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Paper short abstract

Institutionalized co-financing through informal taxation and diaspora contributions is reshaping welfare provision in fragile contexts. Drawing on cases from Somalia and Mexico, this paper shows how communities mobilise resources beyond the state, alongside the risks and inequalities this entails.

Paper long abstract

As international aid contracts, communities, diasporas, and local associations are increasingly filling the gaps in financing essential public goods. This paper examines co-financing mechanisms—hybrid arrangements combining informal taxation, community and diaspora contributions, and government or donor funding—as an emergent form of welfare and mutuality in fragile contexts. Drawing on evidence from Somalia and Mexico, we show how these mechanisms function as locally rooted but transnationally supported systems of collective provision, operating in spaces where state welfare is absent, fragmented, or contested.

The paper shows that co-financing arrangements can mobilise substantial resources for public goods; expand citizen participation and ownership; strengthen horizontal and vertical trust; and, at times, generate unexpected state-building dividends. Yet these benefits coexist with significant risks: regressive burdens on vulnerable households, elite capture, uneven access across communities, politicisation of funds, and exposure to criminal or armed group interference. Using four case studies—Mexico’s 3×1 Programme, the Sokaab and Bulsho Kaab digital crowdfunding platforms in Somalia, the Somali government’s Bulsho Programme, and IOM’s emerging CFM2PFM (community financing mechanism to public financial management) model—we trace how design features, political economies, security dynamics, and diaspora engagement shape outcomes.We argue that co-financing mechanisms reveal not only how communities survive shrinking state support, but how they actively re-imagine welfare and development “from below.”