Center for global development

By Kimberly Ann Elliott - Last week President Obama responded to the rising carnage in Syria by saying that he is looking for “every tool available to prevent the slaughter of innocents in Syria,” government-instigated violence that has already claimed thousands of lives. What new tools are available? The economic sanctions imposed are having an impact, but they are weakened [...]

By David Roodman -

I have a piece in the Washington Post this week based on my book. I’m told it will appear on the front page of the Outlook section of Sunday’s print edition. It will look familiar to you if you follow this blog:

There has been enough time and evidence now to explore the full impact of microcredit in depth, and, set against its vaunted reputation, my verdict is dour: Microcredit rarely transforms lives. Some people do better after getting a small business loan, while some do worse — but very few climb into the middle class. It’s a constructive endeavor, but it has been vastly overhyped. And the hype has undermined the good that the movement can achieve.

Accompanying the piece is a two-minute video. The soundtrack is almost all me. Video footage is taken from two recent documentaries: Holly Mosher’s Bonsai People and Tom Heinemann’s Caught in Micro Debt. After the Post contacted me for ideas for the video feature, I suggested that they juxtapose clips from these two opposing films, much as I open my book with two contrasting stories of the impact of microcredit (the sad one coming from Heinemann). My idea was to show the audience both the power and the limitations of stories as ways of understanding the impact of microfinance and much else. Then the Post decided to put me in the mix, so I’m not sure that my original idea comes through. But I’m pleased with what they selected from their interview with me.

By Lawrence MacDonald - This week I was privileged to chair a panel discussion at the World Bank on the Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). In celebration of International Women’s Day today, I want to share what I learned and a suggestion for what just might be a new and promising intervention [...]

By William Savedoff -

There are new reports of casualties in Pakistan but not from terrorism. Instead, some 150 poor patients died after receiving contaminated drugs from a public cardiology pharmacy in Lahore because the country’s politicians abolished the federal health ministry without creating an appropriate national drug regulatory agency, as explained in a recent Lancet article by Dr. Sania Nishtar. The failure was not only predictable but predicted. Before Pakistan devolved health sector responsibilities to the country’s provinces, many people raised concerns over the fate of key national programs related to disease surveillance, drug regulation, and medical supervision (including a blog that I posted a year ago). Unfortunately, this latest news shows that the critics were right to be concerned.

This is only the most extreme case that I’ve seen in which decentralization has debilitated public health functions. Many Latin American countries also decentralized public health services in the 1990s only to find that immunization rates fell or surveillance data was compromised. Most have recovered from these shocks to the health system, reestablishing key functions at the national level and devolving others. But the tendency to think that all health sector services are the same and can be devolved to subnational authorities – whether they involve assuring the quality of drugs, epidemiological surveillance, health financing regulations or managing health clinics – is astonishing. The diseases and injuries that result when these functions are neglected are often invisible to the public. This time, in Pakistan, they are only too visible. Hopefully, federal and provincial officials will take this as a wakeup call to establish, fund, and support the creation of an effective federal drug regulatory agency as well as to address the other health sector responsibilities that are best suited to national action.

The devolution of Pakistan’s health care services to the provincial level is not necessarily bad. In an earlier article, Dr. Nishtar argued that this strategy could work if federal officials were given authority to focus on public health functions that benefit from centralization while other services are devolved. But in this case, central functions are paralyzed by power struggles between regional and national authorities, and citizens are paying the price with their lives.

By Rachel Silverman -

This is a joint post with Victoria Fan.

While PEPFAR and the Global Health Initiative (GHI) have dominated the global health community’s attention over the past few years, the President’s Malaria Initiative (PMI) has largely flown under the radar. Surprisingly little had been written about the PMI; still the few available materials painted a reasonably positive picture.  But just this month, the PMI released the results of an external evaluation which confirms what we’ve long suspected: PMI is doing a remarkably good job and generating “value for money” in U.S. global health efforts. Such results are all the more impressive in light of the common criticisms of USAID past and present – that it is ineffective, incompetent, and hampered by a complex and arcane bureaucracy. The PMI is a USAID success story that helps validate its ongoing efforts to reform and rebuild into the U.S.’s premier development agency.

