"Cash on Delivery": Progress-Based Aid for Education

The Trouble with Aid

Donor countries have committed to major increases in development assistance, but donors and their taxpayers want to know additional funds will achieve results. Yet it is not usually clear that funding inputs will achieve desired outcomes. In the education sector, aid directed for building schools, training teachers, and buying textbooks may help children get to school and learn to read and do arithmetic. But it may not – for example, the teachers might not show up for work, children might be kept home to help in the house or fields, or principals might decide to put away the new textbooks safely rather than letting students use them. In other words, donors can rarely identify the optimal use of funds in each country to best achieve the outcome of expanding and improving education. In addition, some donor practices, such as spending funds outside recipient budget and procurement systems, can hinder the long run development of country capacity and institutions, including systems to deliver education.

How Cash on Delivery Aid Would Work

The Center for Global Development is developing a design for a new form of aid to help overcome both of these problems. Under “cash on delivery” aid, donors would commit ex ante to pay a specific amount for a specific measure of progress. In education, for example, donors could promise to pay $100 for each additional child who completes primary school and takes a standardized competency test.

A credible baseline survey would be conducted, the country would publish completion numbers and test scores, and then the donor would pay for an independent audit to verify the numbers. The payment would be made upon a successful audit. Payments would be “cash on delivery” – made only after measurable progress, only for as much as is verifiably achieved, and without prescribing the policy or means to achieve progress. The country could then choose to use the new funds for any purpose: to build schools, train teachers, partner with the private sector on education, pay for conditional cash transfers, or for that matter build roads or implement early nutrition programs. This innovative approach would place full decision-making about the use of funds in the hands of developing country governments, letting them determine the best way to achieve the outcome recipient and donor both want: a quality education for all.

The approach is also being explored for application by governments to their own transfers to states or districts.

CGD staff are working with technical experts, potential official and private donors, and partner countries to design a pilot of “cash on delivery” aid, and to design a research program to accompany the pilot. This research would 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 Savedoff of Social Insight, with the support at CGD of Ayah Mahgoub, program coordinator. Please send feedback to amahgoub@cgdev.org.