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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.
“But we want them to begin counting.” This is the key line in Tina Rosenberg’s column today on Cash on Delivery Aid, where she responds to comments on her initial column from readers worried that governments in poor countries don’t have the capability or the resources to measure things – not even births and deaths.
In a presentation delivered at the UK Department for International Development on March 9, 2011, CGD president Nancy Birdsall spoke about opportunities and challenges for the implementation of Cash on Delivery Aid, an approach that allows aid agencies to address both short-term and long-term objectives of aid.
Interest in Cash on Delivery Aid has been so strong that we’ve printed a second edition of the book which can be purchased or downloaded online. Here is our new preface:
Since Cash on Delivery: A New Approach to Foreign Aid was published in March 2010, the ideas we proposed have been embraced by presidents and ministers, by heads of public and private institutions, and by researchers and practitioners. The Education Ministry in Malawi sent us a letter asking for help creating a COD Aid program there, the British government has publicly committed to financing pilot experiences, and articles and essays have addressed COD Aid in a range of publications including The Economist, The New York Times, and Public Choice. In the debates that ensued, we have learned even more about the Cash on Delivery Aid (COD Aid) approach and how significant a departure it could be from current aid practices.
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).
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.
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.
I'm joined this week by Ayah Mahgoub, a program coordinator here at the Center for Global Development who works on issues related to the effectiveness of foreign aid. Along with Nancy Birdsall and Bill Savedoff, Ayah is working on designing a new form of development assistance called Cash on Delivery Aid that would pay for progress on specific development outcomes.
Nancy summed up the basic idea of the Cash on Delivery approach on a Wonkcast last month—read that post or go here for a short introduction to the idea of COD Aid. While discussions are underway to develop COD aid mechanisms for a number of sectors (including water and health), the initial application is in education. In this sector, a Cash on Delivery contract would pay recipient governments a fixed amount for each additional student who completes primary school and take a standardized test. Ayah is helping to match aid donors and recipient governments who are interested in supporting a pilot of this innovative approach. I asked Ayah to tell us about the countries where the first COD Aid programs might happen: Malawi, Ethiopia, and Liberia.
The Green Climate Fund (GCF) is the newest funding source to address climate change in developing countries. With $10 billion in pledges – and $5 billion committed to mitigation – the GCF is at a critical juncture because its Board is considering the rules and protocols it will follow when it pays for results. We believe the GCF can learn a lot from existing results-based aid agreements and the state of REDD+ finance (summarized in the forthcoming report of a CGD Working Group) which demonstrate the strengths and weaknesses of pay for results approaches.