Originally conceived in 2005 as a five-year, $1.2 billion scale-up of America’s malaria control efforts, the PMI was extended and expanded by the 2008 Lantos-Hyde Act, receiving $625 million in funding for FY2011. While its funding pales in comparison to PEPFAR, which received almost $7 billion for the same period, the PMI is among the largest global donors for malaria, aiming to halve the burden of malaria for 70 percent of at-risk populations in sub-Saharan Africa. Led by USAID under a U.S. Global Malaria Coordinator, the PMI is jointly implemented with the Centers for Disease Control (CDC).

USAID’s malaria programs have not always received “gold stars” from the development community. Indeed, just a few years back, U.S. malaria efforts were a source of scandal and controversy for the beleaguered aid agency. At the urging of anti-malaria advocates, a series of congressional investigations between 2004 and 2006 revealed a complete lack of performance monitoring and evaluation; no accountability for spending; over-reliance on expensive consultants; promotion of poor technical practices; and enormous waste. As Roger Bate described in a 2007 paper, “only approximately 8% of USAID’s $80 million FY 2004 budget was used to purchase actual life-saving interventions…USAID could provide almost no evidence to show that programs actually helped save lives or even build sustainable capacity.”

Only six years later, the turnaround is remarkable. While also pointing out flaws and areas for improvement, the evaluation offers a glowing overall assessment:

“PMI is, by and large, a very successful, well-led component of the USG Global Health Initiative. Through its major contributions to the global malaria response via its collaborations with multilateral and bilateral partners, effective relationship with the Global Fund, and contributions to reinvigorating national malaria control programs, PMI has made substantial progress toward meeting its goal of reducing under-5 child mortality in most of the 15 focus countries….[PMI] has earned and deserves the task of sustaining and expanding the U.S. Government’s response to global malaria control efforts.”

Notably, the evaluation does not bill itself as a formal “impact evaluation” of the PMI. Instead, the document (1) provides a detailed process evaluation, and (2) uses survey data to report on progress toward outputs (i.e. 85% bed net coverage among vulnerable groups) and outcomes (70% reduction in malaria burden), using all-cause child mortality (ACCM) as the primary impact indicator. Accordingly, this evaluation methodology cannot isolate the PMI’s specific impact from the effects of other malaria efforts, including the Global Fund and national malaria control programs. Moreover, the evaluation methods rely on DHS data, which was limited at the time of its publication. Nonetheless, the evaluation pointed to signs of decline in the malaria disease burden for 8 of the 15 focus countries with available data (other surveys are underway or upcoming). In Tanzania, the only country where the PMI had already completed in-depth impact analysis, the evaluation found evidence to suggest that malaria control scale-up has reduced ACCM by 10 deaths per 1,000 live births.

So what’s behind the PMI’s recent success? There are lots of good nuggets to choose from, but a few key decisions and design features stand out.

• Leadership: Housed within USAID, the PMI’s leadership earns high marks for its management skills and flexibility. According to the evaluation, the Global Coordinator’s office has effectively engaged its partners both domestically and on the ground, and achieved rapid scale-up through excellent program management. Management highlights include the fielding of interagency teams, use of “jump-start” funds to begin implementation before the distribution of annual central funding, a collaborative and transparent mechanism for resource allocation (annual country operational plans), and “a well-led, highly motivated technical and administrative workforce.” Some credit the PMI’s success to the military leadership style of U.S. Global Malaria Coordinator R. Tim Ziemer, a retired Rear Admiral with the United States Navy. Even if his personal leadership is responsible for  much of the initiative’s accomplishments, the PMI has showcased USAID’s ability to get out of the way for good managers.

• Interagency Collaboration: Despite the ongoing, high-profile interagency handwringing over GHI leadership, the PMI has managed to foster effective collaboration between USAID and the CDC, all under USAID’s stewardship. Generally speaking, the Global Coordinator has built and sustained interagency and bipartisan support for the initiative. While some friction and disagreements remains, particularly from senior CDC officials who desire greater institutional and financial autonomy, their differences have not hampered program implementation in-country, where different agency representatives put “debates aside and got on with the tasks of improving malaria control programs to meet the shared goal.”

