New CGD Report: Results-Based Payments Reduce the Real Costs of Corruption in Foreign Aid

Tuesday, January 14, 2014

A new report from the Center for Global Development presents an idea for reducing funds lost to corruption in aid: pay for results. A summary of the report explains the idea:
Why don’t foreign aid programs simply pay recipients for attaining agreed upon results? The idea has been around for decades, but it continues to meet resistance. Some donors worry that programs that pay for outputs or outcomes would not be able to control how funds are used and would thus be vulnerable to corruption. This brief explains why results-based payment systems are actually likely to be less vulnerable to corruption than traditional input-tracking approaches by making the effects of corruption—the failure of programs to deliver results—more visible.
The relatively short report is available as a PDF download, or you can read the full text online. It makes a decent argument for reducing graft; in fact, similar suggestions have been made to try to trim the US defense budget by only paying contractors for finished products. The downside to this approach is that it would probably deter countries and donors from less proven or more experimental aid projects; though some would not necessarily think this is a bad thing, others who see value in embracing and learning from failure will point out that it might stifle innovation. I also think that this runs against the recent push for greater country ownership of health and development programs.

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