Linking aid to progress

This paper, by me and Nancy Birdsall, recommends that donors should consider linking aid to the progress that recipient countries make towards a small number of high-level goals (eg the number of children in school). The payments would be guaranteed, with no strings attached about how the recipient could use the money (though further payments would depend on continued progress); and the commitment would be transparent.  It would enable civil society organisations in developing countries to push for more rapid delivery of services, given that their government would be guaranteed a stream of aid revenues to cover its costs.

A promise of this kind would turn social benefits (eg better education, better health care) directly into a financial stream of payments, which they could use to invest themselves, or to pay private sector firms to deliver services.

(This paper was written before I returned to the UK Civil Service.)

5 thoughts on “Linking aid to progress”

  1. Dear Owen

    I am a fan of the Centre for Global Development but was rather dismayed by this paper.   A number of points struck me

    1) You skim over the incentives that would be created by such a payment for progress scheme, which strikes me as naive inthe extreme.   – do you think that its feasible to set up the type of system of nationwide testing that you propose and be confident of the results?  If you do believe this, may i ask when you last visited a rural district in a poor African country?  Are you aware of the conditions that prevail in schools and clinics in such settings, let alone the problems of phsical access? How you could possibly hope to introduce something along these lines baffles me.  The costs of implementation and monitoring would be exorbitant and i am not convinced whether the findings would have any validity or benefit.

    2) What do you propose to do about measuring quality? Is it sufficient for a country to claim that they have educated x% o children for over 6 years, or would you wish to gain some sense of the quality of schooling that was on offer.  If so, see point above on impossibility of doing so without imposing nationwide testing, and then there would surely be arguments to be made about how to interpret differences in results between regions…..  Surely we are having debates about this ad nauseam within our own education system, are we really proposing that this is the latest idea to be exported ?

    3) I am also baffled by how you stress the importance of national institutions at the beginning of the paper, which is then replaced by your focus on highly specific targets.  Surely the whole debate between Easterly and Benn recently was claiming that DFID doesn’t approve of such narrowly "measurable" outcomes.

    4) finally a point of clarification.  You cite the example of NGOs in Cambodia being paid according to measurable outcomes.  As far as I am aware, this is not the case.  The NGOs are paid a fixed budget, and health statistics in the districts where they are have been monitored.  IN AFghanistan, there is a programme where the World Bank offers a bonus payment to NGos that reach certain targets.  However, it is not possible to judge whether these targets being reached is linked particularly to a)the activities of the NGO or b) the existence of the bonus payment.  The CGD has a book cominng out shortly on the subject of payment for performance (P4P) in health care settings.

    Finally I can’t help but wonder whether think tanks and DFID managers may benefit from some doses of reality occasionally.  Those who dream up these schemes should be tasked with describing and costing in detail how they will be implemented , as well as summarising lessons of experience from the developed world before embarking on making recommendations that do not have an evidence base.  Perhaps then we might be less inclined to constantly seek for a new magic bullet, (payment for progress!)  and deal with some of the real problems of development, such as the behaviour of aid organisations.  How about a pilot where we pay DFID for demonstrating some progress??

    all the best, Natasha


  2. Natasha

    Thank you for your comments, and for your kind words about CGD.

    On the danger of perverse incentives: yes of course there is a danger in any development assistance of creating unwanted incentives.  That is true of existing aid programmes as it would be of any other scheme.  It seems to me that one advantage of this proposal is that the incentives that are (inevitably) created are transparent and consistent.

    I do not think we understate the difficulties of measurement of progress.  But I do not see this as a criticism of the idea.  Rather, this is information that governments should, as a matter of high priority, be collecting anyway, to make informed choices about priorities and to track progress.  There is a huge industry of consultants and other development professionals collecting and collating all sorts of other information, but the basic evidence about whether and where progress is being made is not available.  So I am unapologetic about the fact that this proposal would force donors, as well as developing countries, to focus some serious attention and resources on collecting this sort of data.

    On outcomes – we, and the rest of the world community, are committed to the MDGs and the associated targets, agreed by the General Assembly.  It is not in any way undermining  national institutions to say that we will link aid to making progress towards them.  That stands in stark contrast to the approach used by many donors, which links aid to a raft of specific policies, inputs and other short term indicators, which does represent an attempt to micromanage other countries and their policies.  Linking aid to internationally agreed high-level outcomes does not do that.

    This is not intended to be a "magic bullet", nor do we envisage that it will replace the hard work of managing projects and activities that deliver services on the ground.  We see it as a way of ensuring that all approaches that deliver services do not fail through lack of funds, and allowing different countries to adopt their own approaches to delivering services in ways that are appropriate for them, without prescription from overseas about how that must be done.  In that way, it is intended to address some of the behaviour of aid organisations which you criticize.

    I was taken aback at the tone of your remarks about "dreaming up" schemes, naiivety, the need to get out to rural Africa more, etc.  Please be more civil in future.




  3. Dear Owen

    Firstly let me apologise if the tone of my comments took you aback!  I will try to be more civil, and avoid sensitive issues. 

    I entirely agree with your points that the measurement of progress is centrally important and currently sadly overlooked, and that unfortunately this is one of the weaknesses of donor agencies.  I would welcome an initiative that focussed on the need to build this basic capacity.   However what I have come to fear/ expect is that we will have the intervention (payment for progress) delivered before we have the groundwork done that would enable it to be properly implemented at any meaningful scale.   My experience of health information systems in several parts of Africa is that they are a long way off being able to deliver the type of statistics that you would need.  The only way that these are currently gathered is by use of expensive household surveys or other forms of special initiative.  Your proposal therefore strikes me as very clever and well thought out but impossible to implement effectively.

    kind regards,Natasha

    Owen adds: no need to avoid sensitive issues. 

  4. Natasha

    Thanks. I think we agree on the need to put more resources and attention into investing in the capacity of developing countries to measure progress.  I fear it will remain neglected until and unless we start to make it matter – for example, by linking aid payments to evidence of progress.

    Kind regards


  5. Owen

    I enjoyed reading the paper and thought the idea was well-presented (in plain English, which is always welcome and depressingly rare in development thinking) and thought-provoking.  The key issue, as always, is how to create positive incentives and avoid perverse incentives.  As you rightly point out, this is already an issue with development assistance.  I have some experience of working on basic education in an Asian country.  We got to know the local officials in some of the places we worked well, so we were able to have relatiuvely open disucssions with them.  Our regular discussions would go something like this, "What’s the official enrolment rate?" Answer: "98%"  And what’s the actual enrolment rate; "About 70%". In this case, the 98% was the Government’s target for all local districts.  Of course, this brief anecdote only illustrates the problem and doesn’t offer any solution. 

    Donors clearly have a key role to play in improving incentives.  The idea in your paper may help here.  But of course it could only be taken forward in an aid-dependent country as in a non-aid dependent country it would almost certainly be the case that the incentives created by development assistance are much smaller than internal (non-aid related) incentives.

    Best wishes



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