• Focus and Selectivity: The PMI is selective both in the countries and interventions which it chooses to support. Rather than spreading its resources over a wide range of countries, the PMI has selected 19 focus countries to receive concentrated assistance based on their respective disease burdens, country commitment, and support from other funding partners such as the World Bank or Global Fund. On the program side, PMI only supports four life-saving, cost-effective interventions to prevent and treat malaria, focusing on concrete commodity procurement and distribution rather than USAID’s past, highly criticized approach of consultant-based technical expertise.

• Transparency: Everything is relative, but among U.S. programs the PMI stands out as unusually transparent to the public. The website provides detailed country operational plans, and even full contracts(!) for public viewing. Still, there is room for improvement: neither expenditure data nor line-item breakdowns of cost are currently available, making it difficult to assess the true distribution of costs and implementers’ cost-effectiveness.
• End Use Verification: We’ve all heard horror stories about bed nets being thrown out the windows of moving cars to meet ambitious output goals. To avoid this type of waste and monitor the success of distribution efforts, the PMI has implemented end use verification. This promising tool monitors the availability of key malaria commodities at the clinic level, helping to ensure effective supply chains and hold implementers accountable for successful distribution. If the PMI makes this data publicly available to civil society and researchers, it will become an even more powerful tool to promote accountability and efficiency.

At this point, there are still reasons to be concerned about USAID’s potential leadership of the GHI. Notably, these issues have little to do with USAID itself, and much more to do with structural power relationships and continued uncertainty about what, exactly, GHI leadership really entails. Still, as PEPFAR moves toward potential reauthorization in 2013, this story should offer food for thought to the administration and Congressional leaders. USAID’s rebuilding process remains a work in progress; still, it has turned malaria programs from an embarrassment into a remarkably successful initiative, all without great fanfare.

Moving forward, the PMI could be a model for eventually bringing the Office of the Global AIDS Coordinator (OGAC) under the USAID umbrella. While some believe this move could compromise PEPFAR’s effectiveness and expertise, the PMI shows the best of what USAID can offer: thoughtful, collaborative leadership; the potential for a semi-autonomous but integrated OGAC within the greater USAID structure; and real potential to reemerge as the U.S.’s premier development agency.

By David Roodman -

If you are an outsider wanting to support economic and political development and you view development as an evolutionary process, you face two key questions: Which kinds of evolutionary change are good and which bad? And how does an outsider tweak the evolutionary environment and the mechanisms of adaptation to produce more of the good and less of the bad?

I suspect an answer to the first question would combine utilitarianism with the Amartya Sen’s definition of development as freedom. Societal evolution is for the good when it enhances the agency of the many, not of the few at the expense of the many. Answers to the second may have to do with access to energy sources, as well as opportunities for people to connect with each other in novel ways (think of arm’s-length contracting being essential to formal commerce, or Twitter in the Arab Spring).

Yesterday in the New York Times, Stephanie Strom documented what seems to me to be an exciting positive example of outsiders helping to tweak the process of development. A website called I Paid a Bribe aggregates anonymous reports from people in India forced to pay petty bribes, in order to embarrass the government and prod change. Sunlight, as they say, is the best disinfectant.

This passage caught my eye:

The Omidyar Network supported Janaagraha to develop I Paid a Bribe, but the Web site will have to find a way to sustain itself. “A couple of the organizations we’re working with in the area of transparency and accountability have been looking at things like microdonations, asking for a nominal amount to help cover their costs like a Wikipedia model,” Mr. King said. “There’s also some potential for carrying advertising on the sites.”

Kudos to Omidyar for supporting this project. And I understand its funds are limited. But I wonder: should such sites have to find ways to sustain themselves? Surely it would be an excellent use of donor funds, public or private, to support such sites around the world, permanently if necessary. It won’t feed the starving. But relative to the modest cost, such aid, by nudging polities onto slightly different evolutionary paths, could make a huge difference in the long run.

By Lawrence MacDonald - Conventional wisdom has it that when the United States catches a cold, Latin America gets pneumonia. But when the United States caught financial pneumonia in 2008, Latin America escaped with little more than a cold. What’s changed?   In this week’s Wonkcast, CGD senior fellow Liliana Rojas-Suarez explains why Latin America was mostly successful in [...]

