle of Sacrifice: It is the duty of the well-off to sacrifice some of their wealth to protect those who can’t protect themselves.
• Responsibility of the Developed Countries: Countries that are least responsible for climate change and have the least economic capacity to fight the effects of climate change are the most affected ones. It is only ethical that they receive funding. For example, funding to promote research in the field of Climate change and creating climate resilience.

Economic Explanation – Export of Capital: 

Western countries have an excess of capital that requires investment in lucrative developing countries.

• Capacity building: It is widely argued that international funding helps build capacity and empower local development actors (like NGOs) in developing countries. This is an inclusive and democratic approach to development.
• Preventing crisis: India has bailed out its neighbours several times in the past in order to prevent an economic crisis.

• Preventing Global Crisis: Several crises are global in nature, such as the COVID pandemic, disasters and climate change. The world benefits by preventing this crisis at the point of its origin.
• Preventing Instability in the neighbourhood and the world: When there are places in the world with no opportunities, economic insecurity, war, instability, hunger, and overwhelming hopelessness, it’s a natural breeding ground for terrorism. So, one of the best ways to tackle global terrorism is to lift people out of poverty. International funding is a way to achieve this.

It is anticipated that the complexities of responding to climate change require partnerships between international and local NGOs and CSOs.

Case Study for Foreign Funding: Should the world intervene during Genocide in a country?

Genocide is a crime against humanity, and the world has signed the ‘UN Convention on Genocide to end this. Even after that, Genocide does happen in the present world.  Some of the notorious genocides include the Jewish Holocaust in Nazi Germany (1933 to 1945), the Armenian Genocide by the Ottoman Empire (1915 to 1923) Rape of Nanking by the Japanese Empire (1937), the Rwandan Genocide (1994), the Tamil Genocide in Sri Lanka, Rohingya Genocide in Myanmar etc.  Ethical aspects related to this include:- Right, to Protect is vague: As a result, either the international community acts very late or doesn’t at all against the genocides carried out by the states. How to intervene: The international community also faces a dilemma of whether it should intervene on its own or arm the group so that the persecuted section can protect itself. The narrow definition of Genocide: The definition excludes targeted political and social groups. It also excludes indirect acts against an environment that sustains people and their cultural distinctiveness.

Ethical Problems in International Funding

State vs Non-State actors:

Through which actors Funding should be done?

If funds are given to the Government of Donne Country, most of the time, they are inefficient in spending them.

NGO and UN organisations can utilise the funds more effectively than Govt Organisations.

But if rich countries give funds directly to non-state actors, there is an issue that erodes the sovereignty of the nation.

Conditions on Funds- 

Most of the funds that developing nations receive have a large number of conditions attached to them, such as:

• Conditionality ignores local needs, societal diversity and local ownership. Often receiving nations can’t use it for their most pressing needs but only on projects that donor countries or agencies allow. 
• Highly paid observers have to be hired, which makes the overall cost very expensive. World Bank and IMF grants come with large conditions, such as opening markets for the world. This can, therefore, be viewed as a continuation of colonialism by other means.

• The policy framework and strategies are shaped by the donors through impositions, substantially weakening the people’s rights, choices, and decisions to choose the demands and activities necessary for their development. For example, The IMF loans to India after the 1991 economic crisis came with severe conditions on macroeconomic policy.

Lack of Transparency in Funding Institutions

The key problem of the major funding institutions of global governance is the unilateralism of Economic powerhouses like the US, EU, and Japan and the lack of transparency in their work.

• Democratic Deficits:  Voting shares are in favour of the US, EU and global north. Countries like China and India are showing discontent.

• Global Response to Regional Problems: Response concerning problems of developing nations is untimely.

• Issues of accountability and transparency are due to large back-door diplomacy.

Suppresses Sovereignty and Democracy

• Debt-Trap: Foreign funding to governments in the form of loans can infringe on national sovereignty. This has come to light due to China’s debt-trap diplomacy. China provides loans to Pakistan for ‘One Belt One Road’, and as Pakistan is not able to pay back, it is entangled in China’s debt trap.
• Suppresses Democracy: Many claim that foreign sponsorship is anti-democratic since it goes against the idea of “government by, for, and of the people.” According to this viewpoint, civil society, whether progressive or not, is legitimate when it can generate money domestically.
• Decrease the legitimacy of Elections. Funding of elections opens a new and more direct way of foreign influence on local politics. There have been allegations by some Western countries against covert Russian meddling in their elections. Such incidents can happen in India as well. 
• Indirect benefits to rebel groups: The rebel groups might derive considerable financial benefits from humanitarian operations by imposing charges on transports, levying taxes on imports and employees’ salaries, and collecting rent for warehouses, offices and residences.
• Dependency on foreign aid: The state starts to lose its independence and relies on foreign aid for socio-economic policies.

Funding to NGOs

• There is a growing concern that foreign government contributors are trying to sway local NGOs’ policies and advance their interests by sponsoring them, giving their views unwarranted prominence, and supporting their initiatives.
• It has been claimed that foreign operatives utilize NGOs to further their goals, such as causing civil unrest and delaying development projects, among others.
• By delaying coal power projects, Greenpeace advances Western interests.

Furthering Hidden Agendas:

• The proliferation of Monoculturalism: These programmes are often aimed at inculcating certain forms of culture and have low regard for indigenous culture in the targeted nations.
• Modern technologies are preserved for for-profit motives, and ‘Obsolete Technologies’ are transferred, instead of advanced, to developing nations. 

Human Rights Violations

• Funding for Clinical Trials: Many Western countries have been accused of funding voluntary clinical trials in poor countries in Africa and Asia. This is a clear violation of human rights.

