Distributing Foreign Aid
No unitary world body is responsible for coordinating and distributing foreign aid. Foreign aid efforts generally consist of bilateral or multilateral aid. One country directly grants bilateral aid to another, while several countries pool resources together before joint-delivering multilateral aid. The U.S. Agency for International Development (USAID) is an example of a bilateral aid organization because only the United States is part of its decision-making process. A strong example of a multilateral aid donor would be the United Nations or the World Bank, where the organizations themselves exercise a strong degree of autonomy over distributing foreign aid.

International Cooperation in Foreign Aid

The World Bank, United Nations and the Organisation for Economic Co-operation and Development (OECD) are some of the biggest agenda-setters in foreign aid. While they all operate independently, each contributes to a shared effort and common understanding in achieving their goals.

In 2012, the United Nations convened a large conference to set targets and an agenda for goals in sustainable development by 2030. Of its 17 development goals and 169 targets, poverty topped the list and contained seven targets. The conference determined the most significant and salient issues relating to sustainable development until 2030. In support of this common objective, OECD also incorporated a platform regarding the 2030 Agenda for Sustainable Development. This exemplifies how one organization’s agenda can cross over and influence agendas that others set.

The Coordination Efforts of the OECD

The OECD advises the distribution and implementation of effective foreign aid flow among the aid members of its Development Assistant Committee (DAC). Within many different frameworks and groups, OECD utilizes a “gold standard” for foreign aid called Official Development Assistance (ODA). Since 1969, the largest countries convened within the DAC have adopted ODA as their primary source of distributing foreign aid. The definition of ODA is a complicated matter, because, for instance, the countries that are eligible for ODA change over time. Regardless, distributing foreign aid undergoes careful optimization to promote and target economic development and welfare in developing countries. These repercussions are wide-ranging. International bodies from the World Bank to the U.N. respect the standards that the OECD sets.

The OECD utilizes a top-down approach to achieving broader development and aid objectives. The organization regularly measures and assesses its progress in implementing its objectives. This includes providing advice to member countries. In its report on “Measuring Distance to the SDG Targets,” it provided member countries with an assistive overview of strengths and weaknesses when it comes to achieving the Sustainable Development Goals (SDGs) that the U.N. set. Such feedback helps countries stay on track to best reach the goals. Overall, the study revealed uneven progress on the Sustainable Development Goals. Some targets, such as infrastructure experienced near achievement, but other targets rated medium to low progress.

The World Bank

The World Bank is something of a twin to the International Monetary Fund (IMF). However, instead of preventing and dealing with financial catastrophes like the IMF, “the [World] Bank is primarily a development institution.” One can see the international links when the World Bank discusses ODA while considering foreign aid flows.

In 2021, one of the World Bank’s primary objectives is to soften the economic blow of COVID-19. It plans to deploy up to $160 billion by June 2021 in support of countries’ responses to the virus. For example, the World Bank provided nearly 7,000 infection, prevention and control supplies and more than 31,000 personal protective equipment to Papua New Guinea. In Ghana, it supported the training of thousands of health professionals and technicians. Today, the World Bank is the largest external financier of education in developing countries. In its 2020 annual report, the World Bank estimated that the International Finance Corporation, a member of the World Bank Group, would contribute to the creation of at least 1.9 million jobs through the projects it financed in the fiscal year 2020.

Looking Forward

Thanks to organizations such as the World Bank, the U.N. and OECD, foreign aid benefits from higher levels of cooperation than ever. While no unitary body exists to overlook aid distribution, these organizations are filling the gap. Their efforts foster hope for even greater effectiveness in distributing foreign aid.

– Marshall Wu
Photo: Wikipedia Commons

Iceland’s Foreign AidIceland, located in the North Atlantic Ocean, has a population of fewer than 400,000 people. The small Nordic island is home to some of the most sought after natural landmarks and tourist attractions such as the northern lights. Although small, the country has provided big backing to countries triple its size through its foreign aid programs. In 2008, Iceland experienced what economists considered to be the most severe economic downturn in its history. After years of hard work, Iceland was able to rebuild its economy and rebounded successfully. Aside from the financial crisis in 2008, the country has been able to maintain relatively low poverty rates with rates remaining at 0.10% from 2013 to 2015. Iceland has paid its good fortune forward by offering assistance to countries experiencing economic fragility. The Icelandic government is committed to fighting poverty by providing support to nations in need. The main objective of Iceland’s foreign aid pursuits is to reduce poverty and hunger while advocating for human rights, gender equality and sustainable development. Three countries, in particular, have been supported by Iceland’s foreign aid.