By David Roodman -

Larry Reed, the new director of the Microcredit Summit Campaign, along with Jesse Marsden, its research and operations manager, recently posted a gentle review of my book, with which I disagree.

I think the central argument is:

…he makes no effort to recognize the differences among the many microfinance programs employed globally.

His analysis relies most heavily on just two studies from 2009 which examine the data from a few programs studied within a very short timeline of 12–18 months. While his book references many studies that have widely ranging scopes and methods, Roodman chooses to focus on a very limited set of data to draw generalizations about the wide variety of microfinance programs in use globally.

Yet, if not all microfinance providers are the same, it would follow that some might place more emphasis on helping their clients climb out of poverty than others who might emphasize greater financial performance of the institution itself. A study that focuses on institutions aiming to maximize client benefit and movement out of poverty might show different results than a study that fails to make a distinction among its test subjects.
…
Our belief is that the way in which microfinance is implemented matters greatly to the very poor. We suspect that those MFIs which judge their success according to the measureable improvements in the lives of their clients end up designing very different programs and, we also suspect, have very different results from those that focus on market share, share price, and investor interests.

To which I reply:

• I do rely on a small number of studies. They are the only ones I believe it is safe to rely on. I devote many pages of chapter 6 to explaining this view (whether I do a good job, I don’t know). I have spent a good deal of time over the last ten years scrutinizing the sorts of non-randomized quantitative studies that I discount, even writing computer programs to replicate their math. So I speak from knowledge and experience. And my view is mainstream among academic researchers who are trained to measure impacts. The post does not address these arguments. In fact, it seems to greatly underestimate how hard it is to measure impacts, when it refers to “MFIs which judge their success according to the measureable improvements in the lives of their clients.” The fact is that even MFIs that seek to judge their success according to measurable improvements basically can’t unless they perform the sorts of rigorous studies on which I rely so heavily. Almost none has. As a result, they don’t have a firm statistical grasp on what their clients’ lives would have been like without microfinance, the counterfactual that is needed in order to measure impacts.

  I’d rather not generalize from such a small number of studies. But one must make decisions today based on the information one has. Fortunately, more studies are appearing at a steady clip, albeit of short-term impacts. I hope that studies of longer-term impacts will eventually come.

• It is entirely possible programs that are intended to help the poor do so more. But that is a hypothesis (something they “suspect”) and needs to be tested. After all, programs run mainly for profit often help people too (think of mobile phones) and programs intended to help the poor often fail (see Pakistan). So I hope the Microcredit Summit Campaign will encourage the microfinance institutions that it favors to collaborate on rigorous research to see if they make more of a difference. In the meantime, I believe it is most prudent to generalize from the evidence we have and to bias toward the assumption that interventions do not reduce poverty among clients until proven otherwise.

By Charles Kenny - Despite protestation from all sides that there should be only one development agenda post-2015, the Rio process continues on what appears to be a parallel, overlapping track.  Not least that’s because the Sustainable Development Goals (SDGs) are facing the same issue as the process to come up with new Millennium Development Goals (MDGs) –everyone with [...]

By David Roodman -

For almost three years, I’ve been citing a single randomized study suggesting that microsavings does good. By Pascaline Dupas and Jonathan Robinson, it found that offering a savings account to market vendors in Kenya increased their investment, income, and spending on average. The account was a commitment savings account, meaning that it was expensive or impossible to quickly get one’s money out once in. This commitment device mainly appeared to help women. This finding of a stimulus to investment lined up with the studies of microcredit found around the same time that also showed higher investment. But in the microsavings study, unlike the microcredit ones, household spending and income also went up. It is one reason I advocate savings in my book.

Last October, two new microsavings appeared as working papers. One is marked DO NOT CITE OR CIRCULATE. But it’s on the web so how can it not circulate? And does blogging count as citing? Anyway, I haven’t digested it yet.

The other is by four economists: Lasse Brune and Dean Yang of the University of Michigan, Xavier Giné of the World Bank, and Jessica Goldberg, who is at the University of Maryland as well as CGD, as a post-doc. The experiment was run through Opportunity International’s bank in Malawi. The study’s results are at once encouraging, in corroborating Dupas and Robinson on the benefits of commitment savings, and confusing, in digging into the why of these benefits and producing unexpected answers. (This is the second study I’ve read in the last week involving an Opportunity International affiliate. Kudos to them for collaborating on rigorous research.)

