Building Bridges in Development

What happens when twenty American Jews work with fifty Hindu villagers in rural India?

Jacob Kohn

IDDG member since 5/2014


If we were to go only by today’s breaking news headlines on rural India, we would find little cause to be optimistic: floods engulfing entire villages, poor sanitation practices spreading diseases, sexual harassment of women. Certainly these are very serious issues that must be dealt with on a local and societal level. But today I would like to share a positive story on the potential for empowerment and change in an area usually not well understood by the Western world.

Several years ago, I traveled to northern India to work on a social empowerment project in a partnership between an international nonprofit and local NGO. Our group, made up largely of relatively affluent American Jews, was tasked with working alongside dalit villagers on various construction projects such as drainage ditches and road repairs in order to help the villagers build a more sustainable community and strengthen the bonds between them.


In caste-bound rural northern India, dalits are the lowest class of society. While the Indian government allocates capital to building up rural communities, the village we worked in was one of the last to receive funds to build water pumps and maintain infrastructure. Such is the case in many rural areas in India, where money intended for development is siphoned off to line pockets or serve special interests along the way, leaving little for those without connections or status. As a result, these villagers lacked electricity, well-paved pathways, and adequate drainage–all things that their higher-caste neighbors enjoyed in the village just ten minutes’ drive down the road.

While generations-old caste differences were at play here, perhaps India’s beginnings as a sovereign state could help us understand such persistent economic disparity between India’s rich and poor. Indian author and political activist Arundhati Roy refers to the dichotomy between two approaches to development as a “Nehru vs. Gandhi” contest. In the midst of India’s quest for independence, Jawaharlal Nehru and Mahatma Gandhi had markedly differing viewpoints on how to best run the linguistically and culturally diverse group of peoples that would make up the modern Indian state. As India’s first Prime Minister, Nehru believed in a paternal, centralized state, while the grassroots-oriented Gandhi preferred a more maternal, delegated village-by-village governance system. While neither system is a panacea, the decentralized, bottom-up system appeared to be a good starting point for our village project. Without the benefit of government resources trickling down, the villagers would have to start at the local level. And here is where our group came in.

On our seven-week journey, we learned that recognizing the humanity in others is the first step to the foundation of a working relationship. Once this relationship is established, any change resulting from the two groups coming into contact must be undertaken in a consultative format. Our work touched upon the International Labor Organization’s principle of consulta previathe right of indigenous and ethnic groups to be consulted on matters affecting their culture and heritage. In South America, the principle has arisen as both governments and private firms come into contact with relatively isolated or less powerful indigenous groups. Our group of Americans partnered with a local NGO that had established a relationship with the group of villages in the area. Before our arrival, the NGO had entered into a conversation with village elders and reached an agreement on the specific project our group would be undertaking. This support was absolutely necessary to the success of our work with the villagers—it ensured community ownership rather than an imposition of an outside force with its own interests.  When we arrived, we learned that our specific project task had been changed by the village elders just the day before. While some may have been disappointed, I took this as evidence that our work would have all the support it needed.


On the first day of our project, we sat down and listened as the village pardhan, or elder, welcomed us. Both of us must have seemed intimidated by the other: the twenty American Jews surrounded by half a village of Indians. I was reminded of a biblical scene in which Israelite scouts compare themselves to the current indigenous inhabitants of the land they are about to enter: “We seemed like grasshoppers in our own eyes, and we must have looked the same to them” (Numbers 13:32-33). The villagers stared at our pale skin, which in India instantly conferred a special status that many in our group felt uncomfortable with or undeserving of. At the same time, I personally felt insignificant in such a group–perceiving that my group’s ivory-tower liberal arts degrees paled in comparison to the villagers’ firsthand knowledge of harvesting peppermint, mixing cement, or raising water buffalo.

We were both defined and labeled by what our respective dominant societies would call “untouchability”—the dalits as an entire class in a negative sense, the Americans as a high-status, rich, privileged positive one. The challenge before us would be to discard such labels in the interest of working together for a sustainable goal.

As we worked alongside each other over the next seven weeks, the intimidation factor lessened. Our cameras worked themselves out of our backpacks, and we allowed the village youth to snap photos during our work sessions. It quickly became clear that they, too, shared the cultural value of the selfie.

Secured with an increasing familiarity, we began to ask the more difficult questions about the value of our transient foreign presence in a rural village marked by stability and tradition. Our groups’ strict no-gifts policy, especially towards technology, helped us navigate the knife’s edge between modernization and indigenous traditions. While the entire village now had cell phones, electricity and televisions were only available in the higher-caste village next door. Gifting our cameras outright to a few villagers could have disrupted relations both within the village and between it and the more powerful one next door.

