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Results-Based
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Editorial
SPRING 2011
Results-Based Financing in Action:
Cambodia MSME
BY SHANNON SARBO AND DAVID HILL
With only 5 percent of Cambodia’s rural households
connected to piped water, the challenge for the
Cambodia Micro, Small, and Medium Enterprise
(MSME) Project was to incentivize private sector
water service providers (WSPs) to upgrade and
expand their piped water delivery systems in poor,
rural areas. In October 2008, the project set out to
expand drinking water to 10,000 households within
a span of 20 months and a budget of $1.2 million.
While MSME hoped the WSPs would cut their connection fees, especially for the poor, the project did
not dictate how providers should manage their own
discount programs. The rebate incentives MSME
provided the WSPs were uniform across providers,
yet flexible in allowing the WSPs to manage their own
pricing and their own investment in areas that required
more piping and treatment to reach poorer, more rural
households.
PAGE 21
Photo by Sithiyut Sam
Rather than following the traditional model of lengthy
surveys, poverty assessments, and communityoriented decision-making, the U.S. Agency for
International Development-funded project made
a simple offer to the WSPs: cash rebates for connected houses. This “results-based financing” (RBF)
approach attacked the business challenge for private
WSPs at its core. The primary reason Cambodians
lack access to water is that the connection fees—
which represent the full installation costs incurred by
the WSP—are often more than a household earns in a
month: an unmanageable one-time expense. However,
once connected, even poor households are able to
pay the monthly water bill.
Testing the quality of water delivered by water service providers.
Spring 2011
1
Founded in 1970, DAI is an independent, employee-owned,
mission-driven development firm.
Developments, the DAI newsletter,
highlights the achievements of the
firm’s overseas projects and the
activities of DAI staff.
Subscriptions to Developments are
free. To be added to the mailing
list, please contact Danielle Jaffee
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Editor: Steven O’Connor
Associate Editors:
Elizabeth Drachman, Kitty Stone,
Kara Schulz
Layout: Joanne Kent
DAI Washington
7600 Wisconsin Avenue
Suite 200
Bethesda, Maryland 20814 USA
Tel.: +1 301 771 7600
New DAI Staff
Prior to joining DAI in March, attorney Anne Simmons-Benton
led the Trade and Gender in International Development portfolio
at Booz Allen Hamilton. She created a diagnostic tool to assess
the business-enabling environment for women and piloted
this approach in Rwanda, Vietnam, and West Bank/Gaza. She
has worked with the European Union, World Bank, and U.S.
Government agencies on trade issues in Africa, Latin America,
Southeastern Europe, Russia, and the Far East.
David Besch, DAI’s new Technical Area Manager for Agribusiness,
has 26 years of experience in domestic and international
agriculture. As a Peace Corps volunteer in Swaziland, he taught
middle school agriculture. He later joined the senior management
team at Continental Grain Company, and served six years with the
U.S. Agency for International Development (USAID).
Julie Bourns is DAI’s new project team leader for the Capitalizing
Knowledge, Connecting Communities project. She has worked
for 15 years with international conservation organizations and
development consulting firms on environmental and natural
resources management projects for the Global Environment Facility,
USAID, and other donors.
Richard “Duke” Burruss, a principal development specialist in
agribusiness, launched his development career following 18 years
of service with the Virginia and U.S. agriculture departments. Before
joining DAI in November 2010, he worked for five years with the
Millennium Challenge Corporation (MCC) as a consultant.
DAI Europe, London
DAI Jordan, Amman
DAI Mexico, Mexico City
DAI Pakistan, Islamabad
DAI Palestine, Ramallah
Paul Delucco, a principal development specialist in the Economic
Growth Sector, first worked for DAI in 1983 in Zaïre on the North
Shaba Integrated Rural Development Project. A six-time Chief
of Party, he has managed projects in East and Central Africa on
natural resources management and post-conflict stabilization.
ECIAfrica, Johannesburg
www.dai.com
This newsletter was printed with 100
percent wind-generated power and
ECO-Smart certified vegetable-based
inks on acid-free and elemental chlorine-free paper certified by the Forest
Stewardship Council, and contains 50
percent recycled content including 50
percent post-consumer waste.
Laura Viehmyer is DAI’s Vice
President for Human Resources,
responsible for benefits, compensation,
employee relations, recruitment,
talent management, and training and
development. She most recently served
as Vice President for HR at the United
States Pharmacopeial Convention. Previously, she held
positions at organizations including the American Institute
of Architects, ICS USA, and the American Council of Life
Insurance. Viehmyer holds a master of science degree in
human resource management, and is a Senior Professional
in Human Resources (SPHR), Certified Employee Benefits
Specialist (CEBS), and Certified Association Executive
(CAE).
PAGE 18
2 2
Developments
Developments
BY EDWARD B. RACKLEY
The Dividends of Disaster Preparedness
The 2004 Asian tsunami, the 2010 Haitian earthquake, and Japan’s recent catastrophe convey a
common message: The impact of natural disasters
can be buffered by prior investment in preparedness
and response readiness. Japan’s greatest threat now
is radioactive pollution, but its systematic preparation for earthquake damage is paying off in terms
of trained rescue teams, appropriate equipment on
hand, and pre-stocked survival supplies. The drain
on human and material resources from outside the
country likely will be minimal.
Where preparedness is absent, as in Haiti, the burden
of emergency response falls almost entirely to the
international community. Airlifting everything from
emergency management teams to blankets and bottled water multiplies costs exponentially. And because
time is of the essence and lives are on the line, there’s
no opportunity for training or skills transfer. Haitians
certainly benefited from the massive international
relief effort, but after all the search and rescue efforts,
rubble clearing, and intensive rebuilding funded by
foreign taxpayers, is Haiti now more able to handle
earthquakes and hurricanes than before?
Haiti and the many countries devastated by the
2004 tsunami conform to an unfortunate stereotype,
wherein local catastrophes appear to necessitate a
global response—with the bill to be footed by taxpayers everywhere. Yet effective disaster preparedness
is not exclusive to industrialized countries, and nothing intrinsic to Haiti prevents it from becoming selfsufficient in handling calamity.
Agency for International Development (USAID)-funded
PPES program began in 2006, there was no legal
framework for national emergency management and
no single official institution responsible for preparedness and response. Disasters regularly required
outside intervention and assistance. PPES began by
training and certifying local municipalities according
to international standards of disaster management—
meaning preparedness, planning, and response
capacities. Soon we had trained and certified more
than 50 municipalities as emergency-ready, and when
real disasters hit, everyone could see the return on
investment.
The path toward autonomous emergency management capacity was unclear at the outset; most ominous was the absence of political will at the national
level. Suspicion between the ministries of interior and
defense, each dominated by rival political parties,
was compounded by hostility toward NATO countries, particularly the United States, making prospects
for progress bleak. And yet, five years later, Serbian
officials from the newly created Sector for Emergency
Management were recently in Washington for their
second U.S. study tour with the Federal Emergency
Management Agency (FEMA). Not only is the new
body able to prepare for and respond to Serbia’s
natural crises, its members are now well-connected
and recognized as leaders in the region.
As PPES enters closedown, DAI will conduct a comparative analysis of Serbia’s response performance
PAGE 4
Indeed, as DAI has learned from its Planning, Preparedness, and Economic Security program in Serbia
(PPES), effective disaster preparedness is achievable
even in emerging and developing countries, through
intensive training, scenario planning, and live simulations at the field level, and by securing political buy-in
among relevant ministries at the national level for the
creation of a supportive legal framework.
THE CASE OF SERBIA
Emerging from years of conflict and the painful
partitioning of the former Yugoslavia, Serbia is also
regularly subject to severe flooding, landslides, forest
fires, and occasional earthquakes. When the U.S.
Flood defense measures in Jasa Tomic, Serbia.
Spring 2011
3
eventually these discussions were opened to solicit
public input. When the Ministry of the Interior
presented its draft law to the Parliament on emergency situations in early 2009, it could legitimately
claim public backing—unprecedented in Serbia. In
late 2009, the national law was passed. The Sector
for Emergency Management was formed, combining resources from both ministries. The sector’s
new National Training Center will take over DAI’s
work and continue to train and certify the remaining 120 municipalities across Serbia.
Disaster Preparedness continued from page 3
High-level donor support can be crucial. Allies
at the USAID Mission and Embassy were ready to
support the program at a moment’s notice. Mike
Harvey, USAID Mission Director, was exemplary in
his judicious but direct involvement. His coaxing of
rival institutions was essential in forging the political alliance that resulted in the Sector for Emergency Management.