Syria

Syria has a long history of political turbulence with numerous uprisings dating back to the 20th century. One event, in particular, was especially tumultuous. In 2015, Syria had experienced a major political uproar in one of the largest and oldest cities in the country, Aleppo. “The Battle of Aleppo” began in 2011 in the city of Deraa. Citizens who opposed the leadership of President Bashar al-Assad decided to rebel. This led to a civil war between the Syrian government and protesters who the Syrian government referred to as rebels. The civil war that lasted six years had a detrimental impact on the citizens. There were massive food and gas shortages. Multiple buildings were victim to mass bombings, including schools and hospitals. Civilians were caught in the crossfire and suffered greatly as a result. Iceland stepped in to offer assistance and allocated $600,000 to support civilians impacted by the war in 2015. The country continued in its efforts by supporting Syria with $4 million worth of humanitarian aid in 2016.

Malawi

Malawi holds one of the highest rates of poverty in the world, at 51.5.% in 2016. Malnutrition and infant mortality impact Malawi’s 18.6 million population. The country has experienced notable economic growth in the past three years, with a 4.4% increase in economy in 2019. Unfortunately, these economic gains have been stalled as a result of the COVID-19 pandemic. In early November 2020, the Icelandic government donated $195,000 to the World Food Programme to assist with the COVID-19 response in Malawi.

Uganda

Uganda and Iceland established their relationship in the year 2000. The Icelandic government is committed to enhancing the livelihood of Ugandan fishing communities located in the Kalanga and Buikwe districts. Uganda is one of the largest recipients of Icelandic foreign aid with an annual distribution of $6 million. Iceland’s contributions have seen monumental success with safe water coverage now standing at 77%, up from 58% in 2015. The primary school completion rate in Buikwe is up from 40% in 2011 to a staggering 75.5%.

Iceland: A Foreign Aid Leader

While Iceland may be small in comparison to its peers, Iceland has been tremendously influential in its foreign relations. The three countries above are just a few of the nations that Iceland has assisted. Humanitarian efforts continue to provide support to countries in need through Iceland’s foreign aid.

– Imani Smikle
Photo: Flickr

Foreign Aid efforts in AfghanistanAfghanistan’s evolution after two gruesome decades of immense adversity has caught the attention of countries all over the world. The South Asian nation has made breakthroughs in infrastructure, getting millions of girls in school and improving community development. Nonetheless, foreign aid efforts in Afghanistan are still crucial for the further development of the country.

Foreign Aid Skepticism and COVID-19

The world wants to see Afghanistan succeed, but despite willing donors, definitive complications hinder the level of aid that Afghanistan is severely reliant on. The imminent withdrawal of U.S. troops has caused violence from the Taliban to spike while pressures of long-awaited peace talks between the two powers unfold, making donors wary of sending money that could be wasted due to corruption based on past events.

On top of that, COVID-19 is running rampant and bruising economies all over the world, cutting aid efforts in half compared to previous years.

Afghanistan’s rooted systematic issues will continue to undermine any reconstruction and development efforts unless a clear and mindful plan is made that addresses the topical concerns affecting the nation and motions toward this kind of growth are beginning to come to fruition. There are several important facts to note about foreign aid efforts in Afghanistan.

Cuts to US Forces Links to Cuts Toward Aid

To end the United States’ longest war, the Pentagon announced that a cut to U.S. forces in Afghanistan from 4,500 to 2,500 will be underway by mid-January 2021. This decision has already sparked vigilance and tensions between the Afghanistan government and the Taliban, as there is a great concern that the Taliban will feel invited to expand its influence and interfere with hopes of peace and progress. United Nations High Commissioner for Refugees, Filippo Grandi, urges that Afghans are in “acute need” of humanitarian support, stating that nearly 300,000 Afghans have been displaced by conflict in 2020.

Deadly attacks on Afghan forces show the Taliban’s intentions during a time where peace talks are being strained after months of stagnance and it has made donors feel uneasy about whether the Taliban could abuse any funding meant for aid. Even amongst suspicions, foreign donors like Germany are still showing support, urging the international community “not to turn their backs on Afghanistan.”

