Development institutions should adapt their approach and measures of success to deliver better impact in a fast changing environment
Now that the UK has reached the goal of spending 0.7% of GDP on development assistance, the focus of the aid debate is moving away from the quantity of aid spending to the quality. How can we make the largest impact with what is still a relatively small amount of money compared to the other funds available in a recipient country?
The quality of our aid intervention is all the more important now that the quantity of resources available from other sources is so much larger than it used to be. Not only are developing countries succeeding in gaining access to more non-aid funds, but the quantity of private investment into the developing world has also expanded exponentially.
Pure resource transfer – giving developing countries money to buy goods, or buying goods for them by building schools or supplying school text-books – is less and less attractive, because each £1 of our assistance buys just £1 of impact, minus transaction costs. It is far better to leverage our funds so that each £1 results in several pounds, or even thousands of pounds worth of impact.
Achieving significant economic or governance change is often the most effective way to maximise impact. For example, reducing trade barriers can transform the economic opportunities of millions. So can enabling poor people to gain proper title to the land they own, and thus security against which they can borrow to start or expand a business. In countries where lack of infrastructure is a major economic constraint, overcoming the barriers to infrastructure investment can unleash dramatic economic growth.
Helping to channel other resources more effectively can also have a major impact. Assistance with improving tax administration can result in many hundreds of millions of additional pounds flowing into government coffers, enabling public services to be greatly expanded. Establishing a transparent framework for extractives sector payments to governments should lead to billions of pounds being used to benefit public finances and communities, rather than being siphoned off into offshore bank accounts.
But it is the detail of how these changes are made that really matters. As a single example, land registration should be implemented such that women can register their land themselves, rather than in the name of their husband or brother. Providing technical assistance to develop strong regulatory frameworks that build on years of experience in other countries is invaluable. It isn't sexy, but it can increase the effect of aid many fold, helping millions more people in the process.
While the developing world is changing rapidly, traditional institutions of development—whether private sector, NGOs, bilaterals or multilaterals—represent a huge global business of vested interests. That needs to be more openly recognised. Few have it in their interest to wind down. Most measure their success by their growth in size and the budgets they manage, as much as their development impact. Jobs and pensions are legitimate self-interests and priorities, but they can contribute to an inertia; an inability to respond in a fast-changing world. As economies grow and investments from new actors increase, this new developing world has greater capacity and capability as well as access to sources of finance that dwarf aid budgets. They are correctly and increasingly intolerant of traditional development approaches and demand ever more effective outcomes.
The question is can traditional development institutions overcome their institutional inertia and be nimble enough to adapt so that they remain responsive, technically excellent and relevant enough for their clients and the tax-payer who funds them?
Charles Duff, Julian Lob-Levyt and Peter Young represent international development companies. Duff is the regional director for Europe, the Middle East and Africa for GRM International. Lob-Levyt is the senior vice president, International with DAI. Young is a director of Adam Smith International.
Julian Lob-Levyt and Peter Young will be speaking at a Guardian fringe meeting at Labour party conference on Tuesday 24 September on the challenge of increasing impact in a fast changing international development environment. The fringe is sponsored by DAI, GRM and Adam Smith International
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