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Money Fight: Cash on Delivery vs. Cash Transfer

March 29, 2010

Cash on Delivery (COD) seems to be gathering pace and ideas for how it can be put to use are spreading too.

They don't make films like this any more... probably for the best, that.

So what is Cash on Delivery? Well in short, it’s a new idea from the CGD to ‘reward’ particular actions carried out by aid recipient countries. For instance:

“In education, donors could promise to pay $100 for each additional child who completes primary school and takes a standardized competency test.” (from CGD).

Basically it’s a Conditional Cash Transfer scaled-up for governments. Conditional cash transfers attempt to incentivise behaviour of individuals and families by rewarding them with cash for completing certain actions. COD does the same but with governments.

How do the two compare? As Richard commented here, why don’t we give money directly to people?

Speculatively I would say Conditional and Social Cash Transfer schemes have been successful (please feel free to correct me here). Fungibility aside, in the one scheme I’ve seen in practice ran by UNICEF in Mchinji, Malawi  there were noticable differences in the lives of those receiving the transfers. The money empowered people and allowed them to decide where they think money should be spent. Granted, incentives exist for the recipients to spend it where donors want it spent, in Malawi, on education, but there was the option to take the extra or leave it.

So is the COD vs. Cash Transfer a typical ‘top-down’ vs. ‘bottom-up’ approach? Giving money to governments as opposed to giving to the people. The old planner vs. searcher? Or is it, as  I suspect, more complicated.

Perhaps the two ideas could be used in tandem. A family is paid to send their child to school, and then the government is paid for educating that child to a certain agreed level. Everyone’s a winner!

Free money? Woo hoo!

What do people think? Does COD have a place in improving aid accountability? Will it have the desired outcomes?

And ultimately, whose a better decider of where to spend money? Government’s or it’s citizens?

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