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Innovations in Development

Innovation is an integral part of modernizing foreign assistance and strengthening the effectiveness of development programs. As the global landscape continues to change and development needs evolve, new technologies and approaches are helping enhance the impact of programs in all sectors - from agriculture and health to finance and education.


A bipartisan piece of legislation, Fostering Innovation in Global Development Act, or FIGDA introduced by Reps. Joaquin Castro (D-TX) and Young Kim (R-CA) will give USAID the tools to identify and scale effective aid reforms and propel the agency's humanitarian assistance and development, democracy, and innovation towards local solutions to the world's most pressing problems.

As stated in the bipartisan legislation, FIGDA specifically would:

  • Kickstart a Global Innovation Strategy: FIGDA would require USAID to create a ‘Global Innovation Strategy’ to integrate innovation across USAID programs. This includes a specific innovation plan of action for USAID Country and Regional Development Strategies and other planning documents.

  • Establish a Chief Innovation Officer and an Innovation Fellowship to drive the innovation agenda within USAID. Innovation fellows would initially serve in the office of the Chief Innovation Office and then be detailed to other parts of USAID operating units, where they would be tasked with helping different parts of USAID implement innovative foreign assistance programs. USAID would be allowed to use program funds for this authority. FIGDA would also require each bureau at USAID to appoint a senior advisor responsible for innovation to serve as a connection between the Bureau and the Chief Innovation Officer.

  • Codify the Development Innovation Ventures program: FIGDA explicitly authorizes the well-regarded Development Innovation Ventures (DIV) program at USAID and authorizes appropriations for the program to allow Congress to support DIV and its work more directly. FIGDA authorizes $45 million a year for five years for innovation programs, including DIV, and allows authorized funding to be available for five years. This is an increase from current levels of $40 million a year and the five-year funding authority allows USAID to make long-term planning decisions....read more here

Cash Benchmarking

Instead of relying on success stories of how a program benefited an individual, or even impact evaluations showing a significant average effect of a program, “cash benchmarking” is an approach that compares the impact per dollar of programs to what could be achieved by simply providing development funds directly to beneficiaries.  Put another way, cash benchmarking asks, “Are we doing more for the poor than the poor can do for themselves?” 

A strong and growing body of research backs the use of cash transfers to reduce poverty and tackle a number of related development challenges. Because cash programming is associated with relatively low overhead and administrative costs—and can afford recipients greater agency in determining how to address their needs—it also can serve as a useful benchmark for cost-effectiveness. 

Rigorously evaluating and comparing cash transfers with more traditional aid programs, which deliver defined goods and services, is important for comparing per-dollar results of each approach. Benchmarking against cash won't work for every program. It is most usefully applied to programs that seek to affect household or individual-level indicators. The approach also depends on well-designed impact evaluations which require both time and resources. Nevertheless, as U.S. development agencies design programs, the findings of these studies can be instructive. Where existing evidence on the use of cash is promising, donors and implementers should challenge themselves to ensure more traditional aid programs are designed (and, where necessary, adapted) to secure better results than cash might provide. USAID has committed to building a better understanding of how foreign assistance can do just that by commissioning several cash benchmarking studies through its innovative program known as Development Innovation Ventures. MFAN will be tracking these studies and continuing to explore how cash benchmarking can be a means for improving aid effectiveness.

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Digital Development

Provided that it is utilized in an inclusive manner and with security precautions to avoid misuse, digital infrastructure is a force multiplier that can make development efforts more effective and efficient and deliver solutions rapidly at scale to a broad audience. Digital public infrastructure and goods provide a number of benefits:

  • inclusion – available to everyone
  • efficiency – the next user/developer does not have to reinvent the wheel
  • knowledge sharing – the underlying code is publicly available
  • innovation – access to what exists feeds future innovation
  • security – transparency supports accountability and security

By shifting digital transformation to warp speed, COVID has underscored the benefits and necessity of digital capabilities. Despite isolation during the pandemic, students with digital access and literacy continued to learn; workers digitally literate and with digitally adaptable jobs were able to work from home; governments, such as those in India and Togo, were able to build on existing digital platforms to rapidly extend payments and services; and medical diagnosis and advise were performed virtually.

Infrastructural platforms like identity systems, payments systems, and data exchange systems are especially important. When designed for maximum public use, these are called digital public goods (DPGs). Most donor investment in digital development is in single-use digital components of projects. What is more beneficial for country ownership and donor harmonization – and sustainability and aid effectiveness – is donor support and investment in digital public infrastructures (DPIs). One method for doing so is through DPGs, which are software solutions that are open-source, open-standards, open-data, open-content, and help achieve the Sustainable Development Goals.

As a means for improving aid effectiveness, MFAN is tracking innovative digital technologies’ impact on global development and continued research on digital public goods (DPGs).

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Social Enterprise

Social enterprises are a proven yet underutilized partner in the U.S. Government’s private sector-focused development toolkit. These organizations, which prioritize impact over profit, work across all sectors and geographies: from agriculture in East Africa or Central America, to school feeding in Kenya, or women-led rural product delivery in India. They generate revenue from clients and can leverage hybrid financing (e.g. grants and concessional debt) to effectively and more sustainably provide services to the “bottom of pyramid” - vulnerable populations whom the profit-focused private sector struggles to serve. However, serving the “bottom of the pyramid” is hard and expensive. Social enterprises fill the gap when markets fail to do this, because it is difficult to make a profit doing so. 

There is no standard definition of what constitutes a social enterprise. The Acumen Fund provides a usefully concise definition: "A social enterprise is defined as any organization that prioritizes transformative social impact while striving for financial sustainability.” The key development value of social enterprises resides in three core characteristics:

  • Cost-effective scalability. With a business mentality, social enterprises work beyond limited project life cycles. Because they work with a market-based operating model, they cover much of their operating costs from earned farmer revenue, making them both sustainable and scalable.
  • Ability to prove social impact. Unlike profit-focused companies, social enterprises are committed to providing impact first and foremost. Instead of running many disparate projects, they also tend to focus on a limited number of business lines, which facilitates rigorous impact assessments. For example, agriculture social enterprises can weigh the harvests of the farmers they serve vs. control farmers and calculate the marginal value of their services to clients through one clear outcome measurement.
  • Embedded in communities. To successfully serve their clients, social enterprises must be deeply embedded in local communities. They stay for the long-term and are well positioned to fix complex market failings, as they intimately understand the demands and needs of the communities they serve.

While social enterprises are not excluded from USAID funding, there is a high opportunity cost for them to apply for support. Without large operating overheads and running on tight margins to make their businesses work, social enterprises often lack the bandwidth to engage effectively in USAID contracting. As a means to improving aid effectiveness, MFAN seeks to explore ways that would allow USAID to put a more dedicated funding focus on social enterprises and to find ways of building more fit-for-purpose procurement processes to help catalyze the growth of this important sector.

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