|
|
 |
Direct Aid: a dollar a day keeps the donor away
23 January 2007
The objective of governments, donors and international agencies in sub-Saharan Africa is to reduce poverty. Yet, after a number of decades, they have been remarkably unsuccessful. Poverty rates in most sub-Saharan African countries have remained static - for example, the percentage of the population living in poverty in Malawi has remained stubbornly above 50%. Only in countries starting from a very low base, usually as a result of war or civil upheaval, have any significant improvements been recorded - for example in Mozambique or Tanzania. And offset against that are those countries that have deteriorated dramatically, usually for the same reasons - the obvious example is Zimbabwe.
This failure is not for want of money. Vast sums of aid have been poured into the region: the Horn of Africa alone has received far more in foreign support than was pumped into Europe under the entire post-War Marshall Plan. But clearly this money is not reaching its target: the poorest. Instead, a number of other groups have grown rich on aid: the donors and international agencies themselves with their bloated bureaucracies; recipient government departments and politicians; international and national non-government organisations; and the vast phalanx of consultants, advisers, researchers who guide the process.
The reason for this failure is that all current models of aid are indirect: funds do not go straight to the intended recipients, but are rather channelled through a host of intermediaries. Donors and aid agencies run substantial development programmes and projects; debt relief is returned to the government coffers; budget support is used in support of economic growth in the largely illusory hope of some eventual "trickle-down" effect. The intermediaries grow fat: programme and project staff (and not just the corrupt ones amongst them); consultants (whether good or bad); governments (no-one can pretend that there has not been a dramatic increase in the number of government vehicles or computers). But the poor remain poor.
Why can the money that is destined for the poor not just be given direct to them? How many of those of us involved in the aid business (whether as donors, governments, NGOs or consultants) have not sometimes asked ourselves whether the aid we control would not be better just given away. Just as one out of thousands of possible examples, the author of this paper was once involved in a five-year, $10 million project to increase the macadamia production of 2,500 smallholder farmers. Even if this had been successful (which it wasn't), it would still have represented an investment of $4,000 per beneficiary household - enough to have given each household more than $50 per month for five years. Can we really pretend that they would not have made more judicious use of the money to extricate themselves from poverty than having macadamia trees foisted upon them?
So why not learn from this, and just give aid in the form of cash transfers to the poorest households? Is the reason for their poverty perhaps simply that they do not have enough money? In southern Africa, for example, many such households survive on a dollar or two a day. If they were given an extra dollar a day, they could both improve their consumption and increase their investment - in their own future and that of their dependents. After all, as Winston Churchill said, when defending the UK's old age pension exactly one hundred years ago: "Five shillings is not much...unless you haven't got it".
Conventional wisdom says that this approach is impossible, ostensibly for three main reasons: the first is the paternalistic assumption that 'we' know better than the poor how to extract them from poverty (even though 'we' often come from different cultures); the second is the conviction that it is impractical, or dangerous, or too expensive to deliver such small amounts of cash to so many people; and the third is the myth that such an approach is unaffordable in developing countries.
Yet we are now at a point where these three arguments are demonstrably breaking down, and where we finally have the option of making a paradigm shift in aid delivery, from indirect aid to direct aid.
First, there is growing evidence from around the globe that poor people do know what is best for them, that they can spend money wisely, and that they can extract themselves from poverty. This evidence comes from the huge success of micro-credit schemes (the best known is Grameen in Bangladesh, but there are many others), and from the growing understanding of the benefits of giving cash transfers as a component of social protection programmes (the best examples are in Latin America, but again there are others, including in Africa). Evaluations of such initiatives show that poor people spend their money sensibly (what a surprise!): individual households are better placed than donors or governments to find the optimum balance between their immediate needs on the one hand, and investments for their - and their children's - future on the other.