• Political interventions frequently lead to Human Rights Violations.
• Terrorism: States use Terrorism as a tool of foreign policy and indulge in human rights violations. (e.g., Pakistan (supporting LeT, JeM), Iran (supporting Hezbollah)). 
• Refugee Issue: European nations are closing their borders to refugees fleeing war-torn areas.

Corruption

Further, it is pointed out that it never reaches the right people. Often the existing administrative mechanisms are used to provide aid. Such mechanisms themselves are marred by inefficiencies and corruption. For Example, It was seen in West Africa during the Ebola Crisis.

Terror Financing

Terror Financing is one of the most important Ethical issues of International Funding. It is clear that terrorist financing can never be good. However, countries like Pakistan have manufactured ethical justification to support terrorists. For example, Pakistan’s ISI has been actively supporting radical organizations to create social disharmony, radicalize local youths, and hire them for terror activities.

Good Terrorist vs Bad Terrorist:

States differentiate between Good Terrorists and Bad Terrorists based on their interests. This reveals a selective and self-serving nature. For example, Pakistan differentiates between ‘Good Taliban’ and ‘Bad Taliban’.

• In the age of information technology, foreign funding for technology (software and hardware) companies creates a cyber-security risk.
• For example, in 2020, India banned several Chinese apps and made FDI mandatory through government routes for investments from neighbouring countries.

Similarly, even the US makes a distinction between rebels and terrorists. It treats rebels almost as freedom fighters.

What are the sources of terror funding?

The global flow of funds for nefarious purposes has Four traditional channels:

• Sources of terrorist funding include but are not limited to low-level fraud, kidnapping for ransom, the misuse of non-profit organisations, the illicit trade in commodities, and digital currencies.

1. Direct smuggling of cash through international borders.
2. Use of hawala networks.
3. Banking networks, including SWIFT and other international channels. Use of virtual assets and crowdfunding platforms by terrorist entities, their use of the dark web, the links between terror financing and legitimate economic activities, and payment intermediaries.

Technological developments in the areas of blockchain or cryptocurrencies, transcend national boundaries and international currency systems and have emerged as a new channel for financing terrorist and other illegal activities.

Decision on U.S. Foreign Aid and Terror Financing Policies Under Trump (2025)

In recent times, the US government has decided to cut down foreign aid, which can have several global repercussions. Here is the list of all initiatives taken by the Trump Administration:  Trump paused all U.S. foreign aid programs for a 90-day review, suspending thousands of initiatives. Downsizing of USAID – The administration reduced USAID’s role, placing staff on leave and terminating over 80% of grants. Refocus on U.S. Interests – Aid was redirected to geopolitically aligned areas, with humanitarian efforts shifted to a smaller State Department-led body. Cuts to Global Health Programs – For example, cuts in the HIV/AIDS programs (PEPFAR). Reduced Support for Ukraine – Military aid was suspended, pressuring Ukraine into negotiations with Russia. Delayed weapon deliveries weakened Ukraine’s defence.

International Efforts To Curb Terrorism

The international efforts to tackle the menace of terror funding began way back in 1989 when the Financial Action Task Force (FATF) was formed to bring order and implement standards for the world’s monetary system regarding terror finance and money laundering.

However, it was the 2001 terrorist attacks that changed the way security agencies looked at terror financing.

• The UNSCR Resolution 1267 in 1999 and UNSCR Resolution 1373 in 2001 formed the bedrock of the financial sanctions regime for terrorist organisations and individuals.
• The Terrorism Prevention Branch (TPB) of the United Nations Office on Drugs and Crime (UNODC) works on the legal aspects of countering the financing of terrorism, including promoting the ratification of the relevant universal legal instruments, in particular the International Convention for the Suppression of the Financing of Terrorism (1999), and the implementation of these international standards.
• Delhi Declaration of Counter-Terrorism Committee (CTC) of the UN Security Council: It aims to cover the main concerns surrounding the abuse of drones, social media platforms, and crowdfunding and create guidelines that will help to tackle the growing issue.
• The United Nations Office of Counter-Terrorism (UNOCT)  leads and coordinates an all-of-UN approach to prevent and counter-terrorism and violent extremism. UN Counter-Terrorism Centre (UNCCT), under UNOCT, promotes international cooperation in the fight against terrorism and supports the Member States in implementing the Global Counter-Terrorism Strategy.

National Efforts to Curb Terrorism

• National Investigation Agency (NIA): Federal agency established by the Indian Government 
• Unlawful Activities Prevention Act: Anti-terror legislation that seeks to designate an individual as a “terrorist”, and curb terror financing.
• National Intelligence Grid or NATGRID: It is a seamless and secure database that provides information on terrorists, economic crimes, etc.
• Multi-Agency Centre (MAC) and Subsidiary Multi-Agency Centres (SMAC): The mandate is to share terrorism-related intelligence inputs daily.
• NSG Hubs will ensure a rapid response to terrorist attacks and the Coastal Security Scheme for maritime security.
• India has proposed a permanent secretariat to coordinate a bid to fight terror funding: The overall approach of ‘Beyond-Border Cooperation” is the basis for countering terror funding at the global level. India has sensed the need for permanency of this unique initiative of NMFT to sustain the continued global focus on countering the financing of terrorism – a proposal for a permanent Secretariat made for focussing more on this contagious issue.

India has borne the brunt of terrorism and has witnessed serious loss of life and property in senseless, violent explosions in large cities in the past few decades. The dastardly efforts to radicalise and mislead the youth create a schism in society.

Conclusion

 International funding entails various ethical issues, but it is still a need for the development of any nation. This funding, if used correctly, can take the Nation on a positive trajectory of growth and prosperity. It is the need of the hour to ensure an international framework is devised by International organizations and Governments to ensure an ethical approach is taken to give and receive funds internationally. India can use its position as a member of the UNSC to nudge the International community towards such a goal.