Quantitative studies are better at telling us what happened than why. Done right, they measure whether a new drug reduces heart disease; but that does not tell us through what biochemical pathways the effect traces. Case in point: Dupas and Robinson do not know why women offered the commitment savings account earned more. One theory is that it helped them muster the self-discipline they needed to save for important purchases for their businesses. Another, which I often cite, is that it made it easier for them to say “No” to friends and relatives asking for money.

But the black box of human behavior is not impentrable. With cleverness, quantitative researchers can peer inside and measure variables thought to transmit cause to ultimate effect. That way they can rule out some theories.

This study does that. More generally, it reflects the growing sophistication of randomized trials in development economics. Like the Mongolia microcredit experiment, which tested group and individual loans side-by-side, this one compares two variants of the core treatment: commitment savings and ordinary liquid savings. And it overlays one experiment with another: months after the two kinds of savings accounts were randomly offered to some farmers, the researchers distributed raffle tickets (for a bicycle) to those who were offered accounts. For every 1,000 kwacha a farmer had saved (about $7), he got one ticket. Some people were handed their tickets in private, others in a very public way, so that their savings balances became public information. Again, the split was random. The thought was that farmers whose balances were made public would come under more pressure to withdraw and share their money unless they had the shield of a commitment savings account, as hypothesized in Kenya.

The subjects of the study were male tobacco farmers who have been organized by the tobacco companies into clubs of 10–15 members each. Even before the study, the groups were taking loans from Opportunity International Bank of Malawi, for which they were jointly liable. The loans came not as cash, but as in-kind inputs for tobacco farming, mainly fertilizer. Importantly, the standard package of inputs did not provide most farmers with as much fertilizer as they needed to maximize their incomes. “60.4% of farmers were applying less than the recommended amount of nitrogen on their tobacco plots….83.2% and 84.7% of farmers used less than the recommended amount of phosphorus and potassium, respectively.”

So here you can see the stark facts of the farmers’ economic lives. They are poor, living on an average of $1.50/day in purchasing power parity terms…but in fact, their income arrives once a year, not once a day, when they sell their crops the tobacco companies. They could earn more in the long run if they bought and used more fertilizer. But that would require the discipline and foresight to set aside nontrivial fractions of their income at harvest time for use many months later. You can see why a commitment savings account offers such hope as way to help them summon that discipline.

For the experiment, some clubs were offered an ordinary liquid savings account, which allowed deposits and withdrawals at any time. After the next harvest, the payments from the tobacco buyers went, if the farmers requested, straight into these accounts. Farmers in some other clubs were offered a commitment savings account along with an ordinary account; on opening, the account owners could specify how much of the tobacco payments would go into these accounts (the rest going into the ordinary account) and when the bank should allow withdrawals. Some clubs were offered neither kind of account.

The headline results are straightforward. As with vendors in Kenya, farmers in Malawi appeared to benefit from the commitment accounts. Although only 21% of those offered a commitment account used it (against 16% for just the ordinary account), and although farmers in both treatment groups withdrew most of their tobacco earnings pretty quickly, those offered commitment accounts cultivated 0.42 more acres than those in the control group in the next growing season, spent 16,500 kwacha more on inputs, sold 34,000 more kwacha of tobacco, and thus earned 19,200 more in profit ($132). Monthly household spending was 410 kwacha ($2.85) higher. Those offered only the ordinary, non-commitment accounts generally saw impacts of the same sign—but much smaller, and not of statistical significance. The authors put the benefit-to-cost ratio of the commitment accounts for society at nearly 4-to-1.

As I said, the study was designed to shed light also on why commitment savings accounts help people, by measuring impacts on intermediate variables. And here is where things get strange. Those offered the commitment savings account didn’t actually save more than those offered only an ordinary account. In fact the difference between the 21% and 16% take-up rates I just mentioned is within the margin of error. And while those offered commitment accounts did use them, putting in 2,000 kwacha ($14) on average, this represented only 11% of their total deposits at the bank. The other 89% went into ordinary accounts, from which money could be (and generally was) withdrawn quickly. Somehow the commitment accounts made a big difference even though the people obtaining them made little use of them. By and large, the accounts did not tie their hands, since not much money was int hem. They did not use the accounts to discipline their future selves or gird themselves against friends and extended family asking for money.