Language is important. In many countries where
we work, “reform” takes on pejorative connotations—it implies corrective action by a foreign
government whose “standards are higher.” We
used different language—framing the program in
terms of “building national capacity” and “creating
self-sufficiency.”
The Red Cross delivers U.S.-funded emergency equipment.
“before and after” the program, which will also give
us an idea of its replicability elsewhere. Key lessons
already learned include the following:
4
Build from the bottom. Partly because of poor
inter-ministerial relations in Belgrade at program
start-up, our initial efforts focused on remote
municipalities with the greatest vulnerability to
natural disasters and the poorest response capacity. At this most local level, our “product”—intensive training in disaster management and preparedness—was immediately recognized as valuable.
Further, it was highly appreciated because it was
not decreed from on high by an anonymous and
distant Belgrade ministry. Provincial resentment of
a formerly centrist regime remains high in Serbia.
By investing locally first, we “won hearts and
minds.” Our model was not carrot-and-stick but
demand-driven. Leaders from the most disasterprone areas voiced their demands, driving reform
from outside central government. With this momentum, national ownership of the issue grew naturally.
Use local momentum to convert national
authorities to the cause. We were able to sell
our early success in vulnerable areas to the two
Belgrade ministries that, owing to competing legal
precedents, were both responsible for national
disaster management. By providing a neutral floor
for dialogue, PPES managed gradually to restore
trust between ministries and local governments.
Partnerships formed around resources and equipment for specific emergency response needs, and
Developments
The Office of U.S. Foreign Disaster Assistance, the
International Red Cross, and other disaster relief
bodies were once regular visitors to Serbia’s disasterprone areas; this will no longer be the case. As PPES
winds down, we hope to quantify the better disaster response capacity we have helped bring about
in Serbia, and put some numbers around the old
saying that an “ounce of prevention is worth a pound
of cure.” In terms of investment dividends to the
international community, we anticipate relief costs to
be five to seven times higher where there is no local
preparedness or response capacity.
Given the cost of global disaster response to U.S.
and other taxpayers, we hope this precedent-setting
program will open donors’ eyes to the possibility of
replicating PPES’ approach elsewhere. Preventive
capacity building in disaster-prone countries is surely
a win for local and international actors alike.
ED RACKLEY IS A PRINCIPAL DEVELOPMENT SPECIALIST IN
DAI’S STABILITY SECTOR.
BY ANDREA WALTHER
Civil-Military Training Program Finds Its
Locally Led Approach in Demand
For the past few years, DAI has been implementing an
innovative civil-military operations and relations training program called the Trans-Sahara Security Symposium (TSS) on behalf of Special Operations Command
Africa. The program operates throughout Africa’s
Sahelo-Saharan belt, which includes Burkina Faso,
Chad, Mali, Mauritania, Nigeria, and Senegal. Despite
having to navigate a tangled web of interagency relations and funding challenges, the TSS team has won
a reputation as the premier U.S. Government civilmilitary training program in the region. As a result,
TSS has expanded into seven new countries, tripled
its curriculum tracks, and underscored the value of
strategic dialogue in civil-military relations training.
Critical support from U.S. Africa Command (AFRICOM) represents a powerful endorsement of TSS’s
locally led, development-focused approach to civilmilitary security sector assistance programs.
A CHANGING THREAT ENVIRONMENT
TSS began in 2008, the same year that AFRICOM
stood up its operations in Stuttgart, Germany. AFRICOM is the newest of the Department of Defense
(DoD) geographic combatant commands, rough
equivalents of the State Department and U.S. Agency
for International Development regional bureaus. Until
2008, the DoD divided oversight of Africa among
TSS has won support from senior U.S. Embassy personnel
throughout the region, such as U.S. Ambassador to Senegal
Marcia Bernicat, who speaks at each TSS training event held
in Dakar.
three commands; unifying this command structure
under AFRICOM signified Africa’s increasing importance as a U.S. security priority.
TSS Chief of Party Andrea Walther and U.S. Senior Military
Mentor Brigadier General (Ret.) Russell Howard attend a medical capabilities training exercise in Ndindy, Senegal.
Given AFRICOM’s rather hasty creation and roll-out,
African partner nations were initially skeptical of its
motives and programs. When TSS began its training program in West Africa, African participants
were reluctant to discuss or even acknowledge
that transnational threats such as terrorism or drug
trafficking even existed in the subregion. In recent
years—marked by terror attacks on security forces
and Western tourists in Mauritania, Mali, and Niger,
and increasingly visible financial connections between
drug smuggling and transnational groups—these
threats have become difficult to ignore.
PAGE 6
Spring 2011
5
Civil Military continued from page 5
Julius Nyang’oro, TSS governance specialist and instructor, presents a module on African governance.
DEMAND-DRIVEN GROWTH
In the past year, TSS has grown threefold, offering
new levels of training at the national, regional, and
senior leader levels. Each TSS training event builds
on previous engagements, establishing and developing cooperative relationships among the military institutions of African partner nations by strengthening
security institutions, encouraging information sharing,
and facilitating informal network building. The program’s crowning achievement was AFRICOM’s invitation to support Exercise Flintlock 11, a Joint Chiefs of
Staff multinational force training in counter-terrorism,
held in Dakar, Senegal, in February and March 2011.
For the past five years, Exercise Flintlock has focused
on tactical training and medical capabilities exercises
that assemble West African partner nations and key
European and North American allies to improve
regional interoperability and boost counter-terrorism
capacity. This year, AFRICOM asked TSS to establish
a new Flintlock classroom training component that
brought together key civilian and military strategists
from throughout the region.
Focused on conflict prevention, this TSS Senior
Leader Symposium addressed specific threats to
national and subregional security in the Trans-Sahara
region: terrorism; trafficking in humans, weapons,
and drugs; and religious extremism. Leading African
civil-military thinkers and practitioners from securityfocused subregional organizations (the UN Office of
Drugs and Crime, the African Center for the Research
and Study on Terrorism, and the Economic Community of West African States’ Peace and Security
Branch) led participants in identifying interagency and
regional mechanisms to mitigate these threats.
Participants spent most of the week in small breakout
groups—each facilitated by TSS mentors, who are
retired flag officers from the participating nations—
assessing and comparing the security capacity of
each country’s civilian and military security apparatus,
and identifying areas for improvement. The Senegalese colonel who served as the Flintlock Exercise
Director said that the Senior Leader Symposium
“served as a unique opportunity to bring together
senior military and civilian officers in an interactive
session that provides them with the tools to reflect
and develop strategies on how to engage in multinational cooperation, to give them a better understanding of the dangers of the region.”
EXPANDING INTO NORTH AFRICA
Three years ago, the dialogue on these security
threats was hard to facilitate in training events, but
in the intervening years, the reputation of the TSS
program as a forum for debate on these issues has
spread throughout the region. U.S. Ambassador to
Senegal Marcia Bernicat said it best in her Flintlock
opening ceremony address: “the strength of the
TSS training program is in its African-led approach
to security in the subregion.” Now, the TSS team
is receiving requests from countries throughout the
subregion to provide follow-up training, and has been
asked by North African countries to design a special
program for the Maghreb. We look forward to bringing our locally led approach to a new set of security
sector issues.
ANDREA WALTHER IS THE CHIEF OF PARTY
OF THE TSS PROGRAM.
6
Developments
BY MEHREEN TANVIR
Haiti Participants Embody CDE Mission
on the Center’s One-Year Anniversary
The 2010 Haiti earthquake killed and
maimed hundreds of thousands of
people, leaving thousands more homeless
and Port-au-Prince in ruins, with miles
of buildings collapsed and infrastructure
broken. Complicating the unfathomable
disaster was that the country is home to
few organizations capable of leading the
massive recovery effort.
Enormous aid funds quickly flowed to
Haiti, but local organizations were unprepared to win or manage the large projects
for donors such as the U.S. Agency for
International Development (USAID). As
a result, earthquake victims and other
Haitians held limited ownership of the
reconstruction and development work
that ensued in their own backyard.
DAI believes the most enduring development solutions are those that spring from
local people and institutions, and a year
ago launched the Center for Development
Excellence (CDE) as a capacity-building
organization to help put that principle into
practice. On its first anniversary, the
CDE has emerged as a rousing success, having conducted 70 seminars in
18 countries—most recently in Haiti—
teaching local practitioners how to win,
implement, and accountably manage
projects such as those involved in the
Haiti recovery.
