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Cash on Delivery is an approach to foreign aid that focuses on results, encourages innovation, and strengthens government accountability to citizens rather than donors. Under COD Aid, donors would pay for measurable and verifiable progress on specific outcomes, such as $100 dollars for every child above baseline expectations who completes primary school and takes a test. CGD is working with technical experts and potential donors and partner countries to design COD Aid pilots and research programs.
Cash on Delivery Aid is designed to overcome the problems of traditional aid, which often focuses more on disbursements and verifying expenditures than on results, undermines a government’s accountability to its citizens, and undervalues local experimentation and learning. COD Aid’s advantage is in linking payments directly to a single specific outcome, allowing the recipient to reach the outcome however it sees fit, and assuring that progress is transparent and visible to the recipient’s own citizens. These features rebalance accountability, reduce transaction costs, and encourage innovation.
COD Aid can be applied to any sector in which donors and recipients can agree upon measurable, verifiable outcomes and commit to making progress toward those shared goals. The approach is fully explained in Cash on Delivery: A New Approach to Foreign Aid (CGD, 2010). Listen to more about COD Aid in these Wonkcasts.
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Aid agencies are investing more in energy projects than ever before, but will they succeed? Not if they ignore the key obstacle to progress: governments that choose the status quo over serious reforms.
Energy is critical to human welfare, yet energy consumption in developing countries is extremely low relative to modern living standards. Conventional aid programs have invested in energy production with some success but also with many notable failures. This paper discusses how a distinctive approach to development aid—disbursing funds against improved outcomes—could make aid more effective in the energy sector. In particular, it explores the use of Cash on Delivery Aid (COD Aid) to resolve perennial difficulties encountered by conventional aid programs in energy sector development.
I’ve been working on the idea of Cash on Delivery (COD) for some years under the hypothesis that if we could define good outcome indicators, someone would step forward to buy them. So what would happen if an organization came forward with a plan to supply a verified outcome in return for a set unit payment after delivery? In a sense, this is what Dispensers for Safe Water, an Evidence Action program, is currently doing.
For some time, we’ve been cheering MCC’s interest in pursuing approaches that pay for outcomes and encouraging the agency’s stakeholders to get onboard (here and here). Now we can applaud an important step forward. The agency’s new compact with Morocco, which both partners celebrated at an event last Thursday in Rabat, spells out the potential for a results-based financing component—a welcome development.
A dozen years since it was set up with a remit to reduce global poverty through economic growth, the US government’s Millennium Challenge Corporation recently revealed a new Strategic Plan. Deputy CEO Nancy Lee joined me on the CGD Podcast to discuss how the new plan responds to a very different development landscape.
After more than a decade of operations, MCC has made the shift from innovative start-up to established donor agency. “MCC NEXT,” the agency’s new, much-anticipated strategic plan, takes a hard look at how the poverty and development landscape has evolved over the past decade and stakes out the position a more mature MCC should take in this new context.