The Positives of Private Aid

The landscape of foreign aid is changing as global philanthropy revamps the relationship between the world’s rich and poor. The rapid growth of private aid — aid provided by foundations, corporations, non-governmental organizations, and individuals –raises a host of questions about the role of private actors in development assistance. How does private aid work? What motivates private donors? How do funding strategies last? A recent roundtable discussion hosted by Society for International Development (SID) focused on delving on such pertinent questions.

Brookings expert and Georgetown Professor, Dr. Raj Desai mentioned  his paper, The California Consensus, to discuss the emergence of private aid and its potential to be more effective  than government aid. The most believed reasons why private aid fared better than government aid were:

–         ability to bypass public sectors in recipient countries;

–         less leakage (agency and transparency cost);

–         relatively smaller overhead and administrative costs;

–         shield from geo-politics of aid and lending and;

–         better ability to allocate aid on the basis of need.

Children in Ghana supported through Global Giving

Global Giving and Kiva were cited to illustrate the innovations of private aid by using online philanthropy.  While the former matches community projects in developing countries to individual donors, the later allows individual lenders the opportunity to lend to hand-picked microfinance institutions at zero percent interest. Interestingly, an analysis of the motivation of private aid revealed that private giving is not based on country specific factors like poverty, institutions, ODA levels, country risks, but rather on the sector, quality of the field, size, duration and gender of participants in the project. (read report here)

As was pointed out in the discussion, private aid is not without problems: a general lack of  accountability and a low level of engagement at policy level remain. Nevertheless, CGP’s Carol Adelman noted that effects on the output level of private aid are not to be overlooked. Private actors through  cause related marketing, e-philanthropy, public-private partnerships, and remittances are reshaping the landscape of global private assistance. Shedding light on the role of US foundations as the subset of philanthropy, Rob Buchanan, President of the El-Hibiri Charitable Foundation, mentioned that the rate of giving by US foundations for international development purposes has increased from 5% in 1982 to 24% in 2008. Foundations can mobilize quickly and take on greater risk than  official aid, making them a prominent player in international development.

Though private aid has emerged bypassing the traditional channels, there is not extensive evidence to indicate that it produces “better” results. Coordination and planning are becoming a challenge as a raft of new players have emerged from the private sector. The impact of private aid is still to be seen, or rather measured, and more research is always needed to better understand what works and what doesn’t in creating sustainable change whether through public or private channels.

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