Ensuring Prosperity is an International Effort

After 19 years of promised reforms and attempts to grow the economy after the U.S. ousted the Taliban in 2001, Afghanistan will still be reliant on international support for the foreseeable future. Ministers from about 70 countries and officials from humanitarian organizations have pledged a total of $12 billion to the war-torn country over the next four years, at Afghanistan’s international donor conference held on Nov. 23 and 24 of 2020.

Germany has pledged $510 million in civilian assistance, the United Kingdom pledged $227 million in civilian and food aid, Norway pledged $72 million in development assistance and humanitarian aid and the United States pledged $600 million in civilian aid but made half of it conditional on the progress of Taliban peace talks. The U.S. was not alone in donating with specific conditions. All donors stressed that aid would only come as long as Afghanistan shows that it is committed to the peace process and that all parties to the Afghan conflict must respect human rights.

COVID-19 Causes Donation Restraints

Afghanistan is one of many countries taking an economic plunge due to COVID-19. The poverty level jumped from 54% last year to 70% during the pandemic, with more than half the population living on $1.14 a day, despite the billions of dollars devoted to the country over the last two decades.

A global pandemic combined with fragile circumstances emphasizes the need for foreign aid in Afghanistan, but with the heavy burden of COVID-19, most international donors have made significant restrictions on how much they can give. At the last donor conference in 2016, countries pledged a total of $15.2 billion for the years 2017-2020 compared to the $12 billion for 2021-2024.

Past Corruption is Obstructing Development

The U.S. government’s independent oversight authority on Afghan reconstruction, the Special Inspector General for Afghanistan Reconstruction (SIGAR), reported on October 20, 2021, that $19 billion of the total $63 billion that the U.S. has spent on Afghanistan’s reconstruction since 2002 was lost to waste, fraud and abuse.

With corruption forming such a stain on Afghanistan’s reputation and leaving remnants of distrust amongst potential donors, it is apparent why obtaining the necessary aid for growth and development has been such a hindrance for the war-torn country. That is why it is vital to ensure that future investments being made toward reconstruction are not lost and exploited.

Prospects for Peace

The Afghan government and the Taliban have endured a three-month impasse regarding peace talks that were finally brought to a close on November 2, 2020. The Afghan government and the Taliban are now expected to implement an agenda on how they can be partners in developmental changes and advancing realistic and sustainable peace plans.

As the world carefully watches the peace talks unfold, there is hope for a new start. Afghanistan is ready to transform into what it has envisioned for decades, and with realistic compromises set in place, there is an assurance that donors and the international community will feel less wary about foreign aid efforts in Afghanistan.

– Alyssa McGrail
Photo: Flickr

China’s Foreign Aid
Despite the lack of official data and openness in Chinese policy on its aid programs, there has been a visible development over time in the ideology and quantity of China’s foreign aid programs, going from limited in scope to both global and influential. Just as China has evolved from being a net aid recipient to a major global aid donor, so have attempts by researchers to discern the effectiveness and implications of China’s increasing share of aid.

China’s Development Regarding Foreign Aid

China’s developments in foreign aid have strong ties to its own developmental history and situation. For instance, one can examine four noticeable and distinct time periods regarding its approach towards foreign aid. In its first phase, from 1949 to China’s adoption of the Reform and Opening-up Policy, foreign aid was primarily ideological and centered around competing with Taiwan for diplomatic recognition. For instance, it utilized foreign aid in order to encourage countries to vote favorably for or side diplomatically with China. By the end of 1975 (during the cultural revolution), foreign aid had amounted to 5.9% of total government spending. For comparison, the United Kingdom peaked in recent years at 0.7% of its GDP on foreign aid spending. Following the Reform and Opening-up Policy, aid took a complementary role to diplomatic cooperation and trade, shrinking in its ideological orientation.

China’s third phase of aid focused on international institutions as China became increasingly involved in international organizations, treaties and the global economy. Since 2013, in its most recent orientation, foreign aid has matched step with China’s greater economic role in the world as China has contributed more to global aid infrastructure such as the World Bank, and is finding its own ways of improving the effectiveness of its own aid.

The Evolution of Chinese Aid

The expansion and evolution of Chinese aid have come from two main factors, one domestic and one international. Most recently, China’s 13th five-year plan, covering the phase of 2016-2020, laid out an increasingly global agenda for China’s development, bringing up core principles such as sustainability, openness and inclusivity. It follows that China’s current agenda for foreign aid will adopt these development principles. Internationally, adoptions of U.N. resolutions such as the Paris Climate Agreements and the G20 Hangzhou summit have carried sustainable and global development goals into its aid agenda, helping China grow as an international leader in global sustainable development.