Many devel332047_1861868957774_110513134_oopment stories end with a short-term service group leaving, its time up, with another service group ready at the sidelines for their turn to “make an impact.” This experience, however, was different. It did not require a group visit every year. In fact, it was designed to make our very presence unnecessary by building a sense of community among the villagers as we worked alongside them that summer. Throughout our time there, the local NGO highlighted a positive change in the villagers’ demeanor towards one another. Women of the village who had previously stayed inside their houses had begun to step outside and add their own input to our construction work, entering into conversations with male villagers not related to them—a small change, but significant for such a community that had consciously or unconsciously resisted efforts to shake up the status quo.

The following year, another group returned to survey the work we had done. The drainage ditches and paths we had built were not only in fine condition—they were just the beginnings of what had become a greater effort to improve living conditions in the village. A path we had built in front of a schoolhouse was now a paved concrete assembly area. The local NGO has continued its work with the village, helping start skill-enhancing programs such as a women’s sewing training center. Some may call these efforts progress; others may see a disruption of centuries-old traditions. Either way, such changes are only possible and sustainable if those most directly affected claim ownership over these decisions.

A picture is worth a thousand words. The image of twenty American Jews toiling in the blistering summer sun alongside fifty Hindu Indian villagers highlights just how small our world is becoming, and our responsibility within it. In today’s globalized world where ideas propagate like viruses and viruses propagate like, well, viruses, it is becoming harder and harder for cultures to remain isolated from outside influences. Closed police-state societies are utilizing technology to see what others have and they do not, causing a disruptive call for change. Diseases that once were confined to small tropical regions now have the potential to spread as rapidly as people can move across the planet. As members of this new interconnected world, we have a responsibility to use this power wisely—to recognize that which we share, acknowledge our differences, and come to the table ready to engage in conversation and dialogue.


Making an Impact

The importance of measurement

Matt Goodman, Pat Krissek, and Sean Hicks
Meta Americas

As social entrepreneurs, NGOs, philanthropists, and impact investors across the globe seek to drive social and environmental change, measuring and validating impact is an essential part of the process. While challenging, measurement is needed to understand and to manage impact, and, importantly, to keep it in accordance with costs.

Just ten years ago,impact measurement was often dismissed as impractical, misleading, or simply too difficult. Nowadays, grantees and other funders consider measurement to be a condition for support, and practitioners have embraced its ability to enhance the services they provided. These factors have helped lead to 75 percent of charities today actively engaged in impact measurement.

Among the recent innovations in the measurement space are the IRIS (Impact Reporting and Investment Standards), standardized performance indicators that help organizations measure programmatic outcomes, and SROI (Social Return on Investment), a method that provides a framework for managing and understanding those outcomes. Outcomes, which explain the societal impact of programs, are distinct from outputs, which describe what is actually being produced. For example, if you’re distributing mosquito nets to prevent malaria in Africa, the number of nets distributed is the output, while a reduction in malaria cases and mortality rates due to the increase of mosquito nets is the outcome. This causal relationship between outputs and outcomes is at the heart of impact measurement, and is usually the most difficult aspect of the process.

In order to map outputs to outcome time must be spent identifying stakeholders, gathering data, constructing metrics, calculating social return, and even integrating the findings into the overall business model. To help organizations get more bang for their buck with measurement, we at Meta Américas have identified five key components we believe make impact measurement more effective.

1)      A well-defined theory of change

Impact measurement is often characterized by inputs, outputs, and outcomes. However, having a well-defined theory of change is just as critical to the process. The Theory of Change is a methodology that defines long-term goals and maps backwards to identify the necessary preconditions to achieve those goals. In effect, the theory of change explains a causal relationship between the programs that were executed and the impact that ensued. Because causality is the essence of impact measurement, having this framework is critical. In addition to providing an overall framework, a good theory of change will inspire staff and possibly persuade investors.

2)      A specific purpose or goal for measurement

To get the most out of measurement, it must be decided in advance which decisions measurement outcomes will help guide and what measurement approach is most appropriate. Impact measurement is not an exact science—undertaking it without a clear learning agenda will spawn a hodgepodge of impractical data instead of valuable and focused results. This goes back to having a well-defined theory of change. In order for impact measurement to propel an organization forward, it must be embedded into long-term organizational goals.

3)      An understanding of the inherent trade-off between depth and scalability

Herein lies the inevitable and frustrating trade-off ubiquitous in the social sector: depth vs. scalability. It is imperative for organizations to acknowledge and accept this trade-off, but be able to use it to their advantage.  Once again, this tradeoff is where truly knowing your mission pays dividends. If you’re looking for a path toward growth, you may want to broaden your assessment and focus on scaling. If you are employing a leaner model, you may want to narrow your assessment and maximize learning.  Either way, the important thing to remember is to accept this trade-off and avoid pitfalls otherwise.

4)      Stakeholder Involvement and the cultivation and creation of robust “feedback loops”

Impact measurement can only be effective if the necessary stakeholders are involved. Many times impact assessments are based on faulty assumptions in the data and in constructing metrics; nevertheless, assumptions need to be made in the data in order to prove causality.  For this reason, stakeholders and operators need to have identical assumptions. Furthermore, organizations need to set up systems that ensure you can speak to stakeholders about certain things. We call these “feedback loops.” Stakeholders and operators must be on the same page throughout the assessment process in order for the results to be verified.  Meaningful impact assessments not built in vacuum.