“As with any business, it is a thrill to
celebrate our one-year anniversary,” said
Michael F. Walsh, CDE’s Managing Director and former USAID acquisitions executive. “CDE’s success, I believe, speaks
to the deep desire of our development
colleagues worldwide to lead the projects
that improve lives locally.”
Importantly, the CDE’s seminars train participants how to meet the management
and contractual requirements of donors
PAGE 8
Above: Jean Bernard Chassagne, the second mayor of the Port-au-Prince
municipality of Tabarre, and local residents prepare to clear rubble a few weeks
after the January 12, 2010, earthquake.
Bottom: The CDE celebrates its first birthday.
Spring 2011
7
CDE Training in Haiti continued from page 7
such as USAID and the Centers for Disease Control
and Prevention (CDC).
Since obtaining the training curriculum of the Washington, D.C.-based Center for Public Management,
CDE has introduced new courses such as “Proposal
Development Workshop,” “Project Performance
Management Planning ,” “USAID and CDC Award
Compliance for Development Practitioners,” and the
popular “Doing Business with USAID” course that
CDE presented April 19–21 in French and Creole for
CDE customers in Port-au-Prince.
“It is very difficult for grassroots organizations to
access information on how to position ourselves for
awards or partner up with others,” said Marie Gabrielle Vincent of Sonje Ayiti, a local nongovernmental
organization and one of two participants sponsored
by DAI. “We all want to be able to secure the funds
needed to deliver the most needed services. I thank
[DAI] and will make them proud of their investment.”
governance, and crisis mitigation. Training and consulting are customized to be both locally relevant and
affordable.
The CDE took its early inspiration from local nongovernmental organizations and other development
workers in Pakistan—where DAI has been working
since the early 1980s—who are dedicated humanitarians but not always equipped to take on and accountably manage donor-funded work. Since the CDE’s first
seminars in Islamabad in early 2010, the team has
hosted sessions for local practitioners in the Middle
East, Africa, and South Central and Southeast Asia,
with debut trainings scheduled this year for Tbilisi,
Georgia; Bogota, Colombia; and Phnom Penn,
Cambodia.
Port-au-Prince attendees learned about USAID, the
standard project life-cycle—from requests for proposals to project closedown—and ways they could participate as prime contractors, subcontractors, or other
roles. The course emphasized the components of
compliance on USAID projects, including documentation, project performance monitoring, and audits. Participants ranged
from experienced practitioners to
those with no experience working
with USAID. Leading the training
were Ose Pierre, a Haitian trainer
with extensive experience working with bilateral and multilateral
donors, and Annouck Hudicourt,
formerly USAID’s Senior Acquisition
and Assistance Specialist for Haiti.
As happens at all the CDE events,
participants talked enthusiastically
about their work and exchanged
contact information and ideas for
collaborating.
“The CDE has turned out to be a
great asset for DAI,” said James
Boomgard, DAI’s President and
CEO. “First and foremost, it gives
talented local development profesCDE Managing Director Mike Walsh (left) with Training and Curriculum Specialist
sionals access to the knowledge
Bonnie Kligerman and Mehreen Tanvir (right).
they need to qualify for funding that
they can use to improve people’s
The CDE operates commercially to ensure it provides
lives. But the CDE also gives DAI a chance to introproducts valued by clients and responsive to market
duce itself to some of these excellent people, and
needs. For training and consulting, the CDE taps into
positions us to work with them down the road, which
DAI’s technical and project management staff who
can only benefit our projects, donors, and beneficiadraw on the firm’s 40 years of international developries.”
ment experience in areas such as agriculture, food
MEHREEN TANVIR IS THE CDE’S DIRECTOR OF
NETWORK AND PRODUCT DEVELOPMENT.
security, economic growth and job creation, health,
8
Developments
BY PETER MORROW
From Bust to Boom:
Transforming the Khan Bank
If true development means
working yourself out of a job,
then Mongolia’s Khan Bank is
a prime example of the development practitioner’s art. After
more than a decade of work
in Mongolia’s financial sector,
DAI has literally worked itself
out of a job, leaving behind
the nation’s leading bank—a
growing, thriving, standalone
institution that is making a
material difference in people’s
lives.
Our assignment started in
2000 with a U.S. Agency for
International Development
(USAID)-funded management
The old Agricultural Bank was the only financial institution with substantial reach into
Mongolia’s vast hinterland.
contract for the state-owned
Agricultural Bank, which had
lost $4 million the year before and was on the verge
its, and earnings. The bank is one of the nation’s
of outright failure. As the new CEO of the bank, it was
largest taxpayers. And while Khan Bank always saw
clear to me that turning the bank around required
itself as a commercial operation, we also believed
us to leverage, rather than cut back, the bank’s 269
that good business means meeting the needs of your
branches. This network would prove to be a crucial
customers.
part of our strategy to launch new financial services
that met the true demands of the 400,000 people who
GOOD BUSINESS, SOCIAL BENEFITS
at that time were using our locations to do little more
One group that has benefited greatly from Khan Bank
than pay taxes or pick up their salaries.
is pensioners. Before we took over, pensioners would
go to their local branch to wait for payments in cash.
Within half a year, our new approach returned the bank
The government typically ran weeks or months behind
to profitability. New products and a new brand—Khan
on payments and rarely had enough money to pay
Bank—paved the way for a privatization process
everyone. So pensioners would jostle, sometimes
in 2003 that generated three viable bids and a new
even fight, for a favorable spot in line to make sure
owner.
they got paid. As part of our solution, we first set up
direct deposit to place pension checks in savings
A typical development project would have stopped
accounts that would generate interest, while getting
there with the end of our contract. But the new owners
rid of the lines. Next, we extended a line of credit to
from H.S. Securities, a major Japanese company,
the pension authority so the government could always
asked DAI to continue managing the bank. We further
fully cover payments—on time. Then we targeted a
demonstrated our commitment by becoming a minorlending program at the pensioners to give them yearity shareholder, tying us directly to the bank’s considround access to cash (crucial when family expenses
erable success. Khan Bank has long been Mongolia’s
go up, as they typically do at Lunar New Year or the
largest bank in number of locations—now boasting
start of the school season). Almost half of the nation’s
more than 500 branches. By 2007 it had become the
pensioners use this program, one of our most popular
nation’s largest bank in terms of assets, loans, deposservices.
PAGE 10
Spring 2011
9
Khan Bank continued from page 9
with family, access opera market information, or
watch the latest Korean soap opera. Most of those
new panels were purchased with one of our loans.
And Khan Bank’s innovation did not stop in the rural
areas. After privatizing, we opened 30 branches in the
capital, Ulaanbaatar. We became a leader in ATM distribution and Internet banking. More recently, we have
moved into corporate banking, supporting foreign
investment into the country, particularly in mining. We
handle the full array of banking services at the mine
site, from cash management and foreign exchange
to payroll, employee services, and even mortgage
lending.
A SUSTAINABLE ENTERPRISE
Peter Morrow, shown here in 2003.
We always understood the bank’s greatest asset was
its reach. Accessible in every hamlet, we are now connected to 80 percent of Mongolian households. We
have even become the provider of financial services to
the nation’s nomadic herders.
CHANGING LIVES FOR HERDERS
Before the bank started these services, herders lived
in a cash economy. When they were without cash
between the spring season (funded by cashmere) and
the fall (by meat), they were forced to borrow money
informally on short terms and at unattractive rates to
deal with medical problems, food shortages, a broken
motorcycle—whatever contingency came up. When
they started out with the bank, we required them to
open a savings account and we doubled the interest
rate we paid from 9 percent to 18 percent, encouraging them to keep their money in the bank. We also
pushed the meat and cashmere buyers to wire the
purchase monies to the herders’ accounts at the bank
for payment on the loans. Thus we took the cash out
of the process and encouraged savings.
These services yielded tangible benefits in herders’
way of life. To look at just one indicator, the number
who own solar panels has risen from 15 percent in
2002 to 75 percent in 2009. The panels power cell
phones, televisions, computers, and other devices,
transforming nomadic people’s ability to keep in touch
10
Developments
Khan Bank no longer requires DAI to play the same
role it has over the past decade. I left my role as CEO
last year, though I continue to advise the institution,
and DAI Senior Vice President Rob Dressen serves on
the Board of Directors. But fundamentally, the bank is
an autonomous institution.