A Picture of China’s Foreign Aid

The very nature of estimating China’s foreign aid is challenging because the data itself is a state secret. An AidData report, published in late 2017 and meticulously computed and collected by hand over a period of five years, analyzed Chinese aid commitments from 2000-2014 and provides the most recent data. Furthermore, the nature of China’s foreign aid is unlike that of other major global aid donors because it follows its own unique logic. For instance, only as recently as 2018 had China’s foreign aid come under a single centralized body. Furthermore, Chinese aid tends to emphasize economic and infrastructure aid, coming in the form of export credits or near-market rate loans.

As a result of many of these factors, one can truly call little of China’s aid official development assistance (ODA), the most common type of foreign aid in the world today. In fact, one can consider just 22% of China’s aid ODA, while roughly 93% of U.S. aid is ODA. To illustrate the distinction, estimates using looser definitions of ODA find that in some years, China’s quantity of foreign aid has approached that of the United States. Other estimations of ODA in the strict sense find that China’s quantity of aid is comparable with that of countries such as Luxembourg.

Chinese Foreign Aid Around the World

Of China’s complicated foreign aid breakdown, the top three destinations of Chinese foreign aid around the world are Africa in first with 34% of all aid flow, Central and Eastern Europe with 16% and Latin America with 15%. When accounting for only ODA-like aid, however, aid takes on a more nuanced perspective. While Latin America keeps most of its share, now with 12% of ODA-like flows, Central and Eastern Europe receives only 3% of ODA-like flow, and Africa nearly doubles its portions, receiving 58% of China’s ODA-like aid flows.

The Benefits of China’s Foreign Aid

AidData ultimately concluded in its research that Chinese aid, contrary to some people’s fears, certainly did more good than harm. One point AidData made was that Chinese ODA would, on average, contribute to a 0.7% increase in economic growth two years after project commitments, although it did not find positive correlations between non-ODA aid and growth.

China’s evolution from net aid recipient to major global donor has been a transition that has kept pace with its financial development. Despite the shortlisting of available data and information, China is poised to overtake the U.S. as the largest aid donor in Africa if one considers all of the aid it gives. Mystery ultimately shrouds China’s aid, even today, and to know where the next stage of Chinese aid will go, it would be beneficial to follow China’s broader national development agendas which set the broader tone and direction of all economic efforts in the country. Given its expanded role in today’s world, China will likely continue on its overall trend of improving both the quantity and impact of its own foreign aid as it incorporates international development agendas, learning from and teaching others about its own economic lessons.

– Marshall Wu
Photo: Flickr

Demining Zimbabwe's National ParkLocated in southeast Zimbabwe, Gonarezhou National Park is home to 11,000 African elephants, which is how it earned its name as the “Place of Elephants.” Unfortunately, it is also the site of thousands of buried landmines. These landmines were placed by the Rhodesian army during Zimbabwe’s Liberation War and have remained there for more than 40 years. Although there have been efforts to remove these mines, they continue to be a constant threat to the people of Zimbabwe and local wildlife. Demining Zimbabwe’s national park will have several benefits for the country.

APOPO: Demining Efforts

The United States has provided a grant of $750,000 to the nonprofit APOPO to demine the Sengwe Wildlife Corridor, where a large portion of the undetonated landmines reside. The Sengwe Wildlife Corridor covers a stretch of land that connects the park to South Africa and is used regularly by migrating elephants.

The area that APOPO has been designated to work is one of the largest in the world: 37 kilometers lengthwise and 75 kilometers in width. With almost 6,000 landmines per kilometer, communities in the surrounding area are unable to access potential land for farming and endangered species are at constant risk.

The presence of the minefield prevents the elephant population of the park from migrating and potentially mixing with other elephant populations. This presents a long-term risk of limiting the already shrinking African elephant gene pool.

APOPO has established a five-year plan for demining Zimbabwe’s national park, expecting to remove all undetonated landmines from the area by 2025. It estimates that it will remove more than 15,000 landmines before the end of its operation in the corridor.

The nonprofit will be working in tandem with the Gonarezhou Conservation Trust to maintain that the process will not impede conservation goals for the park.

The project also complements USAID programs to support community-based natural resource management, provide climate-smart agricultural technologies and improve the value chain for communities to sell their products for a fair market price.

