Aid
Keeping a low profile: what determines the allocation of aid by Non-Governmental Organizations?
How effective are NGOs at allocating aid?
Authors:
D.-J. Koch; A. Dreher; P. Nunnenkamp
Publisher:
Kiel Institute of World Economics/Institut für Weltwirtschaft, 2008
Allocating aid through NGOs is traditionally seen as an attractive proposition for donors. This is predicated on the belief that NGOs are ‘closer’ to poor communities and so are able to make better use of funds. Furthermore commentators highlight that compared to official state aid the allocation of NGO funds are, in principle, less subject to political and commercial interests. However, in reality little is known about where NGO aid is spent, or how well-targeted it actually is.
The authors of this paper assert that their study is the ‘first comprehensive cross-country analysis of the driving forces of NGO aid’. They surveyed some 60 (of the largest) NGOs from various OECD countries and tested their research against the following hypotheses:
- NGO aid is focused on the needy i.e. recipient countries with low per-capita income
- NGOs are relatively strongly engaged in countries with weak institutions in order to exploit their comparative advantage of working in “difficult” environments
- the preferences of donors affect the allocation of NGO aid
- NGOs locate where other NGOs are active, leading to geographical clustering of NGO aid
- NGOs are more strongly engaged in countries characterized by similarities with their own organization.
The authors found that:
- NGOs do provide better targeted aid than state aid agencies - the evidence suggests that NGOs focus on the poor, in particular in the second stage of the allocation process, i.e., when deciding which amount of aid to grant to eligible countries. In addition, commercial interests have not systematically affected the allocation of NGO aid
- NGOs, however, do not complement official aid through engaging in so-called difficult institutional environments where state aid agencies find it difficult to reach needy citizens. Rather, NGOs tend to replicate the location choices of the donors from whom NGOs get part of their funding. This casts doubt on the notion of autonomous NGO behaviour
- NGOs follow other NGOs so that aid gets clustered, further adding to the divide between so-called ‘donor darlings’ and ‘donor orphans’
- NGOs prefer recipient countries with common traits related to religion or colonial history.
