Responses to this Week’s Pre-Competition Question on Aid Delivery

ideas4action@wharton.upenn.edu Text

Thank you for emailing in your responses to “what aid delivery models do you think are poised to make an outsized impact in the next 5 years”! We’d like to share a couple of them with you to help you think about possible topics to address when the competition question is released next month.
 
Feel free to comment on this post or send in additional thoughts to ideasforaction2015@gmail.com
 
Response from Kat Muller, Monitor Deloitte, New York City (USA)
Outcomes-based aid is somewhat of a hot topic right now, but in my opinion, certainly qualifies as innovative and as having the potential to make an outsized impact in the development space. I suppose it’s more about development financing than aid delivery, but I’m going with it.
Outcomes-based aid is essentially any arrangement where payment is dependent on or linked to the delivery of pre-defined outcomes. The approach is also called “cash on delivery” aid or “payment for success;” social impact bonds are a well-known example. Essentially, this approach is structured to offer several benefits: reducing risk for public funders while increasing accountability; providing further investment opportunities to socially-minded investors; allowing service providers to decide how to seek results (as opposed to traditional aid which is often provided with strict programmatic direction from often far-away donors); and providing incentive and funding for preventive interventions to be implemented, whereas public budgets for preventive interventions might be cut in favor of aid directed at already-ailing populations.
The concept is certainly exciting, and excitement around the concept may just be renewed after the recent (Aug 2014) announcement that the first results of the first-ever social impact bond, directed at reducing recidivism in Peterborough Prison in the UK, imply program success (8.5% reduction in recidivism compared to a control group) and a pending positive return for investors.
Like any approach, outcomes-based aid is not without its challenges. It has seen relatively slow pick-up, for a number of reasons: gathering a group of stakeholders interested in the relatively complex arrangement is difficult; agreeing upon and measuring outcomes, not to mention determining causation of outcomes, is difficult; finding investors willing to take on the risk of such arrangements is difficult; and, as implicitly acknowledged by the purpose of the Ideas for Action competition, the people in charge often like to stick to what they know. That said, I’m hopeful that given the well-documented growing interest in impact investing, the work being done by DFIs and foundations to support the aid ecosystem, and the success of the first social impact bond, that the outcomes-based approach will be highly impactful in the coming decade.
 
Response from Will Docimo, Deloitte, Washington DC (USA)
An issue facing development is the lack of private investment. One potential would be public/private partnerships funded by the Bank. This venture would allow for private companies to train and employ local talent for local needs. With funds from the Bank, investment risk would be diminished and allow for new technologies to be utilized by within the community. An example of this would be mHealth.