Poverty in Zimbabwe and COVID-19

Zimbabwe is currently facing severe economic hardships that have only worsened due to the COVID-19 pandemic. In 2019, 50% of Zimbabweans experienced food insecurity and 40% faced extreme poverty. This number is projected to increase as conditions worsen with the onset of the pandemic and severe droughts. Inflation in the country has been rampant, with prices of food increasing by 725%, resulting in a severe loss of purchasing power for the poor. The pandemic has impacted the already economically challenged country by decreasing trade and tourism.

Aiding Economic Recovery in Zimbabwe

The United States and APOPO hope that by clearing out the Sengwe Wildlife Corridor, ecotourism in Zimbabwe will begin to thrive. As it stands currently, only 8,000 tourists on average visit Gonarezhou National Park compared to the 1.8 million tourists that visit the neighboring Kruger National Park of South Africa. Demining Zimbabwe’s national park means providing an extended opportunity for increased tourism in the struggling country. The efforts of APOPO, with the support of the United States, may be able to help economic recovery, reduce the impact of the pandemic and uplift communities that are battling poverty.

-Christopher McLean
Photo: Flickr

Wheat to SudanSudan’s position on the list of states that sponsor terrorism restricted their trades, imports and economy. However, with the recent removal, Sudan has already reaped the benefits of foreign aid from the United States. USAID approved a $20 million payment to the World Food Programme to provide a massive 65,000 metric ton shipment of wheat to Sudan.

Diplomacy Opens Doors

The $20 million shipment of wheat to Sudan is part of an $81 million commitment from the U.S. to help Sudan fight poverty and hunger. This contribution will bring its total aid for the fiscal year to over $400 million, making the U.S. the largest aid sponsor to Sudan.

Sudan’s removal from the list of states sponsoring terrorism was contingent on Sudan’s recognition of Israel as a nation.  After such recognition, Israel also sent a $5 million wheat shipment to Sudan.

Economic Lockdown Compounds Hunger Crisis

While Sudan has found recent diplomatic success, its plight as a nation remains dire. Nearly half of Sudanese people are in poverty, with 46% living under the poverty line as of 2018.

Roughly nine million people will need food assistance in 2020, up by 9% from 2019, as widespread poverty has been worsened by the effect of COVID-19 on the economy.

Further stress on already limited food resources comes from droughts, floods and conflict that has displaced nearly two million people, compounded with hosting one million refugees who need food assistance.

The rampant poverty in Sudan has led to extreme numbers of children suffering from hunger and malnutrition across the nation. The number of children facing emergency food insecurity levels doubled over the last year to 1.1 million. According to Save the Children’s country director in Sudan, Arshad Malik, “120 children are dying every day due to malnutrition.”  Overall, 9.6 million individuals in Sudan are food insecure as a result of lockdown restrictions, a weak economy, natural disasters and conflict.

USAID Contributes to Disaster Relief

Although the weak economy has waned further from job losses and food prices soaring from economic restrictions, food aid remains the first priority for Sudan and USAID. Additionally, Sudan has suffered from its worst floods in 100 years, which has caused massive destruction due to vast underdevelopment. USAID granted another $60 million in aid for Sudan to recover from flooding and fight waterborne diseases that can spread during floods.

Foreign Aid Essential to Development

Sudan’s new democracy undoubtedly faces short and long-term obstacles with regard to the country’s development and stability. Natural disasters, economic woes, poverty and hunger, cripple an already struggling nation. The shipment of wheat to Sudan from USAID is crucial for helping the people of Sudan meet their daily needs and alleviating hunger and poverty. Extending the olive branch of foreign aid creates interdependence between nations and encourages peace and prosperity. Bringing nations such as Sudan out of poverty creates a more secure, just and prosperous world.

– Adrian Rufo
Photo: Flickr

Efficacy Through Conditionality
During a summit in 2005, the G8 nations committed to increasing aid for Africa from $25 billion to $50 billion a year by 2010. This was a great change in the trend from previous years when foreign aid was in decline. Often, disappointment related to the effectiveness of foreign aid had caused a decrease in donors’ commitments, but recent studies have tried to prove how they can improve foreign aid’s efficacy through conditionality.

Aid Conditionality as a Way to Improve Democracy

Foreign aid can influence democratic development through three methods: first, promoting democratic institutions and the balance of power, and empowering civil society organizations; second, strengthening channels that contribute to democracy, such as the income per capita and education; and third, conditionality.

