Posts Tagged ‘absorptive capacity’

Decentralisation Blues

The World Bank’s Shanta Devarajan reckons that there needs to be real political demand for capacity building to truly transform dysfunctional developing country institutions, and avoid the trap of isomorphic mimicry. He is surely correct in this assertion, but I fear the rose-tinted spectacles return when he advocates the benefits of decentralisation:

“One reason [for doubting local authorities capacity to manage financial resources] may be that no one has given local authorities the chance to deal with funds.  There may have been no demand for financial management at the local level because the central government has told you what to spend.  If you give them the chance to make the decisions, then they might actually build the capacity or hire that capacity because it’s something they can decide for themselves.

Moreover, if the local governments are accountable to the local population, they will have to build capacity really fast. They can no longer put the blame on central government if things don’t work well.”

To be fair to Devarajan he does qualify his enthusiasm with the requirement that local governments should be accountable to the local population. The trouble is that in the decentralisation that I have witnessed in least developed countries I have never seen much sign of that condition coming true, and certainly not any evidence of it leading to substantially increased capacity. Instead, where local official venality and low capacity are the rule rather than the exception, as is the case around here, such pushes as there are to improve service delivery come from above, although even here there’s a lot more political rhetoric than practical action. Decentralisation thus leads to temporary petty fiefdoms that can go largely unmolested so long as performance is not notably worse than elsewhere in the country (and sometimes even when it is).

This rose-tinted view of decentralisation is not restricted to ill-informed denizens of the embassy district and big donor agencies. I think we field operatives can sometimes be equally guilty in assuming that just because community leaders are that much closer to their constituents they will therefore be that much more responsive to their needs, or that bad leaders will get voted out of office. For even at the community level base party politics and local rivalries so often trump technocratic concerns of executive competence.

I would suggest that demand for good services is predicated on at least some idea of what they should look like and sense that they are properly due. By this I mean not just that a community should want the service, and be prepared to air their grievance to anyone who cares to come by and ask (very common around here), but that their sense of justice should be inflamed at the breach to the perceived social contract, and, as an aggrieved party, they are prepared to act seriously to obtain redress. Consuming many government services, e.g. sending one’s children to the local school, might be a largely passive undertaking, but service quality depends upon a community’s aptitude to pursue their due proactively, and in turn for the rest of society not to regard such direct action as disproportionate.

Some would translate all of that as the need for a large middle class, and trot out that old canard about democracy not being workable without one. I am prepared to be a bit more optimistic than that, but I think we should be cautious about expecting demand for service provision to drive improvements in local capacity. There will always be counter-examples, usually championed by exceptional local leaders, but countrywide I wouldn’t pin your hopes on anything other than slow progress, with plenty of steps back interspersed with the forward ones. Social change is slow and messy.

Hat Tip: Lee Crawfurd

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The development tortoise and the donor-fuelled hare

Now my blog has been going for a little while, one of the great pleasures is getting unexpected comments on posts several months old. (Comments on new posts are similarly gratifying – I love all commenters equally! – but not so unexpected.) Thus I’ve recently enjoyed my little debate with David on my post from May: The Scaling-up Fallacy. We touched on several issues related to project scale, but one seemed to need a fuller response, hence this post.

David suggested that small pilot projects that are not designed to be scaled should never happen on the assumption (my inference) that they will never represent value for money. He went on to say:

“I’ve seen a lot of projects that work really well with a ratio of 10 staff to 300 participants from communities of 10,000, without any suggestion that the delivering company can grow to be 100 people and deliver the same service to 100,000 people – and this is often in a country of 10,000,000 or more. It’s hard to see how that is ‘good development’ as opposed to advanced humanitarian relief.”

I think he’s got some pretty good points, and, as a general principle, I do think we should be looking to take things to scale. E.g. I fully support the ambition of Jeffrey Sachs et al. in the effort to make poverty history, I’m just sceptical about their proposed means. But, as I’ve blogged before, I do think there is a lot to be said for small projects that do not try to be something more than they are or can be. So how do we square this circle?

First I think it is worth noting that not every Western company grows into a world-conquering behemoth, sometimes this is not for lack of ambition of the directors, but many other companies stay small out of choice; less hassle for the boss. The same also applies to development, particularly amongst the smaller NGOs. If their donors are happy to keep the money flowing then they clearly represent value for money to someone.

Many small company bosses want to keep their companies small because of the challenges of managing staff. These challenges are multiplied in developing countries where the small pool of educated talent is often a major constraint. I suggest that might be what is stopping many of those projects with 10 staff serving 10,000 community members from growing further.

