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.
Read More:
Cash Benchmarking: A New Approach to Aid Effectiveness | November 2020 | USAID
More Results for the Money: Cash Benchmarking at USAID | September 13, 2018 | Sarah Rose and Amanda Glassman
Committing to Cost-Effectiveness: USAID's New Effort to Benchmark for Greater Impact | September 13, 2018 | Sarah Rose and Amanda Glassman
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:
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 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:
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.