Aid conditionality is “the use of pressure, by the donor, in terms of threatening to terminate aid or actually terminating or reducing it, if conditions are not met by the recipient.” Therefore, donors can perform aid conditionality in different ways:

  1. Potential donors can require the fulfillment of ex-ante conditions regarding the requirements of democracy, governance or human rights before coming to a formal agreement or forming a relationship with the country they have the intention of donating to.
  2. They can impose ex-post conditions in a contractual relationship or legal instrument that the donor country should fulfill.

Moreover, a positive and negative conditionality exists. A positive conditionality means that the aid provider can reduce, suspend or terminate the aid if the government does not follow the conditions, while a negative conditionality consists of provisions that the donor can give as rewards when the government fulfills the requirements.

Some have provided a general critique accusing negative conditionality as ineffective, because sanctions that countries can impose due to conditionality may affect the poor more rather than the government it is targeting. Moreover, the government of the recipient country may easily obtain alternative funding sources. In contrast, the application of positive conditionality does not often experience dispute.

When Can Aid Conditionality Work?

Some argue that the efficacy of aid conditionality relies on the democracy levels of the recipients. Since governments’ primary goal is to maintain power, in an environment of open political competition, they must spend the aid they receive to the level that it allows them to comply with donors’ conditions and also stay in power, whereas autocracies can stockpile as much aid as they receive while maintaining power.

The European Union, for instance, had set aid conditionality elements when it comes to its provision for sub-Saharan countries. After 1977’s Uganda crisis, the E.U. decided not to remain neutral in situations where there are massive violations of human rights and democracy. Therefore, it imposed human dignity as a precondition for the provision of aid and, consequently, human development. Moreover, in 1995, the E.U. decided to declare the respect of democratic principles, rule of law and good governance as essential elements and that it could withdraw aid disbursements if recipients did not comply with its parameters.

The Case of Niger

With the return to power of President Tadja after the coup d’etat of 1999, Niger was able to normalize its relationship with the European Union and have a relatively successful political situation from 2005 to 2009. During those years, the government’s opposition operated through the official channels and institutions and Niger experienced great levels of political and social stability.

Despite this, after President Tadja’s efforts to remain in power caused an escalation of the political and social tensions, the E.U.-led talks failed and the party in power began to harass the opposition and media. In 2009, the E.U. decided to withdraw its support, which the coup d’etat of 2010 later followed. The return to a democratically-elected government in 2011 led to the return of the support that the E.U. gave as aid disbursements and, therefore, the effective use of the donor’s ex-post aid conditionality that later contributed to Niger’s democracy development.

After the new political transition, Niger received a consistent rating as a democracy based on the Polity IV scale. Since then, the country’s political situation remains stable although tensions remain palpable. Now, although the country’s most recent president, Mahamadou Issoufou, has had authoritarian tendencies, he is willing to step down from power and allow a new transition of government.

The Utility of Aid Conditionality

Studies have shown foreign aid’s efficacy through conditionality regarding producing democracy development under certain situations. Regardless, donor countries and organizations should not be so quick to abandon these policies as they can positively impact a country’s social and political environment. Therefore, all donors must understand in depth the different ways aid conditionality could affect policy outcomes in recipient countries based on highly complex situations where donors give foreign aid.

– Helen Souki
Photo: Flickr

African AgribusinessesOn November 30, 2020, USAID announced a joint operation with the Swiss Agency for Development and Cooperation and the IKEA Foundation to contribute $30 million to Aceli Africa to help bridge the financing gap experienced by many African agribusinesses. The grant is estimated to have a tremendous impact and will unlock $700 million in financing for up to 750 African agribusinesses in Tanzania, Kenya, Rwanda and Uganda.

Agri-SMEs Lack Financing

Much of Aceli Africa’s work focuses on a data-driven approach to incentivizing financial institutions to provide loans for small and medium-sized African agribusinesses or “agri-SMEs”, as Aceli Africa calls them.

According to Aceli Africa’s research, agri-SMEs represent a golden opportunity to solve hunger and poverty throughout Africa and help fulfill key U.N. Sustainable Development Goals (SDGs), such as gender equality and climate action.

This is because smallholder farmers consist of both men and women and provide direct access to food sources that are responsibly raised in accordance with the needs of the local environment. Furthermore, the expansion of the agricultural sector in Africa is two to three times more effective in eliminating poverty than growth in any other sector.