Unfortunately, albeit for the best of reasons, many donors, especially institutional donors, are not satisfied with this. They want to reach the 10 million. So they push the accelerator pedal as hard as they can … and then the wheels come off because capacity to deliver is just not there.

One response might be simply to invest in capacity development – e.g. focusing on education, but that turns out to be just as dependent on internal capacity. I think we need to be more pragmatic. If, as most do, donors want to achieve tangible results then they need to face up to the reality on the ground, rather than swinging wildly between over-optimistic up-scaling programmes, and white flag exit strategies. A project that is going just as big and as fast as it can is better than a car crash. As in so many other cases, it turns out that Aesop’s old fable is extremely relevant to conservation and development: nine times out of ten, the tortoise wins in the end.

Life in upside-down land

This is not a post about living south of the equator, but some observations about the topsy-turvy world which NGOs inhabit, and the strange rules that govern their behaviour. You may choose to listen to Queen’s I’m Going Slightly Mad while reading it.

If, in running a business, you make a big sale you have a number of options as to what to do with the money. You might decide to invest your profits in delivering an extra good product to your customer in the hope of enhancing your reputation and winning further business. Or if business is fairly slack at the moment and the outlook poor, you may choose to hoard the cash and eke it out to see you through the hard times. Conversely you could use the revenue to drum up other business or otherwise invest in your company, confident that you will raise enough additional funds to ensure you deliver the promised product to your customer on time. In fact your biggest problem may well be cash-flow, and you may need to rely on bank loans to resolve this situation for you.

In contrast NGOs rarely suffer from cash-flow problems. Except for the most deluded donors, grant money is mostly dispensed up front, which is particularly important as small NGOs are not attractive organisations for banks to lend money to. But, bizarrely, operating under-budget is almost as bad for us as operating over-budget. Of the three broad options available to businesses above, only the first is a possibility for us. We cannot speculate to accumulate because grant acquisition is far less predictable than adding new customers, and donors scream blue murder if we use their cash for something else. Neither can we save our money for a rainy day. Some donors will allow for no-cost-extensions, but typically that may involve moving more money into the salaries pot (we have to pay our staff somehow during that extended period) and changing the budget involves difficult negotiations with the donor. In contrast businesses just commit to delivering on their promises at the cheapest possible cost to themselves.

Now, to be fair to the donors, the better ones at least are often prepared to be flexible, but, and this is the key constraint, everything has to be requested in advance and negotiated! Even for minor expenditure changes that should be frankly beneath their attention they raise queries if things have not been cleared in advance. However, these negotiations take time and energy on both sides, such that, despite the best intentions on the part of donors, NGO managers may be reluctant to make sensible adjustments due to the hassle involved. There is also an implication that somehow budget changes mean that either the project was not planned properly and/or has not been well managed since, when adaptability is a key element of good management and it is impossible to plan projects to the last detail in advance.

The classic result, of which I have recent experience, is an under-performing project that is nonetheless under-budget. This ought to be an oxymoron, and is often put down to lack of (absorptive) capacity on the part of the grantee. But I think it speaks as much for the upside-down way in which we are forced to work, in which managing the inputs has become at  least as important, if not more important, than delivering the promised outputs. I, for one, would feel much more confident about strategically re-budgeting funds to ensure a project stays on track if I didn’t fear aggressive questioning later by the donor, and if I could feel confident that successful delivery of key outputs (or progress towards them if the output is particularly challenging) would inevitably lead to further funding to fill in gaps later on.

Alas, instead I am trapped in a Goldilocks budget management system which frowns upon anything which is either too hot or too cold, or just a bit different from what was on the menu, even if it’s that much tastier as a result.

The Scaling-up Fallacy

Last month Justin Sandefur at CGD lamented the regrettable failure of the Kenyan government to sustain a successful school-based de-worming programme after donor funding was withdrawn due to corruption in the Education Ministry. This is another good example of the sustainability paradox: despite clear evidence that this programme was extremely cost-effective it was cut when the donor funding was withdrawn. I assume that this was as much a political act intended to hurt the donors – who lost something they cared about – but as such is clearly rather callous. But, more than anything, it is another example of the phenomenon that what the donors want and what the recipient country government want are often not the same thing.

This, however, is not exactly news around here. More interestingly Sandefur also suggests that this raises questions about “the feasibility of turning small NGO pilots into manageable national policies”, although he failed to elaborate much on that idea in the rest of his post. This is something I’ve been thinking about a bit recently, and I think there is an important additional argument to be made here.

