DFID should use direct aid transfers more, say MPs

6 Mar 12

Giving overseas aid directly to poor communities rather than through governments brings ‘real benefits’ and it is surprising the Department for International Development does not use this approach more, the Public Accounts Committee said today

By Nick Mann | 3 February 2012

Chair Margaret Hodge called on the department to adopt a ‘clear’ overall strategy for using direct transfers of cash, food and assets, instead of leaving the decision to staff working in individual countries.

In 2010/11, the department spent £192m on social protection programmes, which include transfer programmes.

In DFID: Transferring cash and assets to the poor, the committee said the approach appeared to be less risky than other methods, especially when payments can be tracked electronically.

Transfers can be used effectively to tackle a range of issues, such as hunger and malnutrition, in a variety of contexts, MPs said, echoing the National Audit Office’s praise for the approach last November.

But, they found that the DFID had plans to support transfer programmes in only 17 of its 28 priority countries.

Hodge said: ‘Transfer programmes appear to pose a lower risk of waste and fraud than more traditional forms of aid, with money going directly to recipients. They have been effective at tackling hunger and malnutrition and improving access to health and education services.

‘So it is surprising that transfer programmes are not being used more.’

Despite ‘strong evidence’ of the short-term benefits of the approach, the committee found that evaluation of the long-term effects had been carried out on only one programme.

MPs also highlighted a lack of data on all the costs of transfers. Because the DFID does not factor in the cost of diverting health and education professionals to act as payment administrators, it is unable to compare whether transfers offer better value-for-money than other programmes, the report said.

International Development Secretary Andrew Mitchell said the committee had strongly endorsed the government’s use of direct transfers, and highlighted programmes in Bangladesh, Ethiopia and Kenya as particular successes.

‘Britain has pioneered the use of direct transfers and it is good to see that the PAC confirms that our programmes are helping the poorest people in some of the hardest places to reach,’ he said.

‘It is absolutely right that we evaluate direct transfers rigorously in each country before making decisions on how to expand the programme.’