Cash on Delivery Aid:
Innovating to Improve Aid Effectiveness
Foreign aid often works,
but it is just as often
criticized for failing to
achieve real results.
This brief introduces
an innovative approach
designed to address major
critiques of traditional aid:
a new funding model called
Cash on Delivery aid (CoD).
CoD focuses on results,
which gives recipients
more ownership over
achieving development
outcomes in their
countries and requires
funders to pay only once
progress towards those
outcomes is demonstrated.
The brief describes what
CoD is, how CoD is aligned
with Canadian priorities,
and why piloting CoD
is a unique, practical
opportunity for Canada to
extend its global influence
and lead innovation to
improve aid effectiveness.
Briefing Paper
As a leader in international development,
Canada is not only dedicated to
improving the lives of people living in
poverty, but is also committed to pushing
boundaries in search of better and more
effective ways to do so. In the last year,
the Canadian International Development
Agency (CIDA) has demonstrated this
by signing on to the International Aid
Transparency Initiative (IATI), launching
the Aid Effectiveness Agenda, and ranking
first for fulfilling commitments made
at international summits among all G8
nations.
But Canada allocates almost $5 billion
per year to foreign aid and, despite these
steps and successes, we still don’t know
if we’re achieving a $5 billion impact. In
today’s global fiscal reality, maximizing
the value of our aid is more important
than ever.
One solution designed to do just that is
Cash on Delivery aid: a straightforward,
results-based funding approach. Cash
on Delivery (CoD) is concerned first and
foremost with concrete results. This
means Canada only provides funding
once progress towards mutually agreed
upon results is demonstrated; if results
aren’t achieved, Canada doesn’t pay.
Key Features of Cash on Delivery Aid
1. Pays for outcomes, not inputs
With traditional aid, the funder (eg. CIDA) pays up-front. Recipients
often spend huge amounts of time creating detailed expenditure
reports, often at the expense of effectively evaluating project results.
With CoD, the funder only pays when progress towards mutually
agreed-upon outcomes (eg. x percent of children surviving to age 5)
has been demonstrated. This decreases administrative burdens and
helps create incentive to collect reliable performance information.
2. Reduces bureaucracy via hands-off implementation
With traditional aid, the funder is very involved in planning and
implementing development initiatives. With CoD, the recipient
government chooses the strategy for achieving development
outcomes. This gives recipients the freedom to employ the most
effective and efficient ways to deliver those outcomes in their
country, whether contracting an international company, engaging an
NGO, or doing it themselves. This reinforces local ownership of and
responsibility for development programs, and considerably reduces
administrative costs.
3. Requires independent, third party verification
CoD requires that an independent third party (ie. neither funder nor
recipient) evaluate progress toward the agreed-upon outcomes, which
is critical to the credibility of the CoD agreement.
4. Increases transparency through public dissemination
The content of the CoD aid contract, progress achieved, and payments
made must be made transparently and publicly available. This will
help ensure that all parties fulfill their commitments, and strengthen
the ability of the public and civil society to hold government
accountable.
5. Complements other aid programs
CoD is designed to complement, not replace, other aid programs.
CoD should be introduced as an addition to current aid flows without
disrupting ongoing programs, so that CoD’s effectiveness can be
assessed relative to other aid mechanisms.
In Line with Canada’s Priorities
CIDA’s Aid Effectiveness Agenda
commits to delivering results.
Cash on Delivery maximizes
the value of Canada’s aid, by
only delivering funding once the
partner country demonstrates
progress toward mutually agreedupon results. Canada makes things
possible; recipient countries make
them happen. This also provides
more and better evidence of how
Canada’s focused aid efforts are
making a difference.
CIDA’s Aid Effectiveness Agenda
commits to strengthening local
leadership.
Cash on Delivery contributes to
enhanced global security and the
national interest of Canadians, by
facilitating the strengthening and
stabilization of local leadership,
political institutions, and civil
society. It places the responsibility
for program management and
delivery in the hands of recipient
countries.
CIDA’s Aid Effectiveness
Agenda commits to improving
efficiency.
Cash on Delivery decreases
administrative burdens on both
Canada and our partner countries,
which in turn increases partners’
freedom and responsibility to
manage and deliver on their
development commitments.
CIDA’s Aid Effectiveness
Agenda commits to enhancing
accountability.
Cash on Delivery requires that
all results be made public,
which will better equip CIDA,
Canadian citizens, partner country
governments, and partner country
citizens to understand how CIDA’s
aid is being spent, and hold one
another accountable to their
commitments. It’s a logical next
step in CIDA’s global leadership on
aid transparency.
Other Cash on Delivery Pilots
At this time, the UK Department for
International Development (DFID)
and the Government of Ethiopia are
the first and only aid organizations
that have designed and negotiated
an aid program based on the
Cash on Delivery aid model. DFID
will make grant payments to the
education ministry for the increase
in the number of students above
a baseline that sits for or passes
the national grade 10 exam. There
will be additional payments for
girl graduates compared to boys.
A maximum of £10 million will be
disbursed each year from 2012 to
2014.
Canada’s Opportunity
Despite its successes, foreign aid is
frequently critiqued as ineffective.
CoD offers a potential solution
to many of these critiques, a
solution that is distinguished by its
simplicity. By giving recipients full
responsibility and authority over
funds paid in proportion to verified
measures of progress, there is
a clear incentive for political
leaders to care about measuring
their country’s progress against
clear goals. Since funds are only
transferred once results have been
demonstrated, Canadian citizens
can trust that their tax dollars are
being used effectively.
We do not pretend that CoD is
a panacea for problems in the
aid system. However, we believe
CoD holds enough promise to
be worth trying, adapting, and
assessing. Piloting CoD is a unique
opportunity for CIDA to affirm the
values that have been hallmarks
of Canadian development policy
for decades, and take them a step
further.
Canada can—and should—continue to be a leader in innovation to improve aid effectiveness.
CIDA can make this happen by piloting Cash on Delivery aid.
Engineers Without Borders Canada is a movement of over 50,000 professional engineers,
students, overseas volunteer staff, and supporters across Canada. We believe that poverty
is the product of broken systems that prevent people form realizing their full potential.
Beating poverty means making those systems work. EWB is working to do exactly that.
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