Whether a pilot is being developed by an NGO or a bespoke, direct donor-funded project, it will have its own management structure. It will also have a significant investment of technical advice and support that is inevitably diluted when a project is transformed into a national programme. However, I can live with that; if we want aid to be cost efficient, then we need to be able to realise economies of scale on techniques that have been shown to work.*

My beef is with the management. Because, to the international aid industry, scaling up nearly always means launching a nationwide government programme. In doing so the donors discard the effective management that produced the initial successes in favour of a dysfunctional government bureaucracy. Not only do you lose some basic management nous, but you also lose the driving vision, the leadership that got the pilot project to where it did.

When Larry Page and Sergey Brin founded Google, they didn’t show some initial promise and then hand their genius idea over the government. Instead they secured some outside investment including big business management expertise (Eric Schmidt) – thus addressing their ‘absorptive capacity’ – and grew the company to the multinational search behemoth it is today. More to the point, Google isn’t just big; it continues to be incredibly successful.

I’ve blogged before (here and here) about the importance of the quality of management in delivering conservation and development results. The standard donor approach to scaling up suggests that donors remain stuck in a rut that emphasises technical barriers (leading to misdiagnoses of project failure) over management constraints, combined with the belief that all you need is a bit of capacity-building in profoundly dysfunctional institutions to turn it around.

The next time donors are seeking to scale up a successful programme, I hope they will remember the Google story, the Grameen Bank story, and the countless other examples of private sector efficacy in turning innovation into successful business models. After all, most donors are capitalist countries, not socialist ones, and there’s a reason that communism collapsed.

* There is another argument to be made here that many projects are scaled up before the jury has properly returned a verdict, leaving key issues still unresolved. But, conversely, if an approach does appear to be working, I can understand how funders, desperate for new solutions, may pile in prematurely.

Should the biggest problems get the most money?

Last week Ranil over at Aid Thoughts discussed the new big thing in international aid: fragile states. The powers that be appear to have decided that these are the biggest problem out there in the aid world, and, as such, they deserve to get the biggest slice of the aid pie. I long have noticed a similar approach to prioritisation within conservation: the rarest species and the most threatened habitats get the most money.

Despite the fact that it incentivises everyone to talk up exactly how bad their problem is, on the face of this is in an eminently sensible approach to determine how to divide up a pot of money that is never big enough to solve all the problems in the world.

This, however, pre-supposes two things:

a) that there are solutions to be found to these, the biggest problems, and

b) that these solutions need a lot of money to succeed,

Neither of which are necessarily true. The biggest problems tend to me the most wicked problems, and therefore the least tractable to ordinary problem solving. And we seem to have conveniently forgotten about that old chestnut, absorptive capacity. Whilst I know little about how to ‘cure’ a fragile state (if such a thing is possible), the horror stories coming out of Afghanistan of wholesale corruption of aid flows suggest that the absorptive capacity conundrum hasn’t gone away, and is probably magnified in fragile states.

In both conservation and development I would like to see more money being devoted to solutions, especially proven solutions. That is not to say we should ignore the biggest problems, but if you don’t have a workable solution, then a lighter touch with smaller amounts of supporting funds seems a more sensible approach. Pouring money at a problem is unlikely to achieve very much more than reducing your pot of money for tackling other problems and increasing public and political scepticism of aid due to low success rates.

Great businesses, like great sporting teams, play to their strengths. International aid and conservation too often seems to play to its weaknesses, and that is much to our loss.

Speed eating & the UK aid review

Speed eating has never particularly appealed to me as a spectator sport. (Even less as a competitor!) And yet that was the metaphor that sprang to mind on reading the results of UK’s aid review.

First the good news (gourmet starter): reducing the number of countries in which DFID works has to be a good thing for efficiency. If you better understand a country then you are better able to help it. Moreover if you are contributing a big chunk of money your influence with that country and how it chooses to spend the aid you give rises accordingly. Dropping countries like Russia and China was also a bit of a no-brainer. Even more encouraging was to see a bit of carrot and stick waving at UN agencies. If they’re not achieving anything very much then don’t fund them – that get’s a high five from me! Finally I fully support the results focused agenda (so long as this is defined sufficiently broadly so as not to limit aid to things that can easily be counted).

Now for the carbs-packed entrée: some countries (Ethiopia, Bangladesh, Nigeria, the Democratic Republic of Congo and Pakistan) are due for big increases in aid. These countries, and others which will continue to receive big wads of cash (e.g. Afghanistan, Sudan – presumably the southern bit – and Tanzania) are the ones through to the speed eating final in which they have to gorge themselves as much as possible in the course of a year. And then come back for desserts the year after, and the year after that, and … you get the picture!

“Governance standards in the target area will be a key constraint on the viability of any proposed solutions.”