Despite the great potential of African smallholder farms, banks are largely unwilling to loan them much-needed financing to power additional growth. Banks do not have the risk appetite for small farms in Africa due to price volatility, the seasonality of farming, pest invasions and a weak regulatory environment.

The result of this is an investment shortfall of $65 billion per year for agri-SMEs in Africa. Initiatives focused on microfinancing do not provide enough financial injection for agri-SMEs, which are larger than the microenterprises that are the usual recipients of microloans. Agri-SMEs are thus left out of financing. However, the work of Aceli Africa aims to change these circumstances.

Aceli Africa Incentivizes Banks to Loan to Agri-SMEs

To bridge this gap in financing, Aceli Africa partners with numerous organizations such as USAID, the IKEA Foundation, Feed the Future and the International Growth Center to incentivize banks to loan and provide technical assistance to agri-SMEs.

This is where the aforementioned $30 million contribution has the potential to positively impact agriculture and African agribusinesses. One of the incentive programs that Aceli Africa employs is to cover the losses of the first loan that a financial institution gives to an African agri-SME.

This works by depositing 2-8% of the loan’s value in a reserve account that the lender can access when losses are experienced. This boosts risk appetite among lenders and makes banks and other institutions more willing to invest in agri-SMEs in Africa.

Aceli Africa also provides technical assistance for financial management for African agri-SMEs through online tools and other in-person approaches to help smallholder farmers optimize growth using the loans they receive. These approaches have the potential to put U.S. taxpayer dollars to effective use by addressing poverty and hunger abroad.

United States Outreach is Key in Combatting Poverty

USAID’s decision to partner with the Swiss Agency for Development and Cooperation and the IKEA Foundation to contribute to the work of Aceli Africa symbolizes the value and power of international partnership in the fight against global poverty. When the United States decides to lead on an issue, the rest of the world follows. Key international partnerships are essential for the United States to take the lead and garner international support to address key global issues.

– John Andrikos
Photo: Flickr

Aid to AfghanistanThe period of 2018 to 2020 brought with it a series of difficulties for the people of Afghanistan, including droughts, floods and pandemics. A severe drought in 2018 impacted 95% of the country’s farmland and dried up crucial water sources. More than 250,000 people were displaced and at least 1.4 million civilians required emergency aid. Following the drought, 2019 had the opposite occurrence: heavy rainfall activated widespread flooding in nine provinces, impacting more than 112,000 people. These crises continue to be felt in 2020 as both old and new challenges exacerbate conditions for the poorest Afghans. Countries all over the world are pledging to provide aid to Afghanistan.

Conditions Affecting Afghanistan

  • COVID-19: In November 2020, Afghanistan documented 44,133 coronavirus cases and 1,650 fatalities. The socio-economic impacts have been extensive. Average household debt rose by 36,486 AFS (US$474) and the poverty level increased from 54% to 70%. According to the World Bank, Afghanistan’s economy is predicted to contract by at least 5.5% due to the 2020 impact of COVID-19.
  • Displacement: Nearly 286,000 Afghans at home and 678,000 abroad suffered displacement in 2020, bringing the total displaced to approximately four million. Internal displacement camps are rife with insanitation, poor healthcare, unemployment, limited potable water and food insecurity. According to estimations by the 2020 Humanitarian Needs Overview, one million displaced people will require aid by the end of 2020.
  • Political Uncertainty: Political instability has been a mainstay in Afghanistan for decades and continues to trouble both citizens and the international community. Despite ongoing 2020 peace negotiations with the Taliban, fighting continues in the region. As a result, desperately needed health clinics have suffered closures and 35,000 Afghans were displaced from the Helmand Province in October 2020 alone.
  • Women’s Rights: Conditions for Afghan women and children have improved in recent years, allowing 3.3 million girls to receive an education. Additionally, women have experienced expanding opportunities for political, economic and social engagement. However, government participation is still strictly limited and women are still at high risk of violence.
  • Food insecurity: Afghan farmers still had not fully recovered from the 2018 drought and 2019 flood before the impact of COVID-19 on the country raised food prices, and with it, further food insecurity. Estimates warn that one-third of the population have already exhausted their savings and are in crisis levels of food security, with 5.5 million of them in emergency levels. However, farmers are hopeful that improved climate conditions will alleviate some of the damage done in previous years of difficulties.

