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The idea of applying a Cash on Delivery Aid (COD Aid) approach to the health sector has been raised many times, particularly in relation to addressing malaria, HIV/AIDS, maternal health, and water. The idea of COD Aid emerged from an analysis of the basic relationships between those who fund and receive international assistance and is applicable to almost any sector if the challenges of identifying, defining, measuring, and verifying an appropriate indicator can be met.
This paper assesses the challenges of applying COD Aid in the health sector. After clarifying how COD Aid differs from results-based financing approaches, the paper presents four key characteristics for designing a successful agreement. It discusses features of the health sector and foreign aid flows to health that need to be considered when designing a successful COD Aid agreement for this sector.
The paper then presents 10 indicators associated with the Millennium Development Goals aimed at reducing child mortality, maternal mortality, and the prevalence of malaria and HIV/AIDs. For each indicator, the paper provides definitions, discusses the feasibility of measurement, considers evidence on the availability of effective policy instruments, highlights unintended consequences, and proposes ways to use the indicator in a COD Aid agreement. In this way, the paper provides guidance to those interested in designing COD Aid approaches to improve health outcomes in developing countries.
Cash On Delivery is a new approach to foreign aid that makes payments in direct proportion to measured progress toward a shared objective. The COD Aid approach gives greater autonomy to recipient countries in determining how to spend aid funds. The approach has been described in detail in Cash on Delivery: A New Approach to Foreign Aid (2010). Additional materials are available here.