In reflecting on the bank’s success, it’s important to
recognize various players whose contributions made
it possible. USAID funded the management contract
despite prevailing wisdom that the bank was not fixable. The World Bank conditioned much of its assistance to Mongolia on preventing tampering with the
bank by the government, which was often tempted
to push ill-advised loans. The government, in turn,
honored its hands-off commitment. The International
Finance Corporation made a significant investment
early on, providing the bank with the creditability and
the capital it needed to expand. DAI moved beyond
its traditional role as a project manager and spent a
decade helping build a successful business. And of
course a great many savvy Mongolian managers and
staff did the heavy lifting in the field.
The bottom line? USAID’s two-year, $2.5 million contract put DAI in position to help turn a bleeding bank
into a $1.5 billion enterprise that has contributed $40
million to the government in revenue and serves as a
crucial part of the nation’s economic infrastructure.
Khan Bank is a model for donors looking to leverage
their aid by focusing on potentially sustainable—by
which I mean profitable—activities.
PETER MORROW IS A SENIOR ADVISOR TO KHAN BANK.
BY STEVEN O’CONNOR
DAI Named a Top Development Innovator
In April, DAI was
named a Devex Top
40 Development
Innovator, one of only
10 consulting firms so
honored globally. The
award was based on
a poll of thousands of
Devex members, who
comprise the world’s
largest network of aid and
international development professionals.
“It’s an honor to be recognized for the fresh thinking
and resourcefulness we try to bring to the world’s
development challenges,” said James Boomgard, DAI
President and CEO. “This award reflects the investment we have made in innovation over the years but
above all, it speaks to the spirit of our people and
their commitment to our development mission. As
employee-owners, we have a very personal stake in
the ideas, products, and services we are bringing to
the marketplace in service of that mission.”
Recent DAI innovations include:
l
Bringing together microfinance institutions and
water utilities in a creative financing scheme—
funding more than 12,000 new household water
connections that would otherwise have been unaffordable to low-income people in Indonesia.
l
Promoting household nutrition gardens to provide
food security and improved incomes for HIV/AIDSaffected women and children in Ethiopia’s urban
centers—reaching more than 100,000 orphans and
vulnerable children.
l
Uniting the climate change, forest preservation,
and biodiversity agendas by increasing private
sector involvement in orangutan conservation—leading to more than half a million acres of
industrial forests managed using best practices for
orangutans.
Boomgard and Betsy Marcotte, DAI’s Senior Vice
President for Technical Programs, attended The Devex
Innovators Forum on April 21 at The Sweden House in
Washington, D.C., where they celebrated the achievements of the Top 40 Development Innovators.
STEVEN O’CONNOR IS DAI’S
DIRECTOR OF COMMUNICATIONS.
In preparation for the Innovators Forum,
Devex circulated a questionnaire, excerpts of
which follow:
Devex: If you had to condense it to just one or
two sentences, overall, what is it that makes
your organization innovative?
Betsy Marcotte: Demanding clients and fierce
competitors certainly help, but what really
drives us is an inner compulsion to stretch
our capabilities, and a deep-seated conviction
that “good’’ is not good enough. Personally,
I have never worked in an organization so
inclined to self-analysis and self-improvement; it’s not always comfortable, but it kills
complacency and keeps us moving forward.
Devex: Looking ahead 10 years, what are
some of the innovations in international development that your organization wants to be a
part of?
Betsy Marcotte: For us, the most powerful
catalyst of innovation over the next decade
will be the emerging leadership of host country development professionals and institutions. Another DAI innovation—the Center
for Development Excellence—is designed to
respond to and facilitate this trend. The CDE
builds the capacity of local NGOs, consulting
firms, governments, and other stakeholders
interested in winning, managing, and accountably delivering on international development
projects. We know that the best and most
motivated development talent is increasingly found in developing nations themselves.
Our intent through the CDE is to equip these
emerging development professionals with the
kind of training and structured approaches
they need to give their ideas full rein, and
over time to build a network of relationships
through which DAI can augment its own
capacities in local development contexts all
over the world.
For the full text of the questionnaire, visit
http://www.devex.com/en/blogs/innovatorsblog/dai
Spring 2011
11
BY IVAN ABRAMS
Ministry Capacity Building Project Scores
Success With Economic Diplomacy
In mid-2008, then-U.S. Ambassador to Kosovo Tina
Kaidanow determined that Kosovo’s new Ministry of
Foreign Affairs (MFA) would need help to open and
sustain Kosovo’s missions abroad, and that the MFA
as a whole would benefit from technical assistance,
initially focused on institution building, management
support and development, staff training, and legal
office mentoring. The U.S. Agency for International
Development (USAID) was tasked with administering
the project, and DAI won the award to implement it.
But the economic diplomacy initiative is the shining
star of the program. It combines proven business
development techniques with tenacious diplomacy
to equip Kosovo’s diplomats abroad with the knowledge and skills they need to recognize opportunities
for selling Kosovo’s goods or attracting foreign direct
investment (FDI), to pursue those opportunities, and to
work with the MFA and other ministries to ensure that
the opportunities are captured.
PhotoS by Ivan Safyan Abrams
In collaboration with our colleagues at the MFA, DAI
has accomplished a great deal in the intervening
years, both in terms of supporting Kosovo’s missions
abroad and building the ministry’s capacity to conduct
the nation’s foreign policy.
Photo captions: (Above foreground) Lumnije Bajrami, Senior Officer, Department of International Economic Cooperation, Kosovo Ministry of Foreign Affairs, December 2010.
(Right top) Happy Birthday, Kosovo. Celebrating the second anniversary of Kosovo’s Declaration of Independence,
Pristina, February 2010.
(Right bottom) This billboard in Pristina marks USAID’s 10 years in Kosovo, September 2009.
12
Developments
The economic diplomacy initiative has been particularly successful in cooperating with other USAIDfunded economic growth programs in Kosovo—such
as the Business Environment Enabling Project
(BEEP), the Kosovo Private Enterprise Project, and
the Systems for Enforcing Agreements and Decisions
Project—while also collaborating effectively with the
Kosovo Chamber of Commerce; Crimson Capital, a
private but USAID-supported investment fund that
provides low-interest loans to small and mediumsized enterprises; and other international assistance
projects.
Instead of turf battles and duplication of effort, we
see complementary projects focusing on their core
competencies. For example, our economic diplomacy initiative concentrates on developing Kosovo’s
diplomats as trade representatives while BEEP works
to develop incentives for businesses and eliminate
obstacles to their success.
PAGE 14
PAGE 16
13 2011
Spring 2011 Spring
13
Photo by Ivan Safyan Abrams
Kosovo MFA continued from page 13
l
Handmade rugs from Kosovo are
about to enter the U.S. market,
subject to completion of negotiations
l
A French-Chinese manufacturer of
solar panels has announced that it
plans to build a factory in Kosovo
l
A leading manufacturer of medical
fasteners is interested in locating
a high-tech factory in or near
Ferizaj, in the south of the country
l
Michelin is in talks regarding the
potential manufacture of tires in
Kosovo
Again, many of these opportunities
are as yet only possibilities, but they
are realistic ones. Economic diplomacy works, and it will work even
more in the future.
The newborn spirit of Kosovo! Children celebrate the second anniversary of Kosovo’s
independence, Pristina, February 2010.
DAI has also been able to facilitate the cooperation
of ministries formerly in competition with each other.
Prior to the collapse of the Kosovo government in
October 2010, the MFA—with the support of our
project and at the urging of other projects—had won
the cooperation of the ministries of trade and industry,
and economy and finance. Now, with a new government, we will need to rebuild those ties, but indications are that such rebuilding is quite possible.
Our project has also urged the MFA
to develop a strategic plan and work
toward a unified national government—coalition or
otherwise—that speaks with a common voice for
the good of Kosovo. We are seeing many indications
that the advent of a new government and the exemplary leadership of a new President have ushered in
a movement across ministries to develop national
strategies for the future, work together instead of at
cross purposes, and eliminate both actual corruption
and the appearance of corruption.
Approximately 50 Kosovo economic diplomats
received training from our project in November and
December 2010. Now, barely four months into their
work as economic diplomats, there are ongoing
negotiations for more than €90 million in new business and investment for Kosovo. We won’t get all of
it, and perhaps only a portion will eventually come to
Kosovo. But what a grand beginning for the nation
and its public servants!
We see ministries actively cooperating on small but
important details, such as obtaining the names and
locations of Kosovars in danger zones (the recent
tsunami in Japan was a good test of this capacity).
