Friday, March 18, 2011

New Aid Model: Cash On Delivery

Transparency and efficiency are two major concerns for a lot of tax payers when asked about foreign aid. Corruption and inefficiency are seen as pits where aid money just disappears. This might not be always true, but sadly sometimes it is. That is why development experts from all around the world are always trying to improve current aid modalities. Sometimes they even come up with new brilliant ideas, although experimentation in this field is extremely difficult. "Cash On Delivery" is one of these new brilliant ideas that might improve development aid.

Traditional development aid worked this way: a donor country puts a pile of money on the table and gives it to a recipient country with a goal to fulfill. The donor usually imposes how the money has to be expended and how the goals should be accomplished, often ignoring the particular circumstances of the recipient country. The donor country will also be questioning local strategies and closely monitoring the program, even when this means extra paperwork and methodologies to which recipient country's bureaucracies are not familiar with, and may consequently cause delays and obstructions. Problems do not end here. Once the money is given, it is very difficult to keep track of it, and too many times results are simply impossible to verify. The only penalty that the recipient country might face in case of misuse is a cut of future aid.

Cash On Delivery works differently: it focuses on the outcomes of aid better than the inputs. Both countries would sing a public long term agreement. In this agreement there will be an initial payment and an easily measurable goal (like children finnishing school or vaccines distributed). The recipient country will receive a certain amount of money for each outcome or result up to the goal, and a bonus for every result above the objectives as an incentive. The results will have to be accurately measured by the recipient country, and verified by independent auditors. Technical or material aid can be lent if both countries agree.

This model has several advantages: first of all, the agreement is open and public, so populations of both countries know what to expect and demand from their respective governments. As outcomes are necessary to keep receiving funding, recipient countries are encouraged to accomplish the goals on time, and donor governments can give a much better view of the whereabouts of their taxpayer's money. The hands-off approach means that the recipient country will choose, design, implement, manage and take responsibility of its own strategies and won't be disturbed by external influences. In sum, this will result in more accountability, transparency, efficiency and responsibility with money and at the same time more flexibility and freedom of action.

This model is already being tested by the NGO GAVI in several developing countries, and will be soon put down to practice in big numbers by UK's overseas aid agency. This new approach to foreign aid needs high management skills, well trained personnel and long term commitment, but it can do a lot of good if successful.

- David Nebreda

SOURCE: The New York Times