Can aid donors find a better way to deliver aid? My guest this week is Nancy Birdsall, president of the Center for Global Development. Along with William Savedoff and Ayah Mahgoub, Nancy is working on a potential new way of disbursing foreign assistance called Cash on Delivery Aid. COD Aid seeks to devise simple, results-based contracts that reward developing countries for making progress towards previously agreed goals—such as increased primary school completion rates, vaccination coverage, or access to clean water.
In the podcast, Nancy explains that the traditional mode of giving aid, in which donors often take an active role in prescribing which actions recipient governments should take, can undermine incentives for governments to identify problems and design and implement locally appropriate solutions. "We have to create a system in which outside resources actually help the developing country governments find out what works in their particular setting," says Nancy.
More on Cash on Delivery Aid
We first discuss how a Cash on Delivery Aid contract could be applied to primary education. Instead of directly financing new school construction, teacher training, or the like, a donor would pay a developing country government for each additional child who finishes primary school and takes a test. Figures on school completion would be independently audited, and the process would repeat each year for the length of the contract, say, five years. There would be no restrictions on how the government could spend each year's COD Aid payout (which might be somewhere around $7-8 million in the case of a country like Malawi). Nancy explains that the intention is to create strong incentives for recipient governments to improve their education systems, and to utilize existing aid flows more effectively.
In the second half of the podcast, we look ahead to other potential applications of COD Aid and examine what makes a good COD Aid indicator. To spur government action and allow for civil society to participate in bringing about change, each COD Aid contract (as designed) would rely on a single, measurable goal; e.g. children completing primary school or households with access to clean water. Choosing an indicator that is simple, central to people’s lives, and easily auditable, Nancy says, is critical to the success of a COD Aid model.
At present, says Nancy, donors and recipients alike are part of a system that rewards transferring money, but not necessarily achieving results. By creating a mechanism where performance is the measure of success, and by strengthening incentives for the collection and public dissemination of data on basic service delivery, Nancy explains, "Cash on Delivery Aid is an attempt to switch, to transfer the accountability that governments feel [from donors] back to their citizens."
Nancy is co-author of a book entitled Cash on Delivery: A New Approach to Foreign Aid, which will be released in March. Order a copy in advance from Amazon.
Listen to the Wonkcast to hear the interview. Have something to add to the discussion? Ideas for future interviews? Post a comment below. If you use iTunes, you can subscribe to get new episodes delivered straight to your computer every week.