We see ministers speaking with one another where in
days past they merely exchanged notes, if they communicated at all. We see a spirit in the Government of
Kosovo that, if it continues, will create more and more
opportunities for the country.
Here are some examples of the trade and FDI opportunities being pursued by Kosovo’s newly energized
diplomatic corps:
Economic diplomacy can play a key role in seizing those opportunities. We at DAI hope to play our
part in building on the momentum of the economic
diplomacy initiative, and making good on what has
become the motto for our project’s work with our MFA
colleagues: “Together We’ll Build Tomorrow.”
l
BMW has entered negotiations that may result in
expanding its manufacture of auto parts in Kosovo
l
A Kosovo energy drink is now being exported to
the United States
l
Kosovo wines are being exported and test-marketed in the United States
14
Developments
IVAN ABRAMS LEADS THE KOSOVO MINISTRY OF FOREIGN
AFFAIRS SUPPORT PROJECT.
BY CHUCK COON
DAI Mexico: Laying Down Local Roots
While Tapping the DAI “Cloud”
Now in its second year, DAI Mexico is managing
projects in financial inclusion, ecotourism, regional
competitiveness, and other areas for clients such as
the Mexican Government, Inter-American Development
Bank (IADB), World Bank, private financial institutions,
and foundations. Managing Director Nate Bourns
recently sat down with Developments to discuss development issues in Mexico and the region.
Developments: How can development assistance and
cooperation with Mexico benefit the United States?
DAI Mexico Managing Director Nate Bourns.
Bourns: Sustainable development in Mexico is good
per se, but clearly it’s also good for the United States.
The two countries are linked in ways that are very positive and, as we see in the news, challenging.
We share a 2,000-mile border that features the greatest absolute wealth disparity from one side to the
other of any border in the world. Everyone is aware of
the drug trafficking and associated violence, and of
the immigration issue. When people watch the news
in the United States, they are left with the unfortunate
impression that that’s all the news from Mexico. The
Mexican Government is investing great effort. Civil
servants, police, and the military are putting their lives
on the line to take on the drug trafficking and violence.
Sustainable development has a role to play in this
effort in terms of providing economic opportunities and
alternatives for Mexicans.
On the positive side, our cultures are linked in unique
and ever deeper ways. The countries are key trading
partners for an array of goods and services. Mexico
produces a significant portion of oil consumed in the
United States and is an important importer of U.S.
goods and services. We also cooperate on major
regional and global issues, including fossil fuel alternatives. Development in Mexico may have as direct an
impact on the United States as it does anywhere else
in the developing world.
Developments: What might surprise many North
Americans about their neighbor to the south?
Bourns: Mexico has great technical capacity in
conservation issues and has been a global leader on
combating climate change, developing low emissions
strategies, and reducing deforestation. Mexico City
has an ambitious green agenda, and last November
hosted mayors from 130 major cities around the
world who signed the Mexico City Pact, a promise to
pursue green urban initiatives. A week later, the country hosted the global climate change negotiations.
Mexico also has been a pioneer in conditional cash
transfers through the Oportunidades program, which
provides subsidies to the very poor while requiring
that recipients keep their children in school, have
medical checkups, and so on, as a condition of
receiving the support. It was the first program of its
kind in the mid-1990s and has been rigorously analyzed as a way to address some of the root causes of
poverty.
While the last global recession hit Mexico hard, it’s
worth noting that Mexico’s own financial sector was
stable and soundly managed—a testament to the
technical economic management of the country.
And Mexico is a key contributor to global standards
around technical issues like the Basel capital requirements for banks.
Developments: What is Mexico’s core development
need?
Bourns: Despite being a middle-income country with
a federal government that includes sophisticated,
well-educated civil servants and resources, Mexico
got a late start in various aspects of development
and faces major challenges. Over the past decade,
Mexico has evolved from a single-party state—with
one ruling party that prioritized stability and control
over openness and broad-based development—into
PAGE 16
Spring 2011
15
Interview with Nate Bourns continued from page 15
a multiparty democracy. This means more views are
being publicly debated, and local and state governments are becoming more diverse and responsive.
With this evolution comes growing pains. Development is increasingly addressed based on public
demand rather than on political expediency. So while
there are needs across various sectors, Mexico’s core
development need is to continue evolving its overall
approach to its own development. DAI Mexico is
supporting this change by bringing to bear our global
experience in project design, planning, implementation, and monitoring and evaluation.
Developments: DAI Mexico’s initial focus was microfinance. After two years, have you made inroads into
other technical areas?
Bourns: We’ve been able to work with local private
and government partners to build on that experience while also broadening our microfinance scope
beyond Mexico and into innovative technical areas
such as mobile banking, where we’ve reviewed and
advised some of the key initiatives in Latin America
for the Technologies for Financial Inclusion Program
(www.tec-in.org) with IADB’s Multilateral Investment
Fund and the Andean Development Corporation,
CAF.
But we worked with DAI specialists in other disciplines to examine ways we could further contribute in
Mexico, and we prioritized sustainable development
(environment and energy, and value chain development) and fiscal reform—sustainable development
because Mexico is active in this area in ways we can
help, and fiscal reform because Mexico and other
Latin American countries want more robust and
accountable public services, which requires fiscal
management on the revenue and expense sides.
For our environment and energy bids, we’ve taken a
ground-up approach to identify project opportunities
where we can help, and we’ve had some success
starting with small ecotourism projects in Northwest Mexico. Our governance efforts take a more
proposal-driven approach where we respond to bid
opportunities from governments and donors such as
IADB and World Bank.
Developments: What are some governance trends in
Latin America?
Bourns: As our fiscal reform experts tell me, countries in the region need more effective tax collection,
better integrated systems to move toward resultsoriented budgeting and stronger public balance sheets.
Sound familiar? Governments across the United
States are wrestling with some of these same things.
16
Developments
DAI has strong technical qualifications in this area.
DAI’s projects in El Salvador, Nigeria, Jordan, and
Bosnia-Herzegovina—and its global Fiscal Reform
and Economic Governance project that captures
and shares benchmarking data and best practices—
are some recent positive examples. The gathering
momentum toward results-oriented budgeting in the
public sector is necessary, and requires an understanding of how to plan for, generate, capture, and
learn from efforts across a wide variety of sectors; for
example, to judge investments not just on the basis
of how many hospitals are built with public funds
(an output variable) but also on their impact on child
mortality (an impact variable).
Developments: What is the relationship between DAI
Mexico and the global DAI organization?
Bourns: DAI Mexico was allowed to set up as a local
company to serve the local market, and this is what
we have done. We have figured out how to have a
presence based on local and regional development
needs. We are now plugging this experience back
into a combined approach where we are calling on
DAI’s 40 years of technical and project management
expertise to pursue a broader range of projects that
address real needs throughout Latin America and the
Caribbean. There is no way a local company founded
by a small group of technical specialists in a given
area could stretch into other areas the way we hope
to without the backing of the broader DAI organization. The challenge for us is to continue to win and
deliver on small projects for a range of public and
private sector clients, while also going after larger
projects that would give us a broader base. So there
has to be a tight link to the rest of the DAI family while
also allowing for a decentralized approach.
Developments: What do local development practitioners need most in Latin America and how can DAI
Mexico bridge this gap?
Bourns: We can bring in international best practices
from countries and sectors where DAI has worked.
Mexico can also export development expertise—
DAI Mexico’s projects outside of Mexico count
as exported services from Mexico. The country’s
environment-based national and international nongovernmental organizations are very strong. Mexico also
has some top-notch universities and think tanks that
focus on competitiveness with which we’ve worked.
But it has few local organizations that do development implementation like we do at DAI, so we can
certainly partner with others to improve development
outcomes in Mexico and the region.
CHUCK COON IS A TECHNICAL WRITER ON DAI’S
COMMUNICATIONS TEAM.
BY MARK ROSTAL
FIRM Builds on a Legacy of Agricultural
Finance Capacity Building in Kenya
In Kenya, the U.S. Agency for International Development (USAID) recently awarded DAI a five-year project
called Financial Inclusion for Rural Microenterprises
(FIRM). The project is designed to dramatically
increase financial inclusion and access for marginalized populations, working principally in agriculture,
clean and renewable energy, information and communications technology, gender and youth, and policy
reform. Through FIRM, DAI will build the capacity of
the commercial sector to deliver customized financial
products and services for entrepreneurs and businesses—primarily in rural areas—that are now starved
of the capital they need to grow.
