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This policy brief, by the OECD Development Centre, examines trends in development finance, focusing on the emergence of new actors such as global funds, foundations and NGOs, who provide additional financial flows. The paper draws on the experience of Ghana’s health sector. It finds that, even for ‘donor darlings’, where aid accounts for a large percentage of gross domestic product, new sources of finance have become a credible alternative to Official Development Assistance (ODA).

The brief identifies major challenges for effective development finance. It shows that developing countries need stronger information systems to predict the various flows, and better co-ordination mechanisms. In order to take ownership of their own development process, countries must find ways to improve inter-ministerial co-operation and to address mismatches between budgets and spending. The paper concludes that domestically, many poor countries face capacity gaps that can not be filled by increased finance or improved effectiveness alone. These include skills shortages in ministries and unpredictable human resources in the public service. Addressing such capacity gaps should be an urgent priority for both governments and the donors seeking to assist them.

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