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A woman uses a hand pump to collect drinking water on Ghoramara Island, India, September  22, 2018. Picture taken on September 22, 2018. REUTERS/Rupak De Chowdhuri - RC138069BE00
Future Development

The future of aid: How the global development business is evolving

The Chief Economist of the World Bank, Pinelopi Goldberg, recently called out the need for a “new vision in development.”

We may not yet have a clear new vision, but thanks to three recent publications, we know some of the components. Raj Kumar’s “The Business of Changing the World” contrasts “new aid” with “old aid” and is built on examples of new modes of finance and innovative implementation. Last month, Kristin Lord and I released “Global Development Disrupted,” which provides highlights from a survey of 94 development leaders on how they see the development landscape changing and presents a range of perspectives from the global political environment to how development activities are funded and implemented. Late in 2018, Ann Mei Chang published “Lean Impact,” which draws from interviews with over 200 organizations as well as her careers in the tech industry, government, and civil society to drill down into how both funders and NGOs (domestic and international) can be more impactful—it is a how-to guide.

Each publication takes a different tack, but they all present how the approach to development is, or should be, advancing. Viewed together, they create insights into where the field may be headed.

PROLIFERATION OF ACTORS

A striking feature that is already disrupting the development landscape is the expansion in the number and diversity of development actors. This was a prime finding in the “Global Development Disrupted” survey, with respondents noting that middle-income countries are increasingly taking control of their own development; the expansion of donor governments to China, the other BRIC countries, and Middle Eastern countries; growth in number of foundations and high-wealth philanthropists; and the entry of corporations into the development arena. Raj Kumar characterizes this phenomenon as a change in the marketplace, a move away from a few dominant large foreign aid donors and foundations to “more open competition,” producing greater diversity in approaches.

FINANCING DEVELOPMENT

The reports deal with financing development differently and together show the traditional grant model being challenged.

The number one response to the “Global Development Disrupted” survey was on funding. No one is happy with the dominant model of short-term projects and siloed funding. Respondents are concerned that donor funding is stagnating and the uncertainty of whether funding will continue to be available for development organizations. They are seeking ways to diversify sources of revenues, with interest and experimentation in innovative types of finance, such as earned income, impact bonds, impact investing, blended finance, and social enterprises, but frustrated with how to access that finance. Some see cash directly to beneficiaries as a promising approach. The respondents are encouraged by the expansion of resources within countries, with the growth of domestic resource mobilization (DRM) and private finance, and concerned by the lack of funding for the poorest and fragile countries. Foundations are searching for ways to leverage their resources and a few are seeking to reduce the burden on recipients by applying identical terms and reporting requirements.

Ann Mei approaches funding from the perspective of what works and what does not work. She views grant finance as inadequate to the magnitude of the task and as unsustainable for most development challenges. Even a large grant can carry an activity for only so long and, “without a long-term plan for growth, may only be staving off the day of reckoning.” She suggests the fundamental change to the development model needs to come from funders. The rigid funding mechanisms that characterize most grant funding are at cross-purposes with the agility and flexibility that is required for activities to achieve their objective. She calls on funders to take greater risk. She argues that micromanagement by funders does not work and they should stop demanding “predefined plans … that slavishly specify the expected activities.” Grant requirements should be less prescriptive and “organizations should be held accountable for their results, not how they get there.” She sees many of the most promising solutions being financed with a mix of philanthropic and investment dollars—such as a for-profit social enterprise that has grant funding to “validate and de-risk a business model.”

Similarly, Raj says funders should loosen the reins to allow agencies to take risks. They need to trust recipients, leave to them the details of implementation, and hold them accountable for achieving results. He specifically calls on government donors to innovate their finance mechanisms by moving procurement more to a “market based on results.” He recommends they increase funding for pay-for-performance, tiered innovation grants, impact investment, and blended finance. He notes funders are trying to leverage resources through supporting the often-difficult processes of partnering and collaboration among organizations

He says pay-for-performance, such as provided by development impact bonds, expands the sources of funding and gives funders a mechanism to ensure they are paying for results. He sees crowdfunding, as pioneered by GiveDirectly and GoFundMe, as a form of retail funding that engages millions of individuals—ordinary funders—in the process of development and in a way that puts them directly into contact with the customer. He anticipates a “wave of billionaire philanthropy” that must be required to comply with good development principles and abandon anonymity for transparent giving.

DESIGN/IMPLEMENTING DEVELOPMENT ACTIVITIES

A principal topic in all three publications is a collection of ideas that is best characterized as how development activities are structured and implemented.

Localization

Local ownership of development is viewed as a significant, positive trend by the respondents in the “Global Disrupted Development” survey, but one that puts into question the relevance of the Western model of development implementers. Raj Kumar characterizes this shift as “old aid” driven by donors—“decisions made by people in large institutions at great remove from people they sought to help”—and “new aid” driven at the local level. Ann Mei gives the rationale for localization as “proximity is crucial to understanding problems, integrating customers through the validation process.” Similarly, Raj calls for treating the poor as customers and partners.

Results—adaptation

There is a strong trend of funders demanding, and implementing organizations pursuing, evidenced-based programming and results. The flexibility to adapt programs and projects to frequently changing on-the-ground dynamics is seen as critical to the effectiveness of assistance in achieving results.

Ann Mei puts it in terms of iterative learning, grounded in the ability to adjust programming rather than following an intricate pre-determined plan. She notes that funding organizations frequently require “detailed proposals that imply more confidence than is warranted.” She says grants should be less prescriptive and identifies feedback loops as a critical element to adaptability.