The authors theorize about what is going on, but at the end of the day, they don’t understand it. Perhaps having a commitment account allowed a farmer to tell a supplicant that all his money was locked away, even as he quietly kept it in a liquid account. But that theory is undercut by other evidence. People with access to commitment accounts transferred slightly more money to others outside their family. (Whether they transferred more or less to people within their immediate family is not known.) The results of the raffle experiment too are upside-down from the point of view of this theory. People only offered the ordinary savings account—people whose hands were completely untied—did not withdraw funds once their balances were revealed through the public distribution of lottery tickets. But if such people received their tickets in private they did withdraw more. (Depositors with commitment accounts did not save more or less in response to either type of raffle, which is one what one would expect from people who could at least claim their hands were tied.)

Why were the raffle results for people with ordinary accounts upside-down? The paper points out that most people actually kept little money in the accounts. So perhaps only those who had significant balances bothered to show up for the lottery. Their attendance, then, publicly signaled that they had holdings even when the raffle tickets were handed to them in private. But you would think this effect would occur equally for the public and private raffles. Perhaps, the authors conjecture, it was offset for public raffles by social competition: people boosted their deposits in the run-up to the raffle, knowing that the savings prowess would be publicly exhibited. The trouble with this theory is that two distinct effects would be cancelling each other out almost perfectly—rather a coincidence.

In talking to author Jessica Goldberg about it, she argued against taking those raffle results too literally. Sometimes flukes happen; statistically, one expects them from time to time. If the same group that saw raffle-reduced savings—farmers with access only to ordinary accounts, who got their raffle tickets in private—had also exhibited differences in key variables such as profit and land cultivated, she would take the raffle results more literally. But they don’t, so she doesn’t.

I asked Jessica whether qualitative research—you know, asking people with commitment savings accounts why they didn’t use them much and yet invested more in their farms—might resolve the mystery. She said she has done qualitative work in other projects, but is pessimistic that it would help here. If I asked you how your opening of a bank account six months ago affected how much time you spent at work today, would you know? It turns out that qualitative research too is better at eliciting what happened than why.

At any rate, we have the good news that commitment savings accounts make a difference for really poor people. I hope with time we’ll better understand why.

By David Roodman -

Here are two graphs of data from the Mix Market showing the rise and decline of microcredit in India—or at least in Andhra Pradesh. It is SKS that exhibits the sharpest drops in number of borrowers (from 6.24 million at March 31, 2011, to 4.30 million at December 31) and value of outstanding loans (from $926 million to $341 million). By these numbers, SKS is no longer India’s largest microcreditor.

But it could be that SKS is more conservative in its accounting, i.e., quicker than its competitors in AP (Spandana, Share, Bandhan, AML, BASIX, Trident, …) to write off borrowers who are behind on repayments. It could be that SKS’s numbers are more indicative of actual trends in Andhra Pradesh. If so, that may be because SKS is publicly listed and subject to tougher accounting standards. Or it could be because it raised millions in private equity and the initial public offering, making it readier to absorb and acknowledge losses.

Another complexity is securitizations: India lenders sometimes sell off the loans on their books. As a matter of accounting, these loans are then not part of their portfolio, I guess, but the borrowers might still be attributed to the MFI. I’m not sure how the MIX handles this.

Full spreadsheet here.

Millions of active borrowers by microfinance institution, India, 2000–11

Gross loan portfolio by microfinance institution, India, 2000–11 (million $)

By Will McKitterick -

Earlier this week, Secretary of State Hillary Clinton withstood a grueling marathon of Congressional committee hearings in defense of the FY2013 international affairs budget request. As expected, the briefings ran the gamut of U.S. priorities in national security and foreign policy, touching on everything from U.S. engagement in the frontline states to crises in Egypt, Iran, and Syria, to cuts to PEPFAR and procurement reform. Our team was eager to pull what development nuggets we could from all nine hours of the proceedings.

