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Payment by results in aid: hype or hope?

Duncan Green's picture

Is payment by results just the most recent over-hyped solution for development, or is it an effective incentive for accelerating change?

Madeleine has a 17 month-old daughter who was born at the village's primary health facilityWhen reading up on payment by results (PbR) recently I was struck by the contrast between how quickly it has spread through the aid world and how little evidence there is that it actually works.

In a way, this is unavoidable with a new idea – you make the case for it based on theory, then you implement, then you test and improve or abandon. In this case the theory, ably argued by Center for Global Development (CGD) and others, was that PbR aligns incentives in developing country governments with development outcomes, and encourages innovation, since it does not specify how to, for example, reduce maternal mortality, merely rewards governments when they achieve it.

Those arguments have certainly persuaded a bunch of donors. The UK government (pdf) says that this “new form of financing that makes payments contingent on the independent verification of results ... is a cross government reform priority”. The UK’s department for international development (DfID) called its 2014 PbR strategy Sharpening Incentives to Perform (pdf) and promised to make it “a major part of the way DfID works in future”. David Cameron, the British prime minister, waxes lyrical on the topic.

But I seem to be coming up against a long list of potential problems with PbR. Let’s start with Paul Clist and Stefan Dercon: 12 Principles for PbR in International Development (pdf), who set out a series of situations in which PbR is either unsuitable or likely to backfire. For example if results cannot be unambiguously measured, lawyers are going to have a field day when a donor tries to refuse payment by arguing they haven’t been achieved. They also make the point that PbR makes no sense if the recipient government already wants to achieve a certain goal – then you should just give them the money up front and let them get on with it.

Just give them the money: Why are cash transfers only 6% of humanitarian aid?

Duncan Green's picture

Paul Harvey, ODIGuest post from ODI’s Paul Harvey

Giving people cash in emergencies makes sense and more of it is starting to happen.  A recent high level panel report found that cash should radically disrupt the humanitarian system and that it’s use should grow dramatically from the current guesstimate of 6% of humanitarian spend.  And the Secretary General’s report for the World Humanitarian Summit calls for using ‘cash-based programming as the preferred and default method of support’.

European Commission’s Humanitarian aid and Civil Protection department (ECHO) finances basic services for 100,000 Eritrean refugees in EthiopiaBut 6% is much less than it should be. Given the strong case for cash transfers, what’s the hold-up in getting to 30%, 50% or even 70%? The hold-up isn’t the strength of the evidence, which is increasingly clear and compelling. Cash transfers are among the most rigorously evaluated and researched humanitarian tools of the last decade. In most contexts, humanitarian cash transfers can be provided to people safely, efficiently and accountably. People spend cash sensibly: they are not likely to spend it anti-socially (for example, on alcohol) and cash is no more prone to diversion than in-kind assistance. Local markets from Somalia to the Philippines have responded to cash injections without causing inflation (a concern often raised by cash transfer sceptics). Cash supports livelihoods by enabling investment and builds markets through increasing demand for goods and services. And with the growth of digital payments systems, cash can be delivered in increasingly affordable, secure and transparent ways.

People usually prefer receiving cash because it gives them greater choice and control over how best to meet their own needs, and a greater sense of dignity. And if people receive in-kind aid that doesn’t reflect their priorities they often have to sell it to buy what they really need as, for example, 70% of Syrian refugees in Iraq have done. The difference in what they can sell food or other goods for and what it costs to provide is a pure waste of limited resources. Unsurprisingly people are better than aid agencies at deciding what they most need.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Redefining aid could undermine fragile nations, says UN development chief
The Guardian
The decision to redefine overseas aid to include some military spending in fragile countries will hinder international efforts to help the poorest nations and could even undermine their stability, the UN’s development chief has warned. Last week, the Organisation for Economic Co-Operation and Development (OECD) revised the rules on what can be counted as foreign aid – technically known as official development assistance (ODA) – following lobbying from the UK and other member countries. Although proponents of the new definition argue that supporting military or security forces in fragile or war-ravaged states should be seen as a development aim and paid for from the aid budget, the move has been criticised by charities who fear it will mean less money reaches the poorest countries.

Emerging, developing countries gain ground in the tech revolution
Pew Research
A new Pew Research Center survey shows that across 40 countries surveyed in 2015, a median of 67% use the internet and 43% report owning a smartphone. But one trend stands out: People in emerging and developing nations are quickly catching up to those in advanced nations in terms of access to technology. Here are five takeaways on technology use in the emerging and developing world:
 

Will cash replace staff?