Secondly, new information and communications technologies (ICTs) are breaking down the barriers to delivering small amounts of cash (or, more correctly, credit) to large numbers of people. This is manifesting itself in a number of areas: for example in fingerprint recognition, smartcards, cellphones and 3G networks, which together overcome the twin problems of beneficiary identification and secure transfers to remote areas. On the one hand, smartcard technology provides the means to store incontrovertible biometric identifiers (such a fingerprint data) together with a range of financial accounts (or 'wallets') for individual cash entitlements. These wallets can be topped up remotely at regular intervals, for example to pay welfare benefits or old age pensions, or to transfer rights to medical treatments such as ARVs. On the other hand, improved communications and innovative approaches are making 'branchless banking' a reality, allowing the delivery of basic financial services to even the remotest of rural areas.
In South Africa, for example, social pensions are already being paid through smartcards. Each recipient has a smartcard with his or her fingerprints recorded. Each month, the pension is transferred electronically to the card account, and the beneficiary can access the funds either through conventional banking infrastructure, or through mobile ATMs, or through simple point-of-sale terminals in retail shops - even street-traders and village merchants are now clubbing together to share the use of such terminals, further extending the reach of what are essentially banking agents. The system is highly secure (because of the biometric identification), hugely flexible (because recipients can spend or withdraw money when and where they desire), and much safer than conventional cash delivery. It also provides benefits and incentive to the retailers involved, which encourages them to offer a wider range of financial services, which in turn stimulates the local economy and creates a virtuous spiral of development. Smartcards themselves also offer a much wider range of potential applications within a country - from national identity card to voter registration, and from medical history to tax records. Where these can be leveraged, the incremental cost of using them for making cash transfers to the poorest is negligible.
Diehards protest that such technologies are inappropriate in Africa: how can Africa expect to cope with a 'cashless' society, when it doesn't even have the infrastructure for proper cash banking? But think of telephony, and it is clear that the opposite is true: the technology of mobile telephony has boomed in Africa, precisely because the infrastructure for fixed-line telephony was so inadequate. As a result, mobile telephones are the very first technology in history where there are more now being used in the 'developing' world than in the 'developed' world. The same can be true of cashless financial systems. Bank branches and post offices are these days as redundant to financial systems as copper wire and telegraph poles to telephony.
Third, direct aid is affordable. Just a couple of figures suffice to demonstrate this. Malawi already spends in excess of $170 million each year on a patchwork of ineffectual, poorly coordinated, and overlapping social protection schemes - which would be enough to pay every single household in the whole country $5 per month. And Nigeria, according to its own Economic & Financial Crimes Commission, has lost more that $380 billion through waste and corruption since independence in 1960. That would be enough to have paid for a modest monthly transfer to the poorest 50% of the population throughout the whole of sub-Saharan Africa for the entire period! And an effective social transfer scheme will become more, rather than less, affordable over time as it succeeds in promoting economic growth and reducing the number of beneficiaries requiring support.
International donors have an obligation to be supporting such initiatives. Historically, care of the poorest was a matter for the immediate community; as societies developed, the obligation for caring for the poor fell increasingly to local agencies, such as parishes; later still, with the emergence of nation-states, national governments began to assume responsibility for their poorest citizens. Now, with globalisation and the increasing impact of global issues such as trade and climate change, protection of the poorest members of society should be treated as a global responsibility. Encouragingly, this is increasingly being recognised. As the Parliamentary Under-Secretary of State expressed it, on behalf of DFID, "Putting cash into the hands of poor families sounds like such a simple idea - but it is one with huge transforming power. We want to play our part in making it a reality".
What is more, there is likely to be a dramatic level of popular support in developed countries for providing direct aid. Individuals are naturally motivated to give to the poor...but only when they are confident of direct results. Witness the generosity of the public response to the Ethiopian famines of the 1980s, and to the Asian tsunami in 2005. The general public only becomes cynical when they see 'their' money being wasted - each media report of a corrupt government official stashing millions in a Swiss bank account, of another donor-funded white elephant, of development consultants travelling business class and staying in lavish hotels, of international NGOs spending half their budget on advertising...is a nail in the coffin of public support for the aid 'business'. If they see their tax money is going direct to those that need it most, they will be hugely supportive.
Direct aid to the poorest members of global society is now technically feasible. It is cheap and efficient. It has been shown to be highly effective in alleviating poverty. It offers significant spin-off benefits. And it is a moral obligation in our globalised world. What are we waiting for?
Image Credit: NADO
|
|
|
|
|
