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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.
By Nancy Birdsall, William D. Savedoff, and Ayah Mahgoub
A brief description of a new approach to foreign aid that would accelerate progress toward universal primary education by offering a contract to low-income countries which pays a specific amount for every additional child who completes primary school without restrictions on how funds are spent.
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.
Nancy Birdsall delivered the presentation "Rescuing the MDGs: Paying for results" at the Fighting World Poverty Conference held at New York University. The presentation explores the weaknesses of the current approach to achieving the Millennium Development Goals and introduces a new proposal for meeting the MDG goals on education.
G-20 heads of state gathering in Washington this upcoming weekend to seek solutions to the global financial crisis should consider ways to strengthen the IMF and the World Bank, the international financial institutions set up after World War II,
to prevent a repeat of the Great Depression. CGD president Nancy Birdsall outlines why and proposes a "Grand Bargain."
For the next U.S. president, effective development policy is not only the right thing to do, it will be crucial to the future well-being of the American people. A new CGD volume, The White House and the World, offers practical suggestions for a coherent U.S. strategy. CGD president Nancy Birdsall, who edited the volume and wrote the lead essay, “Why Development Matters for Americans and What the Next President Should Do about It,” discusses the book’s themes on the eve of the Democratic and Republican conventions.
I am pleased to share with our readers at Owen’s request this discussion of Cash on Delivery Aid, which appeared yesterday on his blog, Owen Abroad.
Linking Aid to Results: Why Are Some Development Workers Anxious?
By Owen Barder
The Center for Global Development is working on an idea which they call Cash on Delivery aid, in which donors make a binding commitment to developing country governments to provide aid according to the outputs that the government delivers. I think this is a good idea in principle, and hope that it can be tested to see whether and how it could work in practice. The UK Conservative party have said in their Green Paper that if they are elected they will use Cash on Delivery to link aid to results.
Linking aid more closely to results is attractive from many different perspectives. My own view is that linking aid directly to results will help to change the politics of aid for donors. Many of the most egregiously ineffective behaviours in aid are a direct result of donors’ (very proper) need to show to their taxpayers how money has been used. Because traditional aid is not directly linked to results, donors end up focusing on inputs and micromanaging how aid is spent instead, with all the obvious consequences for transactions costs, poor alignment with developing countries systems and priorities and lack of harmonisation. If we could link aid more directly to results, I think donors will be freed from many of the political pressures they currently face to deliver aid badly; and it would be politically easier to defend large increases in aid budgets.
We often hear criticism of the COD Aid approach from people who question whether a high-level incentive would really alter the behavior of recipient countries. Paolo de Renzio raised this issue in a recent blog, saying that COD Aid is unlikely to work because recipient “[g]overnments have not only insufficient capacity, but also limited political interest in using available resources to maximize development impact.” The question this raises, though, is not whether COD Aid is worth trying. Rather it is questioning whether any foreign assistance can make a difference. The appropriate counterfactuals for COD Aid are existing aid modalities which rely on extensive engagement between funders and recipients on inputs, planning and implementation. The assumption of current aid modalities is that imposing the funder’s views of planning, institutional structures, training, and technical assistance from abroad can achieve progress even when a recipient country is less than enthusiastic about a program. That is the counterfactual against which to consider COD Aid.
Last week UK Secretary of International Development Andrew Mitchell released the outcomes of DFID’s bilateral and multilateral aid reviews.
We were glad to see that the published documents on the bilateral aid review included country summaries that list the funds allocated to each of 27 countries and three regional programs where DFID plans to work in the next 4 years, and the key results these funds are expected to produce. These are likely the highlights of the “results offers” that country and regional teams submitted at the end of last year (as we discussed in this blog).