The Effectiveness of Core and Earmarked Funding in Multilateral Development Cooperation: A Systematic Review

Multilateral organisations are increasingly central to addressing global challenges. Their share of official development assistance rose in the past: Between 2010 and 2022, ODA channelled through or to multilateral organisations by member countries of the Organization for Economic Co-operation and Development’s (OECD) Development Assistance Committee (DAC) increased from 37% to 43%. At the same time, the mid-term results for the Sustainable Development Goals paint a concerning picture, with many targets showing insufficient progress or even regression. Meanwhile, the multilateral development system is under major pressure as several donors, including the US, recently have made major cuts to development aid budgets, or withdrawn from multilateral organisations altogether. Multilateral organisations receive funding primarily through two modalities: core funding and earmarked funding. Core funding is integrated into the organisation’s financial assets, allowing allocation as deemed appropriate within the limits of its mandate. In contrast, earmarked funding, including trust funds, is designated for specific purposes, often restricted by project, region, or country. While core funding gives multilateral organisations more flexibility in how to allocate their resources, earmarking can be favourable for donors, as it allows them greater control over their funding and makes their contributions more visible. Over the past two decades, there has been a notable shift towards earmarked contributions. Against this backdrop and given the role of multilateral organisations in addressing global challenges as well as tightened spending, it is critical to understand the effectiveness of different financing modalities in multilateral development cooperation. The literature on this topic, however, remains fragmented, employing diverse methodologies, concepts of “effectiveness,” and levels of analysis. As a result, empirical evidence is scattered, and findings are difficult to compare, limiting the overall clarity and soundness of existing research. This lack of a clear overall picture highlights the need for a structured synthesis of current knowledge. Accordingly, this paper asks: What is the state of knowledge on the effectiveness of core and earmarked funding to multilateral organisations? We conceptualise effectiveness across three dimensions (process, outcome, and cost) and three intervention levels (project, organisation, and system). Through a structured literature search, quality assessment, and detailed analysis, this systematic review aims to provide a comprehensive overview of the evidence and identify pertinent research gaps. Findings suggest core funding generally offers greater flexibility and appears more effective at the project and organisational levels than earmarked funding. However, earmarked funding can provide flexibility in crisis contexts and reduce administrative burdens under specific conditions. The review highlights a limited empirical evidence base, particularly at the system level, and identifies significant research gaps regarding the effectiveness of multilateral financing modalities. Further, it offers valuable insights for policymakers seeking to maximise the impact of multilateral organisations and foster sustainable development. Authors: Judith Ihl, Ravneet Singh, Isabel Malandu Mukali, Helena Hede Skagerlind and Angela Heucher