CGD President Nancy Birdsall presented Cash on Delivery Aid at a DevTalk as a part of the USAID Development Frontiers in Development conference in June 2012. Nancy explains that COD Aid is a way to put into practice the principles that results matter, country ownership is key, and transaction costs should not overwhelm foreign aid programs. CGD has been exploring the feasibility of Cash on Delivery Aid in several countries and sectors, and supporting development experts in thinking through the implementation of the approach.
The Trouble with Aid
Critics of foreign aid argue that much of it is ineffective or even hinders development. Too often, money is spent on inputs that fail to achieve the desired outcomes. While many aid programs are successful, others fail for any number of reasons. A primary flaw in current aid programs is that they tend to strengthen accountability from recipient countries to donors rather than to their own citizens. This donor-recipient relationship often focuses more on disbursements and verifying expenditures than it does on achieving results. It also frequently has high transaction costs and undervalues local experimentation and learning.
A Solution: Cash on Delivery Aid
The Center for Global Development has developed Cash on Delivery Aid (COD Aid) as an approach to help overcome these problems. It builds on existing initiatives that strive to disburse aid against results, but it takes the idea further by linking payments more directly to a single specific outcome; giving the recipient increased authority to achieve progress however it sees fit; and assuring that the recipient country’s progress is transparent and visible to its own citizens. These features could rebalance accountability, reduce transaction costs, and encourage local innovation and learning.
Recent News
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DFID is making headway on three Payment by Results pilots. More information about the education sector pilot in Ethiopia, modeled after COD Aid, can be found here, and in a CGD report here.
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Engineers Without Borders Canada is leading a campaign for more effective aid programs, and advocating that Canada test COD Aid. See their website for resources including this brief that outlines how COD Aid is aligned with Canada’s aid priorities.
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Twaweza, a citizen-centered initiative in East Africa is implementing an experiment to test whether a Cash on Delivery approach can help to improve poor levels of learning in East African schools.
COD Aid is a practical mechanism for making aid more effective and achieving the goals set out in the Paris Declaration and Accra Agenda for Action, including a greater focus on country ownership and on results, more predictable aid, improved accountability, and increased harmonization of foreign assistance approaches.
The approach can be applied to any sector in which there is a shared, measurable outcome toward which governments and donors are committed to making progress. To learn more, please take a look at our book chapters or book brief, or visit our pages about the approach and its application to education, health, and other sectors. You can also listen to Nancy Birdsall describe COD Aid and several potential applications in these CGD wonkcasts, or Ayah Mahgoub discuss the application to education and recommendations for how COD Aid can be piloted in Malawi, Ethiopia or other countries in this wonkcast.
Work in Progress
CGD is currently working with technical experts, potential official and private donors, and partner countries to design pilots of COD Aid, and to design research programs to accompany the pilots. While we have good reasons to think that COD Aid would be effective, we recognize that development is complex and that only by evaluating its implementation can we learn if COD Aid is effective relative to traditional projects and under which circumstances it can be helpful. This research would also enhance our understanding of how aid can strengthen, rather than burden, local institutions and provide insights about institutional change and good practices in different settings.
Contact
This initiative is led by CGD president Nancy Birdsall and William D Savedoff, with the support at CGD of Rita Perakis, program associate. Please send feedback to [email protected].