Suvojit Chattopadhyay's picture

Consultation workshop in Jessore, BangladeshShould field staff in implementing organisations be made redundant? Do communities not need technical guidance and hand-holding? They also perhaps do not need support from external resource persons in solving collective action problems.

As a corollary to the push for ‘cash transfers’, the role of development workers has come under scrutiny. Last year, evidence from a couple of projects made this point quite strongly.

First, Chris Blattman, who based his argument on a review of the ultra-poor evaluations as well as his own research on ‘cash plus training’ intervention in Uganda:

The biggest expense across all the programs was staff time. Especially for supervision. Delivering training and cows takes skilled labor, and it’s hard to cut this back. But supervision? … should it cost 50 or 60 percent of the program? Is it more valuable than the cow or the grant itself? It’s hard to believe.

We tried to test this with cash-plus program in Uganda. Supervising the women cost about $377, about half the cost of the program and 2.5 times as much as the grant itself…

…and found that the supervision helped the women maintain the new businesses they started, but there was virtually no effect on consumption. We have no idea whether the supervision helps another year down the road. Maybe, eventually, it pays for itself. But the simple fact is this: taking away the most expensive part of the program had little effect on benefits after a whole year.

And Howard White made a similar point, reflecting on the evidence from Community Driven Development (CDD) projects:

In many CDD projects, the decision-making and application process is facilitated by outsiders. A chunk of project resources are used not for funding things communities want, but paying NGOs to train communities in how to hold meetings and help communities decide on what they want.

Now, facilitation may be useful. It can help ensure that the voices of the marginalised are heard, that poorer communities without the skills and connections get to apply and develop skills in project management. But I do wonder if communities that already have community-level decision-making bodies need outsiders to help them hold meetings and to decide their priority needs.

On one hand, Chris is saying supervision and monitoring isn’t worth the money, and on the other, Howard is saying the same might not even be good development strategy.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.


Middle-Class Heroes: The Best Guarantee of Good Governance
Foreign Affairs
The two economic developments that have garnered the most attention in recent years are the concentration of massive wealth in the richest one percent of the world’s population and the tremendous, growth-driven decline in extreme poverty in the developing world, especially in China. But just as important has been the emergence of large middle classes in developing countries around the planet. This phenomenon—the result of more than two decades of nearly continuous fast-paced global economic growth—has been good not only for economies but also for governance. After all, history suggests that a large and secure middle class is a solid foundation on which to build and sustain an effective, democratic state. Middle classes not only have the wherewithal to finance vital services such as roads and public education through taxes; they also demand regulations, the fair enforcement of contracts, and the rule of law more generally—public goods that create a level social and economic playing field on which all can prosper.
 

Humanitarian reform: What's on - and off - the table
IRIN News
As pressure mounts to come up with concrete proposals for the future of humanitarian aid, horse-trading and negotiations have begun in earnest behind the scenes in the lead-up to the first ever World Humanitarian Summit (WHS), to be held in Istanbul in May. The release this week of the UN secretary-general’s vision for humanitarian reforms marks one of the last stages in a multi-year process that has seen consultations with some 23,000 people around the world on how to improve crisis response. (See: Editor’s Take: The UN Secretary General’s vision for humanitarian reform)  Hundreds of ideas are floating around. Which are now rising to the top? And which are being pushed to the side? Here’s our take on the emerging trends:
 

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

The Fourth Industrial Revolution: what it means, how to respond
World Economic Forum
We stand on the brink of a technological revolution that will fundamentally alter the way we live, work, and relate to one another. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. We do not yet know just how it will unfold, but one thing is clear: the response to it must be integrated and comprehensive, involving all stakeholders of the global polity, from the public and private sectors to academia and civil society.

Media, discussion and attitudes in fragile contexts
BBC Media Action
Drawing primarily on quantitative data from nationally representative surveys collected for BBC Media Action programming in Kenya and Nigeria, the paper develops and tests the hypothesis that balanced and inclusive media-induced discussion can be a positive force in mitigating attitudes associated with conflict. The results reveal a rich but complicated picture.  We find relatively consistent evidence in both countries that our discussion-oriented media programmes are strongly linked to private discussion among family, friends and others. Evidence from Kenya also suggests that exposure to debate-style programming is potentially linked to public political discussion, but that this relationship is likely to be mediated through other variables such as private political discussion. Finally, in both cases, both private and public discussion is strongly associated with individual attitudes towards conflict. However, the relationship is a complex one and bears further examination.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.


