Recent developments in mobile technology, including biometric identification and point-of-sale devices, are being considered as alternatives to current foreign aid delivery mechanisms. The possible shift towards electronic transfers of foreign aid comes at a time of rising concern regarding its delivery methods and effectiveness.

A paper from the New America Foundation cites difficulties experienced by the USD 21.7 billion Global Fund to Fight AIDS, Tuberculosis, and Malaria as evidence of the need for change. The fund was forced to retract or suspend a significant sum after the discovery of money misspent and missing. Jon Liden, the fund’s spokesman, painted what may be seen as a bleak picture of foreign aid delivery when he reportedly said “we would contend that we do not have any corruption problems that are significantly different in scale or nature to any other international financing institution”. The metrics used to determine the effectiveness of aid can contribute to the problems as they typically measure not the amount of aid that actually reaches the poor, but the aggregate amount spent.

Electronic delivery is forecast to cut the cost of administration and reduce corruption, with the costs of moving to electronic payments able to offset after one year. Although the potential implementation of such a system may present significant challenges, it potentially would expand the poor’s access to finance by increasing the usage of mobile technology.

By Jacqueline Foelster, Research Associate

Sources and resources:

[1] New America Foundation, February 25, 2011, “Money to the People”, http://www.newamerica.net/node/45551

MicroCapital.org Article, January 18, 2011, “Bill and Melinda Gates Foundation Provides $10m for Haiti Mobile Money Initiative (HMMI) in Collaboration with US Agency for International Development (AID)”, http://www.microcapital.org/microcapital-brief-bill-and-melinda-gates-foundation-provides-10m-for-haiti-mobile-money-initiative-hmmi-in-collaboration-with-us-agency-for-international-development-aid/

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