Key Findings: Trust Funds
Read our key findings on trust funds
Trust Funds (overview)
A ‘Trust Fund’ or ‘Multi Donor Trust Fund’ (MDTF) is a multi-agency funding mechanism, designed to receive contributions from more than one donor (and often also the recipient government), that is held in trust by an appointed administrative agent (Walton, 2011:1) (Molloy, 2019).
Trust funds can be administered by states, regional organisations, or multilateral institutions, who allocate funds through a designated governance structure; and disburse funds to a number of recipients/participating organisations. Trust funds can be country-specific, for example the Afghanistan Reconstruction Trust Fund (ARTF); or thematic, for example the UN Millennium Development Goals Achievement Fund (Molloy, 2019).
Peace agreements have different relationships with trust funds. Peace agreements can:
- Provide for or encourage the establishment of trust funds
- Indirectly serve as a catalyst for trust funds
- Encourage support for existing trust funds, and/or
- Have little influence on the creation of trust funds (Molloy, 2019).
Trust funds serve a range of purposes, which are can be identified through peace agreement provisions and from the activities of MDTFs. Trust funds can:
- support implementation of whole agreements
- support implementation of discrete tasks or aspects of an agreement
- support implementation at state, sub-state and local levels
- incentivise implementation, ongoing negotiations, or peace (Molloy, 2019).
Advantages and Disadvantages
There is little consensus on the utility or effectiveness of trust funds (Molloy, 2019). Trust funds can potentially:
- contribute to increasing recipient government ownership of peacebuilding and post-conflict reconstruction efforts
- permit a sequenced and gradual release of funds to prevent front-loading
- help to absorb political risks for donors
- help to ensure that unfashionable yet critical projects are funded (Walton, 2011) (Molloy, 2019).
However, there are also limitations associated with trust funds. Potential disadvantages of trust funds include:
- limited time-scales provided for trust funds to function, which can impede longer-term strategic planning
- unclear whether donors will seek to advance a peace agreement agenda as negotiated by parties, or impose their own competing demands and visions of peace
- lack of capacity of to provide flexible and quick funding, as MDTFs take time to set up and administer
- whether or not trust funds materialise is often subject to the broader peace process (Molloy 2019).
Peace agreements offer a range of ways to navigate the space between trust fund opportunities and pitfalls. These options can include:
- highlighting the importance of national ownership
- enabling sub-state units, or particular peace implementation bodies to receive donor assistance directly
- elevating domestic interests over international influence
- stressing the need for sequencing and absorption capacity of the recipient state (Molloy 2019).
Implementing Trust Funds
The timescale of funding is important. In particular, short time frames and deadlines can negatively affect the impact of Trust Funds, leading to unmet expectations, unrealistic objectives and inappropriate technocratic measurements. Trust Funds must take account of the fact that needs and opportunities change over time due to the impact of macro political developments (Kilmurray, 2019).
Funding mechanisms should be able to support:
- short term humanitarian issues, delivering a sense of confidence to impacted communities that progress is being made and that their immediate needs are being met
- medium term re-instatement of services and infrastructure, as well as responding to opportunities (and averting crises) linked to the implementation of the peace settlement
- longer term building of resilience, inclusive statehood, economic infrastructure and peace sustainability (Kilmurray, 2019).
For trust fund mechanisms and strategies to be fit for purpose, there may be a need to disentangle various aspects of investment. An overall Peace & Conflict analysis (reviewed and updated in an inclusive manner on a regular basis) is necessary to draw out the specific clusters of potential interventions (Kilmurray, 2019).
Trust fund management mechanisms can in themselves make a crucial contribution to peacebuilding. Guiding questions to make this happen include:
- Who is being seriously consulted about the focus of fund programmes and measures?
- What is the ethnic/gender/regional/age, etc. composition of those who are consulted?
- Can local representatives be actively involved in the selection of priority areas of investment at both national and regional levels?
- Can the allocation of specific resources linked to particular thematic areas of investment be used to encourage people to forge relationships?
- Can more innovative/independent mechanisms be used where investment is required to pilot new approaches?
- What are the areas of investment that need to be managed at a national level? (Kilmurray, 2019).