The Global Risks Report 2016
World Economic Forum
Now in its 11th edition, The Global Risks Report 2016 draws attention to ways that global risks could evolve and interact in the next decade. The Global Risks Report 2016 features perspectives from nearly 750 experts on the perceived impact and likelihood of 29 prevalent global risks over a 10-year timeframe. The risks are divided into five categories: economic, environmental, geopolitical, societal and technological. The report also examines the interconnections among the risks, and through that analysis explores three areas where global risks have the greatest potential to impact society.

The Quest for Good Governance
Journal of Democracy
Once of interest mainly to specialists, the problem of explaining how institutions change is now a primary concern not only of economists, but of the international donor community as well. Many have come to believe that history’s main lesson in this regard is “politics first”—that political institutions are decisive in shaping economic institutions and, with them, the course of innovation and investment that leads to a developed society. Yet there has been much less discussion about the key institutional change needed to bring societies to the point where they are capable of controlling corruption and achieving good governance. This is the shift from patrimonialism to ethical universalism, a transformation that I first explored in these pages a decade ago and have further analyzed in my new book The Quest for Good Governance: How Societies Develop Control of Corruption. 

Fragile to fragile: How the g7+ is bringing optimism to the Central African Republic

Anne-Lise Klausen's picture
School children in the Central African Republic
Credit: © Pierre Holtz | UNICEF

At a meeting of the g7+ group of fragile states recently held in Nairobi, Bienvenu Hervé Kovoungbo looked back on his time in the same city, two years ago.

Back then, the citizens of his country, the Central African Republic (CAR), were caught in a fight between different militia groups. Bienvenu, who is the Director of Multilateral Cooperation and former Head of the Investment Budget Division in the Economy, Planning and International Cooperation Ministry, flew to Nairobi to attend a steering meeting of International Dialogue on Peacebuilding and Statebuilding. There, he appealed to g7+ colleagues and to donors to come to their assistance.  After the meeting, he could not get back to the capital Bangui for two weeks, held up in Douala, Cameroon while his family had to flee their home and live with thousands of others in makeshift camps on the outskirts of the city.

#3 from 2015: Have the MDGs affected developing country policies and spending? Findings of new 50 country study.

Duncan Green's picture
Our Top Ten blog posts by readership in 2015. This post was originally posted on August 20, 2015.

Portrait of childrenOne of the many baffling aspects of the post-2015/Sustainable Development Goal process is how little research there has been on the impact of their predecessor, the Millennium Development Goals. That may sound odd, given how often we hear ‘the MDGs are on/off track’ on poverty, health, education etc, but saying ‘the MDG for poverty reduction has been achieved five years ahead of schedule’ is not at all the same as saying ‘the MDGs caused that poverty reduction’ – a classic case of confusing correlation with causation.

So I gave heartfelt thanks when Columbia University’s Elham Seyedsayamdost got in touch after a previous whinge on this topic, and sent me her draft paper for UNDP which, as far as I know, is the first systematic attempt to look at the impact of the MDGs on national government policy. Here’s the abstract, with my commentary in brackets/italics. The full paper is here: MDG Assessment_ES, and Elham would welcome any feedback (es548[at]columbia[dot]edu):

"This study reviews post‐2005 national development strategies of fifty countries from diverse income groups, geographical locations, human development tiers, and ODA (official aid) levels to assess the extent to which national plans have tailored the Millennium Development Goals to their local contexts. Reviewing PRSPs and non‐PRSP national strategies, it presents a mixed picture." [so it’s about plans and policies, rather than what actually happened in terms of implementation, but it’s still way ahead of anything else I’ve seen]

"The encouraging finding is that thirty-two of the development plans under review have either adopted the MDGs as planning and monitoring tools or “localized” them in a meaningful way, using diverse adaptation strategies from changing the target date to setting additional goals, targets and indicators, all the way to integrating MDGs into subnational planning." [OK, so the MDGs have been reflected in national planning documents. That’s a start.]

How do developing country decision makers rate aid donors? Great new data (shame about the comms)

Duncan Green's picture

A small business owner, GhanaBrilliant. Someone’s finally done it. For years I’ve been moaning on about how no-one ever asks developing country governments to assess aid donors (rather than the other way around), and then publishes a league table of the good, the bad and the seriously ugly. Now AidData has released ‘Listening To Leaders: Which Development Partners Do They Prefer And Why?’ based on an online survey of 6,750 development policymakers and practitioners in 126 low and middle income countries. To my untutored eye, the methodology looks pretty rigorous, but geeks can see for themselves here.

Unfortunately it hides its light under a very large bushel: the executive summary is 29 pages long, and the interesting stuff is sometimes lost in the welter of data. Perhaps they should have read Oxfam’s new guide to writing good exec sums, which went up last week.

So here’s my exec sum of the exec sum.


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