When I am in an area of relative poverty compared to my home country, I am sometimes aware that I am paying over the local market price or being in some way ‘fiddled’. I have a souvenir from Koi Chang hanging in my kitchen that reminds me how well a beach trader ran rings round this MBA. I liked his product better than the one I had bought only minutes earlier and wanted to swap. I ended up giving him my first purchase and some money in exchange for one of his products. He walked down the beach with exactly the same number of items to sell and some spare cash.
I was embarrassed by his superior skills and mocked by my wife. But the relative value of my drop in holiday pocket money was dwarfed by his increased earnings for the day in real terms. My money was entering the local economy and probably more useful there in than back in the UK.
In the development sector, we are very sensitive about corruption and the need to verify that our aid has gone to the right people and been spent on the specified inputs. If the UK government, for example, are to persuade the media to let them spend 0.7% of income on development, they need to win the argument on fiduciary risk (see this Telegraph attack). And none of us want to see food or medical supplies siphoned off from charitable donations to be sold commercially.
I attended an event at Christian Aid where a few people, including an economist from the UK DFID spoke about value for money. My attention was grabbed by Transparency International and I was grateful to talk to their speaker afterwards. He told us about a very simple project to increase the percentage of textbooks reaching schools and reaching them in good condition. Young people inspected the books at the printers and binders and rejected poor quality items. Others travelled in the truck with the books to ensure that they were delivered to the school and were counted in. These are simple, small actions that together resulted in 100% efficiency in delivery of that valuable resource.
I applaud the work of Transparency International and especially the young Ghanins who stood up against corruption. But I wonder what happened to the books that went missing before. They didn’t come back to the UK. Did one end up in the hands of the truck drivers’ daughter? Did a box end up in a private school? Are either of those outcomes tragedies? I know I am skating on thin ice here, and I not supporting corruption or theft. Of course, children in the target school still want and deserve all of their books and should not be cheated of them.
But I am trying to illustrate the point that we already get leakage in development and it is not all going to the Mafia. Sometimes it is through corruption. But the biggest source of leakage is administration.
The most pessimistic estimate has two cents in every aid dollar reaching the beneficiary. Project and administration costs strip off about 10-20% each time another layer is introduced, e.g. the DFID contract a fund manager who contracts a UK based INGO who contracts an in-country programme office who in turn contracts local partners.
Fiduciary risk is high, with capacity problems in-country stalling project start-up and rollout, funds being misdirected or misappropriated and items being damaged before reaching the beneficiary.
Many of the micro-actions amenable to promotion via mobile phones require no intermediary at all except to
- produce the media that stimulates reaction and
- monitor and track performance.
It is not always quite so simple. Experience to date has shown that partnerships are sometimes needed, for example in providing eye tests or glasses. The micro-action model does, however greatly reduce complexity and risk compared to many other attempted interventions. It seems to be very efficient way of transferring resources from the rich to poor.
Suppose some enterprising young man starts using mobile phone based micro-actions to increase his income. He might be distorting the aims of my development project, but the extra few dollars he’s generated will very likely be spent in his local area and stimulate the local economy. Frankly, I’d rather lose 5% of my project funds to the local economy than to lawyers drawing up contracts between development agencies.
Also, this enterprising young man would need resources beyond his access to cover his tracks well enough to stop my colleagues in data analysis spotting a pattern in the micro-action history database. It’s a lot easier to spot than a bribe going to an ‘independent’ evaluation consultant conducting an end of project review, for example.