USAID has a long history of building local capacity
and markets in developing countries. Twenty years
ago, microfinance was a raw idea in Kenya. Over the
years—through the Kenya Micro-Private Enterprise
Development Project (MicroPED), the Kenya Microfinance Capacity Building Program (KEMCAP), and
the Kenya Access to Rural Finance (KARF) project—
USAID has consistently and strategically invested in
Kenya’s microfinance sector, to the point where it is
now an internationally recognized leader, populated by
cutting-edge institutions such as Equity Bank, K-Rep
Bank, Faulu, KWFT, and SMEP.
Likewise, in the absence of high-quality business
service providers for agriculture, USAID has facilitated the development of the sector. Now, business
development services are increasingly performed by
high-quality Kenyan providers on commercial terms.
Through FIRM, DAI will continue to build the capacity of Kenyan consultants and local business service
providers, and create the conditions for them to thrive
so they can serve the agricultural finance sector on a
profitable and cost-effective basis.
To achieve this objective, FIRM is partnering with
FSD Kenya, a locally registered financial services
trust backed by the U.K. Department for International Development, the World Bank, the Gates and
Rockefeller foundations, and the Swedish International Development Cooperation Agency. Together,
FIRM and FSD will create the agriculture Value Chain
Finance Center (VCFC) to strengthen agricultural value
chains by promoting the development of appropriate and sustainable finance, principally by identifying
and then working to overcome information failures in
agricultural and related financial markets. Crucially,
the VCFC will apply rigorous quantitative research to
high-impact agriculture value chains that suffer from a
finance gap. Ultimately, it will partner with financial and
nonfinancial sector actors to pilot and deliver services
that improve the performance of agriculture in the
Kenyan economy.
Already, FSD has pledged $5 million to VCFC to help
fund its first three years. FSD will staff the VCFC with
Kenyan professionals and DAI will build their analytical and financial capacity. Then, together with the
center, DAI will transfer the skills and expert knowledge housed in the VCFC to Kenyan consultants and
service providers. Over time, the VCFC will be institutionalized within FSD so that it outlives FIRM and
continues to serve the needs of agriculture finance.
One of the under-appreciated benefits of development
programs is the personal and professional development of the many host-country individuals who pass
through them and go on to lead the ongoing developPAGE 18
FIRM is very much standing on the shoulders of its
predecessor USAID programs, most recently the
KARF project.
Under KARF, DAI helped build the Development Credit Loan Guarantee program into one
of USAID’s top-performing portfolios through
partnerships with commercial banks and deposittaking microfinance institutions in areas such
as small and medium-sized enterprise finance,
credit unions, water, micro-health insurance, and
agriculture. All told, more than $100 million in new
lending was attributable to KARF through its Kenya
partners.
KARF also pilot-tested a new quantitative agriculture value chain finance research methodology that won widespread acceptance from the
financial sector and donor community. After KARF
helped the Central Bank of Kenya to pass the
Deposit-Taking Microfinance Bill and, later, built
the regulator’s capacity to implement the new bill,
the Central Bank requested further assistance
from KARF in policy reform areas including agency
and branchless banking, credit reference bureaus,
risk-based microfinance supervision, anti-money
laundering, and crisis management.
Spring 2011
17
FIRM continued from page 17
“I’m one of those unwritten development success stories, one that people infrequently or never
hear about. I was trained by DAI through a USAID
Kenya program when microfinance was a fledgling
industry and later I went to work in Tanzania with
DAI and then in Malawi with FINCA. Now back in
Kenya at Treasury, I continue working to help my
country’s economic development. We, at the ministry, have plans to partner with FIRM, and USAID,
our trusted partner, in a range of areas, and
specifically with the programs we manage working
with the value chain finance center by leveraging
the knowledge and capacity-building skills of DAI.”
– Ezra Onyango, former USAID Kenya MicroPed
Project Chief of Party, National Microfinance Bank
of Tanzania consultant, FINCA Malawi Country
Director, and current Kenya Ministry of Finance,
Microfinance Team Leader
New Staff continued from page 2
Dana Kenney, a senior consultant in DAI’s
Environment and Energy Sector, is an energy and
climate change expert with 20 years of experience in
policy analysis, project implementation, and capacity
building. Before joining DAI, she led efforts to achieve
Chicago’s building retrofit goals. For the previous
10 years, she developed strategies for USAID and
managed an energy, water, and environment portfolio.
Tine Knott, a principal development specialist in DAI’s
Governance Sector, joined DAI in January. She spent
15 years at USAID, managing portfolios in Jordan and
Mozambique, among other responsibilities. In Jordan,
she developed cross-sectoral programming in human
rights, good governance, and poverty.
Kathleen M. Kurz, a senior nutritionist and food
security specialist, joined DAI in March, following a
career at the International Center for Research for
Women, where she was team director for reproductive
health and nutrition programs, and three years with
the Academy of Educational Development, where she
worked on Africa’s Health in 2010 project.
Leida Schuman, who joined ECIAfrica in April,
previously worked for Sasol, a South African firm
with interests in chemicals, energy, liquid fuels,
and gas. From 2001, she oversaw black economic
empowerment programs there, developing and
enforcing requirements.
Barbara Seligman, a principal development specialist
in DAI’s Health Sector, has more than 20 years of
18
Developments
ment of their countries. If history is any guide, many
of the VCFC employees trained by DAI—people like
Ezra Onyango (see textbox)—will become industry
leaders in Kenya’s financial, agricultural, or related
sectors. Regrettably, these stories often go undocumented. But they are the essence of a program’s
success.
These successes are typically grounded in longterm relationships built on the trust that comes
with delivering results for beneficiaries, whether for
institutions, people, or both. To remain relevant and
useful to our clients in the realm of financial services,
DAI must consistently deliver high-quality services
and constantly upgrade our menu of options to meet
the evolving needs of our host country partners and
satisfy their appetite for increasingly sophisticated
development support. From KEMCAP to MicroPed
to KARF, we have done that, with a core emphasis
on building local capacity and skills. FIRM is the next
step in that evolution.
experience in health program development, technical
assistance, and management. Most recently, she
worked on Abt Associates’ health systems and policy
practice areas. She previously served in USAID’s
Office of Population and Reproductive Health.
Jason Singer, a senior economist in DAI’s
Economic Growth Sector, has more than 15 years
of experience in economic policy, development, and
management. Before joining DAI, he advised the
African Development Bank in Tunis. Previously, he
was director of the MCC Threshold Program Office at
the USAID/Indonesia Mission.
Kay Spearman, a principal development specialist
in decentralization and local government, helps
establish and monitor performance objectives for
DAI projects in Afghanistan as well as for field- and
U.S.-based staff. Her experience includes 12 years
at an international development program, local
government, and university, and 18 years as president
of Spearman, Welch & Associates.
Kirsten Weeks joined DAI in April after six years
with the Academy for Educational Development,
where she led HIV/AIDS programs in Botswana
and the Dominican Republic. Over her career, she
has supported livelihood strengthening and the
prevention, care, treatment, and mitigation of HIV/
AIDS through systems development, public-private
partnerships, civil society strengthening, and
improved health management.
BY ALYSON LIPSKY AND BARBARA SELIGMAN
With international development assistance budgets
under scrutiny, donors are increasingly seeking ways
to ensure that aid is well spent and that its intended
benefits reach the poor. At the same time, governments in developing countries are looking for innovations in service delivery that put people at the center
of development approaches. Subsequently, in recent
decades there has been a marked shift in the focus
of development funding—especially in health and
agriculture—from funding program inputs to funding
measurable results and outcomes.
Results-based financing (RBF) reflects this transition
from inputs to results, thereby increasing the incentives for providers to achieve established targets and
for beneficiaries to change behavior. Underlying RBF
is the precept that people respond to incentives.
In his recent glossary of RBF terms, the late health
economist Philip Musgrove defined RBF for health
as “a cash payment or non-monetary transfer made
to a national or sub-national government, manager,
provider, payer or consumer of health services after
predefined results have been attained and verified.
Payment is conditional on measurable actions being
undertaken” (see www.rbfhealth.org).
While the health sector has led the way, RBF has been
applied across development disciplines including
agriculture, water and sanitation, energy, education,
and telecommunications, with varying degrees of
Photo by David Hill, DAI
Understanding Results-Based Financing
With piped water service now available, one family in Kampong
Cham decided to relocate their home safely away from the river
and its associated dangers, such as flooding.
documented success. Factors determining success
or failure include the appropriateness of incentives
and defined results, the availability of accurate monitoring and evaluation systems, the ability to enforce
contracts or to transfer money, and the local context,
such as local governance structures.