That was me, just yesterday, blogging on humanitarian emergency response.  It seems to me this applies ten times over when committing many millions to another national government. None of the five getting big increases strike me as doing particularly well on that front. Ethiopia is perhaps the most interesting example, in that it enjoys a reputation for relatively efficient distribution of aid, but whose government is increasingly autocratic and intolerant of dissent. Whilst I am sure there are many local complexities of which I am unaware (I don’t know the country), it seems to be pretty inescapable that substantial aid will serve in some way or other to prop up the existing government.

News from North Africa over the last few weeks have shown the danger of supporting autocratic regimes: from “Made in the USA” stamped on tear gas canisters used by the police in Egypt, whilst the UK government faced extremely awkward questions over its arms sales to Gaddafi’s regime in Libya. These things, it seems, have a nasty habit of coming back to bite one in the proverbial later on.

The term “absorptive capacity” is a pernicious one: the implication that I can manage resources properly but you cannot is pretty insulting, especially coming from the sorts of organisations that typically use it (“lot’s of staffing, lots of activity, b****r all impact”). But at these highest levels, it surely has to be considered. Aid is not the kind of sector in which  doubling the inputs leads to a doubling of the outputs, there are serious problems of diminishing returns; simply turning on the tap is not the solution.  In particular I really question to what extent DFID has considered absorptive capacity of recipient countries not just at the top, but at the bottom; at the last mile of aid delivery.

The trouble with speed eating, of course, is the serious danger contestants will vomit back everything they’ve just rammed down their throats. I really hope that DFID’s chosen star contestants do not end up vomiting all over their benefactor’s feet.

Do we need more Aid?

Lots of hand-wringing this week in New York about poor progress towards the benighted Millennium Development Goals. (Texas in Africa has an excellent post about exactly who is doing the hand-wringing.) It is good to see top level acknowledgement (from the very top!) that business as usual in the aid industry is not going to solve the problem. However, the old 0.7% of GDP argument is rearing its head again, with the UK promising to up its donations to that figure by 2013 at the same time as implementing a whole raft of reforms about how it provides aid. Do I think this is sensible? No I do not, and here’s why.

There is a huge gap between a successful pilot project and a wide scale programme of intervention. When an intervention is scaled up in this way a savvy donor will lean on upon the government of the beneficiary country to ensure that someone good is put in charge of the new programme. This person may well be very able and impressive, and sitting in comfy aircon offices in the capital, it can be easy to be beguiled by these people – after all, they’re our chosen partners. But, the person in charge is not the person on the ground implementing the programme. They will likely be of much lower calibre, and working in a management system that is mildly dysfunctional at best. In actual fact all the donor’s hopes are vested in a bunch of pretty junior employees who are a long way from the supervision of the donor’s chosen champion. Even if the beneficiary government wanted to overhaul their civil service, they would be greatly constrained by the talent pool available.

In my experience the closer one is to a project, the more one sees the problems, when from the outside it may appear all is well (and this applies as much to our projects as any others). Some of the biggest problems are at the sharp end, in actual service delivery; here capacity is at its lowest (development speak for incompetence is at its highest) and management skills almost non-existent. Yet the donors by and large trust these local government officials to deliver key projects and services, and just suck up the all the reports of ‘success’ which are sent to them.

It is true that part of the blame lies with recipient governments. Donors can do little to clean up corruption and improve management practices – these things need to come from within. A lot of responsibility lies with donors who are maddeningly inconsistent both between themselves and over time (witness DFID’s back-tracking on general budget support) with conditions upon grants and loans often subsequently relaxed. They ignore basic issues like sustainability.

However, the rest of the aid industry (especially aid advocates) are also often guilty of mistaking local success stories with the next silver bullet and making wild extrapolations. Take, for example, the Guttmacher Institute’s estimate of $180 million for the annual cost of providing effective maternal health care to every Ethiopian women who wants it. (HT: Owen Barder) Now I’ve never worked in women’s health issues in Ethiopia; maybe there really is that capacity in the health system (Ethiopia does have a reputation for more efficient implementation of aid projects), and maybe the Guttmacher Institute have really researched the issue to its utmost limits, but I hope they will excuse me if I am just a little bit sceptical because I don’t see any capacity like that where I am.

The development sector is not just a pipe into which if you pour more money one day, more impact will come out the other end the next day. Where ‘absorptive capacity’ does not exist the additional funds will either go unspent, be wasted on unnecessary overheads, or be stolen. NGOs such as the one where I work continually have to battle to convince donors as to our absorptive capacity (not entirely unreasonably), and yet donors appear happy to continue to pour in more money into government systems which manifestly have considerably lower management capacity.

Few people would disagree that the aid system needs serious reform. Many say we need both more and better aid. I think that’s too much to deal with at one time. First make it better, much better, then add more if the absorptive capacity really is there.

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