Can aid money ever deliver intended results perfectly? In an attempt to address this question, Nancy Birdsall and William D. Savedoff coined the term Cash on Delivery Aid (COD Aid). The basic idea behind the COD Aid is that donors make a binding commitment to developing country governments to provide aid according to the outputs/results that the government delivers.
The approach, as Bill Easterly mentioned, would change aid in two welcome directions: emphasizing outcomes rather than inputs and giving recipient governments freedom to choose how to reach their goals. From a donor’s perspective, Result Based Aid will free aid from many political pressures. From the recipient developing government’s perspective, it will increase access to funds without the attendant costs of conditionality and foreign interference in domestic policy. So, does this mean Result Based Aid will be more effective?
Nancy Bridsall in her latest blog post argued that Result Based Aid is definitely more effective than traditional aid. She argues that the approach will force aid- recipient governments to deal aggressively with bureaucratic constraints to achieve results and thus pave new initiatives and interventions. She further notes that “the governments do not have lock themselves into a 5-year contract to pay for incremental progress against the agreed result”.
It is evident from past development efforts that traditional aid with its high transaction costs focuses more on donor disbursements and verifying expenditures than it does on achieving results. Though, donor countries have committed to major increases in development assistance, whether these funds are effective remains doubtful. The growing focus in the aid world on results-based budget frameworks, on donors’ growing investments in evaluation. and the creation of the International Initiative for Impact Evaluation (aka 3ie) suggests that results based aid could pave a new way towards effective development.