The Big Picture: Budget austerity was a common theme. Members of Congress were quick to remind the administration that the country faces record deficits and a persistent economic crisis. Reining in spending was on the minds of many. On the other hand, most Congressional leaders were fairly even handed when questioning the Secretary. Reps from both sides complemented Clinton on her hard work and dedication. It was also encouraging to hear enthusiastic members from both sides of the aisle acknowledge the importance of our foreign engagement and commitments abroad. For her part, Secretary Clinton was quick to remind the committees that the international affairs account remains at less than 1 percent of the total budget and that State and USAID are still working hard to squeeze every dollar’s worth of efficiency out of their spending.

MENA: The FY13 request sets aside $770 million for a new Middle East and North Africa (MENA) Incentive Fund that would tie assistance in Arab Spring countries to democratic, institutional, and economic reforms. But members of Congress were curious, if not skeptical, of the efficacy of the new proposal which has almost no restrictions on how it can be used. Secretary Clinton skillfully defended the fund by reminding the members that a similarly flexible pot was utilized in 1989 after the fall of the Soviet Union. At that time, $1 billion alone was set aside for Poland and Hungary. She assuaged concerns by emphasizing that the fund would only support credible proposals validated by rigorous analysis and by Congress. Nevertheless, the MENA fund is still vulnerable to future scrutiny as Congress loathes the sight of big pots of money that remain unobligated.

Frontline States: These were a hot button issue during the hearings, especially now that our military is readying to pull most of its forces out of the region. Congressional leaders were primarily concerned about off ramps – how the administration plans on easing into the civilian transition, what resources that might save, and whether diplomacy and development are ready to take center stage in these countries. Secretary Clinton called it “right-sizing” and stressed that as our civilian presence ramps up, we would remain committed to providing economic and governance assistance to our frontline partners. In Afghanistan, she highlighted major foreign assistance gains in health, education, energy, and infrastructure. In Pakistan, she reemphasized our commitment to working with the Pakistani government on a host of issues including enhancing the country’s energy sector.

Global Health: Congressional leaders seemed alarmed by reductions in global health spending and raised specific concerns over the administration’s ability to meet its commitments to its PEPFAR goal of placing 6 million people on life-sustaining treatment by 2013. Secretary Clinton assured the committees that cuts would be balanced by consolidating programs, finding efficiencies, improving partners’ capacity, and shifting more responsibilities to host countries. She also praised PEPFAR’s efforts to bring down drug costs and leverage support from multilateral donors like the Global Fund, which received an increase in the request.  However, it’s unclear whether or not recipient countries will actually have the capacity to take on greater local ownership of programs, or if PEPFAR targets are still on track.

Aid Reform: Secretary Clinton and Administrator Shah were applauded for their progress on reforming foreign assistance, particularly for their efforts to fix outdated procurement rules and foster greater country ownership. Giving praise to Administrator Shah’s leadership, the Secretary lauded the USAID Forward agenda to eliminate duplication and redundancy; enhance IT platforms; and improve coordination between State and USAID. Specifically, she touched on USAID’s strong-suits under Shah’s watch: monitoring and evaluation, and delivering measurable results. Finally, to allay the fears of budget hawks, she emphasized USAID’s commitment to the principles of sustainability and country ownership.

Selectivity and Focus: Congressional leaders expressed concern over cuts to foreign assistance in the Western Hemisphere and the Europe, Eurasia, and Central Asia (AEECA) account. Secretary Clinton emphasized the need to shift resources to meet priorities, an effort which we applaud the administration for undertaking. Given Europe’s record of growth and stability, we say good riddance to many of the outdated aid programs in the region. In Latin America, where the ratio of operating expenses to program costs is high, reductions in assistance funding seem logical as well.

Multilateral Aid Review: Perhaps the most unintentionally wonky question of the hearings was voiced by Senator Lee who asked whether or not the U.S. had engaged in a DfID like “value for money” multilateral aid review of our funding to multilaterals. Secretary Clinton submitted the question for review, but not before claiming the U.S. had undertaken multiple “independent, high level reviews” of our multilateral engagement. To our knowledge, the U.S. government has never completed a “DfID-like” review of multilaterals, even though we’ve asked them to.

These hearings are just the beginning of what promises to be a long year of budget negotiations between the administration and Congress over the foreign assistance account. If you’ve enjoyed this installment, stay tuned for next week when administrator Raj Shah goes to bat for USAID in another round of Congressional hearings. Expect more thoughtful analysis from Rethink as we continue to bring you in-depth coverage of the 2013 budget.

