Cash on Delivery: A New Approach to Foreign Aid

Public and private aid can improve lives in poor countries, but the willingness of taxpayers and private funders to finance aid programs depends more than ever on showing results. COD Aid is a funding mechanism that hinges on results. At its core is a contract between funders and recipients that stipulates a fixed payment for each unit of confirmed progress toward an agreed-upon goal. Once the contract is struck, the funder takes a hands-off approach, allowing the recipient the freedom and responsibility to achieve the goal on its own. Payment is made only after progress toward the goal is independently verified by a third party. At all steps, a COD Aid program is remarkably transparent: the contract, the amount of progress made, and the payment are disseminated publicly to highlight the credibility of the arrangement and improve accountability to the public. COD Aid is a new approach to foreign aid, but one that complements other aid programs and would ultimately encourage funders and recipients to use existing resources more efficiently.

Cash On Delivery Aid: A New Approach to Foreign Aid explains the approach in detail and investigates its application in one sector: education. More specifically, the authors show how foreign aid agencies could use COD Aid to help developing countries achieve universal primary school education. The example illustrates how to deal with potential challenges of the approach—challenges that are no greater than those of traditional aid—and includes model term sheets for contracts that could be used for any COD Aid agreement.