2020 Afghanistan Conference

International donations fund at least half of Afghanistan’s annual budget. This is unlikely to change anytime soon, especially as COVID-19’s toll on the country’s economy also decreases government revenues. There was concern that the 2020 Conference would see a diminished aid pledge from Afghanistan’s largest donors, but the meetings that took place on November 24 secured a minimum of US$3.3 billion annually for four years contingent upon a review of Afghanistan’s progress in areas of peace, political development, human rights and poverty reduction. The United States is one such donor, pledging $300 million for 2021 and promising another $300 million worth of aid to Afghanistan if the ongoing peace talks prove successful. To this end, the “Afghanistan Partnership Framework” details the principles and goals of Afghanistan’s growth in peace-building, state-building and market-building.

Rebuilding Afghanistan

While some have expressed concern that the donations for aid to Afghanistan are not enough to cover costs and that the contingency requirements will be very difficult for Afghanistan to implement without compromises, there nevertheless is hope that tighter restrictions will prevent fewer funds from being lost to corruption. Despite the future challenges ahead of Afghanistan, Afghan leaders reiterated their commitment to “finding a political settlement that can not only bring an end to the suffering of the Afghan people but strengthen, safeguard and preserve the gains of the past 19 years.”

– Andria Pressel
Photo: Flickr

Sweden’s Long-standing CommitmentOn September 22, 2020, Peter Eriksson, Sweden’s Minister for International Development Cooperation, took to Twitter to announce that Sweden will continue to commit 1% of the country’s GNI to official developmental assistance during the COVID-19 pandemic, urging the international community to follow in the country’s footsteps. This act is indicative of Sweden’s long-standing commitment to eliminate poverty, which is a promise the country is dedicated to keeping.

A Leader in Foreign Aid

According to the OECD, Sweden dedicates around 1% of its national income to developmental aid, making it the highest developmental assistance donor. The country’s commitment to policy development issues is the strongest in three categories: peace and conflict prevention, gender equality and women’s rights as well as environmental sustainability. Since 2006, the country has committed to regularly donate a portion of its GNI as official developmental assistance (ODA) and has since kept its word, donating at least 1% or more every year.

The Swedish International Development Cooperation Agency (Sida)

Sida is a government agency of the Swedish Ministry for Foreign Affairs. Sida is responsible for Sweden’s official development assistance to developing countries.

Sida is a prominent international actor with an overall mission to make sure people living under poverty and oppression are able to enhance their living conditions. During the COVID-19 pandemic, Sida allocated $149 million to mitigate the pandemic’s effects on vulnerable communities and populations abroad. Sida has collaborated with many different multilateral organizations to uphold Sweden’s promise of helping the international community during the pandemic..

Sida has bilateral development cooperation with 35 different partner countries from four different continents and consistently supports multilateral organizations in their pursuit of increasing human rights and democracy globally.

A Leader for Women’s Empowerment

The country has shown relentless support for gender equality and women’s rights, highlighting Sweden’s long-standing commitment to ending gender discrepancies around the world. Sweden is a pioneer for many new policies regarding women’s rights. For instance, in 2014, Sweden created the world’s very first feminist foreign policy. Sweden has garnered the support of many foreign bodies and their allies by raising awareness through forums. The most notable being the 2018 Stockholm Forum of Gender Equality. The gathering brought 700 members from 100 different countries to discuss the implementation of new policies to protect women in vulnerable communities from oppressive regimes, further elevating their rights and enabling an inclusive society.

A Leader for Environmental Sustainability

Furthermore, Sweden’s clean carbon footprint is impressive, with a large quantity of the country’s waste recycled. The country has committed to net-zero emissions by the year of 2045 and it has dedicated many resources to encourage countries across the globe to implement sustainable environmental practices. The country has shown continued leadership. In 2017, Sweden had co-chaired the U.N. Ocean Conference with Fiji. In 2018, Sweden also hosted GEF-7 Replenishment, a meeting between contributing and potential participants from all around the world with efforts to eliminate non-renewable energy sources in the near future.

Sweden: A Developmental Assistance Model

Sweden’s long-standing commitment to developmental assistance highlights the country’s leadership skills as an exemplary model for other developed nations. Sweden’s relentless efforts in supporting foreign aid, even during a pandemic, is a model that needs to be mimicked by other developed nations that have the same capacity to help, now more than ever.

– Mina Kim
Photo: Flickr