By Charles Kenny - I’ve spent the last few days immersed (drowning?) in MDGs 2.0.  First, CGD hosted a discussion of Washington-based folks interested in the issue (thanks to ODI’s Claire Melamed for headlining), and then I went to New York for a meeting organized by UNDESA and UNDP –the Experts Group Meeting to Support the Advancement of the [...]

By David Roodman -

Two Kennedy School students who were there have blogged Vikram Akula’s remarkable mea culpa.

Hala Hanna provides more detail than I’ve seen anywhere else (and a great photo):

He said he was so focused on scaling the SKS model that he did not take the time to anticipate the potential downsides of tapping into the public market. He admitted: “it’s so hard to control for the unintended consequences of your work”. Akula says his views on microfinance have changed drastically in the past year. He used to think the three main challenges of Microfinance were lack of Capital, lack of Capacity, and high Costs. Today, he argues for a new set of 3 Cs: Culture, Code of Conduct, and Control. First, a founder’s challenge is to make sure the Culture of passion persists when [she/he] leaves and is replaced by a regular CEO in a suit. Second, a solid Code of Conduct is even more crucial in a context of vulnerability like the one faced when working for the bottom of the pyramid. Rules in this context have to be adapted to the communities. And finally, Control: social entrepreneurs are naïve, Akula pleaded.

In The Great AP Microfinance Catharsis, on the CMF blog, Sushmita Meka focuses more on her own reactions to the event. I continue to love her writing voice:

Friday’s Washington Post/Associated Press story recapping, in grim detail, the manner by which SKS loan officers did push borrowers to unthinkable limits, all while top management knew, understandably left me feeling betrayed, irate, and incredulous. How could its top management have been so irresponsible as to have hidden the evidence and continue to deny any culpability? This was an affront not only to the families that had suffered the loss of one of their own but to all SKS borrowers that had placed trust in them, and to the hundreds of thousands who were once again deprived of a much-needed instrument of financial access.

Vikram Akula was set to speak at the Harvard Social Enterprise Conference, organized by the Harvard Kennedy and Business Schools, the next day, and I was ready to put forth tough questions about all that had happened.

I could never have predicted what actually ensued. My anger was replaced by shock, first by his demeanor, one that was visibly shaken and sincerely remorseful, and by the courage it must have taken to say what he related to us.

Don’t miss her afterthoughts in the comments.

By David Roodman -

I gave a book talk last night at an event sponsored by CGAP and the Club de Microfinance de Paris. There were two excellent commentators (and no unexcellent ones): Florent Bédécarrats, who is finishing his Ph.D., and Jérémy Hajdenberg of I&P Conseil, which invests in microfinance. A central point of discussion was how to limit the harm from overly ample outside capital while protecting the constructive role that outsiders can play in building businesses and strengthening governance. I think we all recognized both horns of this dilemma, and that finding a middle course would not be easy. Jérémy quoted a line from my last chapter, where I say that if it can’t be done right, it is better to err on the side of doing less—better for the outside investors to leave the scene than to keep inflating bubbles. We talked some about my idea for a credit bureau for investment in microfinance.

Separately, Florent just sent me a paper summary with some interesting graphs of data he collected on microfinance impact studies over the last 30 years. All graphs show number of papers with bars (left axis) and number of citations with diamonds (right axis).

There have been more negative studies than I realized. But still, as I have explained in blog and book, I distrust most of the (non-randomized) quantitative studies before 2009.

By Vijaya Ramachandran - This is a joint post with Julie Walz Since the mid-nineties, many African nations have ushered in dramatic economic and political changes.  But growth in other countries is stalled due conflict, repressive regimes, and lack of infrastructure.   A new publication captures the diversity across Africa, using an economic lens to evaluate the key issues affecting [...]

By Michael Clemens - I spent last Friday in rural North Carolina, talking with American farmers who employ farmworkers from developing countries. I wanted to get the hard facts on whether or not those workers displace U.S. citizen labor. I spoke with the North Carolina Growers Association (NCGA), the largest employer of documented temporary farm labor from poor countries under the H-2A [...]