RBF has been called a “game changer” because of
its potential to transform service delivery systems.
The body of rigorously evaluated RBF programs is
small but growing, and RBF has already shown strong
promise in:
l
Targeting poor households to expand their access
to social services such as health services, education, and safe drinking water
l
Creating incentives for service providers to
improve productivity and performance, especially
in health
l
Promoting innovation
l
Engaging the private sector as service providers
l
Permitting flexibility in program responses
What’s in a Name?
Various mechanisms fall under the general
rubric of RBF: output-based aid, performancebased incentives, pay for performance or
performance-based payment, performancebased financing, performance-based contracting, and cash on delivery. These different
approaches are distinguishable based on who is
supposed to respond to the incentives (providers, beneficiaries, or both) and what those
incentives are (monetary or otherwise). For
more information on the different types of RBF
initiatives, see Financial and Other Rewards for
Good Performance or Results: A Guided Tour of
Concepts and Terms and a Short Glossary by
Philip Musgrove.
WEIGHING THE RISKS OF RBF
The institutional and operational challenges of RBF
are well known. They include the risks of creating perverse incentives, compromising quality, putting stress
PAGE 20
Spring 2011
19
Results-Based Financing continued from page 19
on already weak institutions, and selecting inappropriate outcome measures for reward. Less well known is
how one can best address those challenges. Following
are some of the key issues for development practitioners seeking to incorporate RBF in their programs:
l
Balancing tensions between quality and quantity. The biggest unknown about RBF, especially
as applied to the delivery of health services, is the
extent to which incentives weighted in favor of
quantitative targets may jeopardize the quality of
care and services.
l
Efficient doesn’t always mean effective. What are
the best practices for ensuring that the results being
purchased are ones that respond to communityperceived needs and priorities?
l
Does one size fit all? To what extent are current
best practices common across sectors and to what
extent are they sector-specific?
l
Reducing distortions. Can incentives be tailored
to avoid creating distortions in service delivery or
consumption (that is, service providers favoring
incentivized services and neglecting others)?
l
Applicability to unstable settings? To what degree
is RBF applicable in less stable settings, including
post-conflict, where the regulatory and governance
environment may be too weak to support the complex mechanics of most RBF programs?
RBF AT DAI
At DAI, RBF is used in programs across a range of
sectors. The Cambodia Micro, Small, and Medium
Enterprise project, for example, discussed in this
issue, used RBF to expand access to piped water to
11,000 poor households in 12 months. To address
Join us in the Twitterverse
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What are we missing? Share gems from
your world at: [email protected]
20
Developments
high upfront connection costs—more than a month’s
wages for a poor household—DAI developed an
incentive-based Water Investment Strategy that
created a system of simple rebates to encourage
infrastructure investment. Water services providers
received rebates after households had gained access
to safe running water in compliance with standards
set by Cambodia’s Ministry of Industries. The incentives encouraged investment in harder-to-access
areas and water service providers were encouraged
to invest quickly, which they did using external or selfgenerated financing.
DAI expects to incorporate RBF more broadly in its
technical service offerings. In Mexico, for instance,
donors and local governments are now looking to
invest substantial resources in improving fiscal structures to achieve results and align incentives—focusing
on both sides of the budget equation: revenues and
expenditure. With the help of World Bank and InterAmerican Development Bank loans, Mexico’s Ministry
of Finance is implementing an ambitious agenda for
results-based management across state government
budgets. Building on knowledge gained through DAI’s
successful fiscal reform work in El Salvador and elsewhere, DAI Mexico hopes to support these initiatives.
RBF shows great promise. Evaluations of Mexico’s
groundbreaking program, PROGRESA—a conditional
cash transfer program launched in 1997 to improve
school enrolment and attendance, and boost demand
for health services and better nutrition—demonstrate
the positive impact RBF approaches can have on
education and health outcomes, as well as household income. Donors are beginning to emphasize the
importance of RBF in their own approaches. The U.K.
Department for International Development’s recent
Bilateral Aid Review, for example, makes “accountability for results” a priority for funding recipients. The
evidence base in support of RBF is expected to grow
later this year with the release of results from a World
Bank study of RBF programs in Afghanistan, Benin,
the Democratic of the Congo, Eritrea, Ghana, Kyrgyzstan, Rwanda, Uganda, and Zambia.
DAI is continuing to look at ways to apply lessons
learned in RBF design and implementation across
sectors, especially with an eye to employing our skills
in community engagement, legislative and regulatory
strengthening, and other governance approaches that
can potentially strengthen RBF as a means for delivering enduring results.
ALYSON LIPSKY IS A RESEARCH ASSOCIATE AND
BARBARA SELIGMAN IS A TECHNICAL AREA MANAGER
IN DAI’S HEALTH SECTOR.
It was a calculated risk that paid off. To reach their targets and get their money, the WSPs had to figure out
how to get poor people to connect to newly upgraded
and expanded systems, and they created a range of
solutions tailored to their local situations. Once the
connection fees became affordable to enough people,
the decision to connect effectively became a community decision: If one or two neighbors signed on, their
neighbors tended to sign on too.
In practice, the WSPs would negotiate informal sliding scales that provided higher subsidies to poorer
people. Connection fee discounts ranged up to 70
percent (that is, 70 percent of the price prior to the
MSME rebate program). Because the WSPs are
local and know their neighbors, they could tailor
approaches far better than an external donor and had
a better sense of what it takes to get a customer to
sign on for service.
POWERFUL RESULTS
The results were impressive: Within 12 months of
signing agreements, 17 WSPs connected 11,000
households (50,000 people) to safe drinking water;
at the 18-month mark, the program had connected
67,000 people. The average, full capital investment
was $152 per house, of which MSME promoted an
average rebate of $70 per household hook-up—about
70 percent lower than the cost of most donor-funded
piped-water initiatives. More than 130,000 mostly poor
rural Cambodians have benefited from the operational
improvements spurred by the program.
Did the rush to connect customers and collect rebates
come at the expense of water quality? No—quite
the contrary. MSME made it clear to its partners that
payment was conditional on meeting the Ministry of
Industry’s standards for clean drinking water. At first,
the WSPs greeted this requirement with skepticism.
For example, during the initial field visits, only one
of 17 WSPs provided water with residual chlorine
at acceptable levels throughout the pipe network.
Common excuses for not providing properly disinfected water were “people don’t like chlorine,” “those
houses are too far away,” and “clear water is good
enough in rural areas.”
Some providers doubted they could ever meet the
standard and thought the MSME team would eventually lower the bar. However, after missing their first
milestones the WSPs figured out that MSME was
serious. For the first time, some WSPs started flushing
out and regularly cleaning their old pipes, installing
new blow-off valves, or using automated equipment
to assist with proper chemical dosing. Every WSP
Photo by David Hill, DAI
Cambodia MSME continued from page 1
A clean water connection can literally be a life-saver.
started monitoring water quality. After a few months,
all 17 WSPs were providing tried and tested safe
water throughout their systems.
This trial-by-fire approach helped build confidence
among WSPs that they could deliver safe water
to every customer. And unlike traditional training
programs, this approach required every operator,
manager, and owner to take quality seriously and
work together to ensure that standards were consistently met. In rapidly building internal capacity,
this approach also built trust with consumers, local
officials, and regulators.
Is this success sustainable after the project comes to
an end? We think so. Certainly, standard operations
will continue. Previously, many of the businesses
were losing ventures because they could not connect enough households, but now all 17 WSPs have
an expanded customer base to keep profits flowing.
Continued investments and growth are anticipated:
Since completing their commitments to MSME,
several WSPs have invested in additional piping, two
have built new treatment plants, and several have
offered further limited-time-only discounts for new
connections. Growth is in everybody’s interest.
For MSME, the RBF approach ensured that the
desired outputs were delivered before any funds
were released—the project did not pay out until the
households involved had invested in the connection
and received safe drinking water. On top of that, the
WSPs bore almost all the risk in these expansion
deals, thereby mitigating the donor’s exposure. RBF
proved to be an efficient and effective way to achieve
significant impact.
SHANNON SARBO HAS COMPLETED SEVERAL
ASSIGNMENTS WITH MSME. DAVID HILL IS A
WATER SPECIALIST ON THE PROJECT.