The respondents to the “Global Development Disrupted” survey view these trends in terms of the importance of local ownership and as positive in making development more innovative and effective. They see the progress in more rigorous monitoring and evaluation and measuring impact—with acknowledgement that current measurement is inadequate due to lack of agreement on what and how to measure—as ways that contribute to development efforts creating greater impact. Ann Mei calls on organizations to be held accountable for results, not how they got there.

Raj puts it in terms of old-new aid. Old aid is funding good intentions and measuring inputs; new aid is funding results and measuring return on investment. He suggests the “aid industry” should become the “impact industry.”

Siloed projects—scale

The related topics of scale and siloed projects are conundrums raised in all three studies. The widespread perspective is that the development field is populated by thousands of small-to-mid-sized projects that consume the valuable time of development experts and host country officials, produce nice outputs and sometimes results, but seldom have real impact on development. Raj argues for a shift from a project to a systems approach. Ann Mei advises organizations to have a big vision with a pathway to scale to the size of the need, but start with quick, small experimentation to reach proof of concept. “Global Development Disrupted” respondents see these issues in terms of the short-term time horizon of projects and siloed funding imposing barriers to scale and impact. They call for moving funding beyond specific projects, which tend to focus on symptoms rather than root causes, to a more systems approach in order to achieve broader development impact.

Technology

Technology is seen as a game changer. The 94 development leaders express excitement about the enhanced speed and effectiveness that technology can bring to development efforts. They say digitalization helps drive efficiency and effectiveness. They are excited about the ability of technology to facilitate communications with the poor and provide them access to information. But they see technology as outpacing their ability to adapt it to development activities. Where there is great divergence among the 94 respondents is in which technologies to harness. They bemoan that funders do not provide the finance necessary for them to develop the capacity to take advantage of emerging technology.

Data

Ann Mei notes that technology brings speed, accuracy, and flexibility in collecting and using data digitally. She cautions against the misuse of data with the contrast of vanity metrics that report absolute numbers (generally of outputs or activities) versus innovation metrics based on unit measures for value, growth, and impact.

The “Global Development Disrupted” respondents are enthused about data and the increased rigor and evidence it brings. They note that feedback from beneficiaries allows for greater and quicker accountability. They bemoan that the field has yet to figure out how to organize and best use data. They note that what is missing is data on long-term impact and caution against over-reliance on “simple metrics to assess progress.”

Raj also talks about the importance of data. He notes that most of today’s data is on inputs, but what is required is information on return on investment—results. He calls on organizations to be transparent in data to avoid duplication and to share learning. He particularly notes that real-time data facilitates course correction to achieve results.

He says funders should provide implementing partners with core grants to invest in data and evidence-gathering capabilities. He says that corporations need data to measure their environmental, social, and governance impact and as a standard metric, such as provided by the Global Reporting Initiative, but sees a universal standard metric as a “holy grail” given the difficulty in securing that treasure. The value of transparent data on impact is it will allow evaluation of the contribution of companies on social goods.

A PICTURE OF THE FUTURE OF AID

This blog is too brief to capture all the richness and fresh ideas in these three publications. Each deals with development with both how it is approached today and how it can be improved. What emerges are the components of how development efforts can be most effective:

Funders:

  • Continue the trend of funding and rewarding results, not good intentions.
  • Provide more funding for organizational capabilities, particularly in harnessing technology and data.
  • Base funding on an organization’s track record and ambitious objectives that will impact development rather than on minutely detailed plans.
  • Allow adaptability and iteration through ongoing feedback.
  • Leverage resources through facilitating collaboration and partnering.
  • Require measurement of impact and results, not outputs.

Implementing organizations:

  • Raise the vision beyond siloed projects to objectives that can reach scale with a plan that can be sustainable and impact development.
  • Ground activities on solid evidence and experience and iterative testing.
  • Integrate into operational plans ongoing feedback and evaluation for use in iterative program adjustment and learning.
  • Advance localization of operations.
  • Provide transparent data on funding, operations, and results.
  • Measure and report on impact.

The best way to wrap up these concepts is in the words of the authors:

Raj Kumar—”The Business of Changing the World”

“The dream of a new aid industry that operates like an open market and drives a virtuous cycle of more funding chasing better solution is far from assured. … Foreign aid agencies and foundations urgently need to open up, collaborate, and innovate if they are to be effective…they need to find a way to tap into the millions of people around the world working in all industries and professions who want to help. If we can crowdsource innovative ideas and solutions and crowdfund the necessary investment…”

Ann Mei Chang—”Lean Impact”

“We are relying on nineteenth-century institutions using twentieth-century tools to address twenty-first-century problems. It’s time for us to stop acquiescing to the old rules of the game and create new ones….There is no one right path to Lean Impact. What matters is setting our sights high, learning as fast as we can, and finding every possible way to maximize value, growth, and impact.”

Lord and Ingram—”Global Development Disrupted”

“Leaders report excitement about new actors in development, new partners, new innovations, new applications of technology and data, new models of development finance, new revenue streams, and the potential of all these trends to improve development outcomes and, in the process, people’s lives.”

This blog was first launched in September 2013 by the World Bank in an effort to hold governments more accountable to poor people and offer solutions to the most prominent development challenges. Continuing this goal, Future Development was re-launched in January 2015 at brookings.edu.

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