Summary
With the current global financial downturn, there is a heightened need to provide aid in an efficient and effective manner. Nancy Birdsall and colleagues at the Center for Global Development (CGD) are developing a new aid modality entitled Cash on Delivery (COD) Aid that will both ensure that donors pay only for measurable progress and promote recipient country ownership of development strategies.
Despite shared interests in educating children, improving health, and reducing poverty, donors and recipients tend to repeat ineffective approaches because, in addition to these shared interests, they also have competing goals for foreign aid and lack reliable information about implementation and outcomes. Consequently, foreign aid programs are weakly accountable – to donor country citizens who finance them, to recipient country citizens who are supposed to benefit, and between donor and recipient governments as well. Recipients regularly criticize donors for being inflexible, unresponsive, and providing unpredictable funding, while donors criticize recipients for lack of transparency and failure to fulfill obligations. These problems are exacerbated by the involvement of multiple donors with different budget cycles and reporting requirements, which dilutes the recipient’s accountability to any single donor, raises transactions costs, and increases the administrative burden.
The Proposal of the CGD is that donors offer to pay recipient governments a fixed amount for each additional unit of progress toward a commonly agreed goal. That is, the donors pay “cash” only upon “delivery” of the agreed outcome. The key features of this proposal are: (1) the donor pays only for outcomes, not for inputs, (2) the recipient has full responsibility for and discretion in using funds, (3) the outcome measure is verified by an independent agent, (4) the contract, outcomes and other information must be disseminated publicly to assure transparency, and (5) this approach is complementary to other aid programs.
Dr. Nancy Birdsall will discuss how the approach addresses many of the shortcomings of traditional aid, and elaborate on the application of the COD Aid approach to primary schooling.
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