Spring 2011
21
BY DOUGLAS HATCH
RESPOND’s Coordinated “One Health”
Approach Begins to Make Its Mark
A DAI-led project that is building capacity in high-risk
countries to control the spread of infectious disease
has been cited in Congress as exemplary of U.S.
Agency for International Development (USAID) efforts
in global public health. RESPOND, part of USAID’s
larger Emerging Pandemic Threats (EPT) program,
connects government officials, university faculty, civil
society, and private sector practitioners from human,
domestic animal, and wildlife health sectors. Together
they are building comprehensive disease management systems and strengthening outbreak response
capacity to prevent emerging infectious diseases from
spreading locally, across borders, and abroad.
“We leverage existing, successful partnerships to
bring human, animal, and environmental health disciplines together,” Amie Batson, USAID’s Deputy Assistant Administrator for Global Health, said March 31
in testimony on Capitol Hill. “[This program improves]
the speed at which zoonotic disease threats are
detected and response and prevention measures are
employed, thus reducing impact on public health.”
Batson noted the support provided by RESPOND’s
office in Uganda to the One Health Central and East
Africa network of 14 schools of public health and
veterinary medicine from six African countries.
YELLOW FEVER OUTBREAK SHOWS PROGRAM
IN ACTION
The RESPOND team in Uganda also recently helped
contain a hemorrhagic fever outbreak in the north of
the country through collaboration with Uganda’s ministries of Health and Agriculture, the Uganda Wildlife
Authority, the U.S. Centers for Disease Control and
Prevention (CDC), the African Field Epidemiology Network (AFENET), the World Health Organization (WHO),
and other partners.
Led by Dr. Mac Farnham of the University of Minnesota, RESPOND helped coordinate the National
Task Force assembled to guide government policy
and response, and supported disease detectives
from AFENET as they investigated the outbreak and
collected samples for testing. RESPOND worked
closely with CDC Uganda and EPT partner DELIVER
to coordinate the shipment of personal protective
equipment to Ugandan ministries and nongovernmental organizations such as Doctors Without Borders to
prevent infection among local clinical and investigative personnel. After the incident, RESPOND collaborated with the CDC, WHO, and Ugandan ministries
to identify ways to strengthen Uganda’s outbreak
response chain.
Although more than 50 people died during the
outbreak and more than 200 suspected cases were
reported, careful teamwork between clinicians and
investigators enabled them to collect the proper
samples for testing, and a CDC laboratory in Fort Collins, Colorado, identified yellow fever as the cause of
the outbreak. The National Task Force promptly began
a mass yellow fever immunization activity in affected
districts in Uganda.
This action by the National Task Force illustrated the
importance of a coordinated One Health approach
to outbreaks of viruses with high mortality. The mass
vaccination campaign likely prevented hundreds of
additional yellow fever cases in the affected districts,
thereby limiting the impact on families and mitigating
the resource burden on an already overtaxed health
care system.
Yellow fever vaccination in northern Uganda.
22
Developments
DR. DOUGLAS HATCH IS RESPOND’S
SENIOR FIELD EPIDEMIOLOGY OFFICER.
FROM THE DESK OF BETSY MARCOTTE, SENIOR VICE PRESIDENT, TECHNICAL PROGRAMS
Five Cheers for the
Private Sector
On May 2, I testified before the Commission on
Wartime Contracting, a body tasked with evaluating
various methods of delivering foreign assistance in
conflict Iraq and Afghanistan. The panel had previously heard from nonprofit nongovernmental organizations (NGOs). And what it heard, according to Eliza
Villarin, a journalist for Devex, was this: “Contracts
are not ideal for implementing projects in U.S. contingency operations in countries such as Afghanistan
because of the contractors’ for-profit outlook and
the lack of independence and long-term community
engagement.”
According to this line of thinking, firms like DAI are
more expensive and less effective than their nonprofit
counterparts, with little commitment to the long-term
development of the communities they serve. If this
were true, no one in their right mind would hire a
private sector development firm. But it’s not, and in
our testimony we tried to make that case, focusing
on results, sustainability, cost, competition, and
accountability.
Let’s begin with results. There is no evidence that
NGOs are more successful at delivering development results than development firms. There are good
development firms and bad, just as there are good
NGOs and bad. The key is to impose a rigorous
system of competition that weeds out the good from
the bad, with a razor-sharp focus on development
results.
Our results have been exemplary. In the east of
Afghanistan, the DAI-led Alternative Development
Program-Eastern Region (ADP/E)—funded by the
U.S. Agency for International Development (USAID)—
improved the lives of millions of Afghans. It reached
2,600 communities; brought 24,000 hectares of
land into non-poppy production; generated 17,000
full-time, permanent jobs; trained 118,000 farmers,
government officials, and small business owners; and
helped more than a quarter of a million subsistence
farmers raise their incomes anywhere from 60 to 125
percent.
ADP/E’s successor program is IDEA-NEW (Incentives
Driving Economic Alternatives for the North, East and
West). The Philadelphia Inquirer’s Trudy Rubin, who
spent a week with IDEA-NEW, called it a model of
foreign aid in action.
What about the charge that we are not interested in
the long-term sustainability of our programs? DAI’s
engagement in Afghanistan dates back to 1976,
with the design for an integrated rural development
project in Mohammed Agha District. Since then, we
have carried out 29 assignments there, including 16
major, long-term projects. But we do not mistake
tenure or local residence for impact. When it comes
to sustainability, DAI focuses on building sustainable
local capacity by developing and nurturing institutions
in the private sector, civil society, and government.
Conscious that assistance programs too often create
dependency where they hope to spur development,
we aim to “work ourselves out of a job” by building
sustainable change agents and in-country development capacity.
Our small business program, for example—the
Afghanistan Small and Medium-Sized Enterprise
Development Activity, or ASMED—has supported
the establishment of more than 1,000 small firms and
assisted 10,000 more, creating 100,000 new jobs.
It has leveraged $91 million of partner investments
through 52 of USAID’s Global Development Alliances,
for an ASMED investment of $13 million. This is a
powerful market endorsement of the program and a
powerful statement of faith in the Afghan people to
create viable, self-sustaining enterprises. This is the
road to a healthy future for Afghanistan.
In Afghanistan, building local capacity is also about
nurturing and training local talent—people who will
go on to lead their own country’s development. In all,
DAI employs more than 1,000 Afghans, or 90 percent
of our workforce in that country. And we partner with
hundreds of Afghan organizations.
PAGE 24
Spring 2011
23
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Betsy Marcotte’s Desk continued from page 23
With respect to cost, there is little difference between
NGOs and private sector development firms, and no
evidence that NGOs enjoy any cost advantage over
their private sector counterparts. Save the Children
claimed that NGO salaries are lower than those of
the private sector. The truth is that USAID does not
permit most development project employees to
receive higher salaries than government employees;
all salaries must be approved by USAID. This restriction does not apply to NGOs. In Afghanistan and other
locations, DAI has seen valued project professionals
leave because we could not match the higher salaries
paid by NGOs.
Again, the solution here is competition. DAI and other
firms compete intensely for projects. The moment we
are not cost-competitive for a given level of service,
the market will tell us. We welcome competition—from
nonprofits and for-profits—because competition yields
lower costs, better value, superior technical innovation, and more diverse technical choices. And we
think the U.S. Government and U.S. taxpayers should
view with skepticism any effort to bar the for-profit
sector from the marketplace.
Once a competitively bid project has been awarded,
rigorous oversight is essential. Contracts provide
the greatest level of accountability because they
are carefully controlled and routinely audited. USAID
contracts involve client approval of costs and actions
every step of the way. By law, contractors are subject to close public scrutiny—of every taxpayer dollar
spent—through independent government audits. The
same strict USAID management oversight and standards of accountability and transparency do not apply
to grants and cooperative agreements. Recognizing
the importance of project oversight, DAI was one of
the first USAID implementers to establish its own
Fraud Prevention and Investigation Unit in Afghanistan.
To be clear, we think there are important roles for both
grants and contracts in Afghanistan, for both NGOs
and private sector development firms. But we contend
that efforts to limit the kinds of service providers available to donors are misguided, anticompetitive, and
ultimately detrimental to the international community’s
development objectives. Fundamentally, we believe
that all development organizations—NGOs and private
sector firms—should be judged not on their for-profit
or nonprofit status, but on their ability to deliver development results on a cost-effective basis.
BETSY MARCOTTE
24
Developments