Making Aid Smarter

• Author: Dean T. Jamiso/Steven Radelet
• Position: Professor of Education/Senior Fellow at the Center for Global Development

Providing primary school education for all the world 's children will be a protracted and costly undertaking. The good news is that major donors have significantly increased their official development assistance (ODA) for education in general and for primary education in particular since 1990. Donor commitments for all education purposes reached $6.7 billion in 2003, more than double the amount in real terms committed just six years earlier. Commitments for primary education have been rising even faster, quadrupling to $1.9 billion between 1990 and 2003. Aid for primary education has risen much faster than total ODA, with its share in commitments rising from just 0.4 percent in 1990 to 1.9 percent in 2003 (see Charts 1 and 2).

The emphasis that individual donors place on primary education varies widely (see table). Five donors allocated more than 4 percent of their ODA commitments to primary education in 2003, while four others provided less than 1 percent. These variations partly reflect different levels of prominence donors place on education, and partly reflect some donor specialization in different activities in an effort to avoid duplication.

Besides ODA, private foundations, nongovernmental organizations (NGOs), faith-based organizations, and other charities make important contributions to education in many countries. For example, some of the most effective primary schools in Africa and Asia, particularly in rural areas, are run by religious organizations. The Organization for Economic Cooperation and Development (OECD) reports $10.2 billion in private aid donations in 2003 for all purposes, but, by all accounts, this figure is too low, probably by a factor of two or three. There are no valid estimates for the share of these funds devoted to primary education, but it is plausible that $1 billion or more is provided annually for primary education from private sources, in addition to the $1.9 billion provided by official sources in 2003.

Nevertheless, while the amount of assistance committed to primary education has been rising, most analysts believe the current level remains too low, particularly to achieve the second Millennium Development Goal of universal primary education by 2015. According to the Task Force on Education and Gender Equality of the Millennium Project, reaching this goal would require an additional $7 billion to $17 billion per year (estimates vary), with perhaps half coming from domestic resources and the rest from foreign sources. Some analysts, such as Michael Clemens at the Center for Global Development (CGD), argue that even with large amounts of funding universal primary education is unlikely to be achieved in all countries, although substantial progress toward the goal is certainly possible.

While there are many competing demands for donor and public sector resources, the development community has long stressed the importance of both expanding primary education to previously excluded groups and improving the quality of teaching, given the expected high economic and social returns. Of course, money alone will not achieve the goals, but it can help to relieve constraints on training teachers, retaining them with adequate compensation, building schools, supplying those schools with books and other materials, and reducing or eliminating school fees.

Much depends on the actions of developing countries themselves, but donors can create efficiencies as well. To make aid smarter, donors can learn some lessons from successes in other fields, such as health, where donors have experimented with results-based incentives. This article examines how effective aid is in general and highlights potential lessons that can be applied to ODA for primary education from the substantial institutional innovations in aid delivery of the past decade. It concludes by pointing to directions donors might take to increase the impact of ODA for primary education, based on our increased understanding of the conditions conducive to aid effectiveness and of how to improve learning outcomes.

How effective is aid?

The effectiveness of foreign aid in achieving development objectives, especially in supporting economic growth, has been a subject of controversy for many decades. There are three main viewpoints that have support in the research literature:

- Aid has no effect on growth, and may even have a negative effect, because it is wasted on bad projects, engenders corruption, or undermines private investment.

- Aid has a conditional impact on growth, working only (or at least better) in countries with good policies and institutions. This has become the most influential viewpoint, although some of the results have come under question.

- Aid on average has a positive impact on growth with diminishing returns-meaning that aid has not worked everywhere, and not necessarily only in countries with good policies and institutions, but overall it has had a positive impact on growth.

In a recent CGD study, Michael Clemens, Steven Radelet, and Rikhil Bhavnani took a new...