5)      Use it or avoid doing it

Lastly, put the assessment to use or don’t do it at all. Conducting assessments for the sake of assessment alone is like studying hard for an exam and not showing up for the test. To avoid this pitfall, it helps to set a clear learning agenda before conducting the assessment, and to have buy-in of all the relevant decision makers. After all that’s said and done, if the assessment process is not integrated into the overarching business model, an organization should not expect that the impact their programs are having will be easily measured in the future.

At Meta Américas, our goal is to streamline the business of impact through combining impact measurement capacity with business skill development. No matter which client that we work with — small and medium enterprises (SMEs), startups, multinational corporations, financial institutions, NGOs, and public entities – we seek to assist them incorporate the impact measurement process into their business model.  Often neglected, we view this activity as the most important part of the measurement and evaluation process.

As funders – from impact investors, to grantees, to high net worth philanthropists – become even more interested in measuring social and environmental return on investment, so should organizations throughout the social sector. The team at Meta Américas is eager to apply these lessons and expertise to any social enterprise interested in prioritizing impact measurement to help in securing additional funds, to comply with monitoring or evaluation requirements, or to validate and benchmark results.


Impact Investing

A Game-Changer for Development?

Sean Hicks
Associate at the Committee for Economic Development

IDDG member since 8/2013

This article also appears on the YPFP blog as of 4/15/2014

Impact investing has gained considerable attention from investors and philanthropists alike since the term was coined about seven years ago. Impact investments are investments made into companies, organizations, and funds with the intent to generate measurable social and environmental impact in addition to a financial return. While many question the feasibility of impact investment’s dual mandate of achieving social and financial returns simultaneously, others claim it has the potential to significantly enhance development initiatives.

Over the last year, impact investment has gained momentum that indicates its disruptive potential. In June 2013, UK Prime Minister David Cameron touted its ability to “tackle the world’s most difficult social problems” at a G8 social impact investing conference in London. Earlier that year, Sir Ronald Cohen and Harvard Business School Professor William A. Sahlman declared impact investing “the new venture capital.” This sentiment is also shared by market analysts. At current, there is approximately $25 billion in impact investment worldwide according to a September 2013 report from Deliotte, while some analysts from J.P. Morgan and the Rockefeller foundation expect it to boom to between $400 billion and $1 trillion by 2020. Despite this recent surge, there is still a fair amount of confusion over what impact investing represents and how it works. Here is some quick knowledge:

  • Impact investing is an investment vehicle, and can be made across multiple asset classes (debt, fixed income, private equity/venture capital, etc.
  • Impact investments can be made in developing and emerging markets
  • Leading contributors of Impact Investment are high net worth individuals and development finance institutions, though banks, pension funds, foundations, and endowments also adopt impact investing strategies
  • Investors can target a range of returns from below market rate, sometimes called “concessionary investments”, (for investors who primarily care about impact), to market rate (for investors with more balanced objectives)

The central assumption of impact investment is that the creation of economic value and social value are not mutually exclusive. This assumption is contrasted with economic neoliberalism which stresses privatization, deregulation, and the ability of the free market to directly or indirectly solve the vast majority of societal inefficiencies. For some, this may be the source of the confusion. The assumption of impact investment, however, is not at all at odds with how Millennial Americans view the role of business in society. Figure 1 shows that the number of Millennials that think the primary purpose of business is to improve society is higher than any other category surveyed. With the Millennial generation’s impact-oriented mindset at its back, it’s quite possible that impact investing could penetrate mainstream investing by the end of the decade.

Figure 1: Primary Purpose of Business According to Millennials



To graduate from this either-or fallacy, perhaps impact investment should be thought of as a pipeline of supplementary capital to developing markets. Social entrepreneurs abroad do not have the same resources as their counterparts in the United States. In the U.S., and other developed nations, entrepreneurs have access to much more developed networks of angel investors and venture capital firms. Indeed, the biggest obstacle for scaling a social enterprise is lack of funding. This is despite hundreds of millions of dollars in assets held by foundations and non-profits, which indicates a massive inefficiency in capital allocation. One reason for this is the resistance of donors to fund overhead costs of startup nonprofits and social enterprises. This is where impact investing enters the picture.  Investors understand that their returns are directly related to a firm’s ability to scale, and are thus incentivized to provide adequate capital to drive the innovation and growth social entrepreneurs need to obtain their desired outcomes.

Before impact investing can reach its full potential, there are a few kinks in the model that need to be worked through.

1.)    Gaps between social entrepreneurs and investors. Many impact investors only invest in social enterprises that can show on-the-ground production, but how does a startup social enterprise get to that point without funding? Silicon Valley may have a mature network of angel investors inclined to provide seed funding, impact investing does not.

2.)    Deal sizes are relatively small. The average direct impact investment is twenty times smaller than the average private equity investment. This makes it all the more difficult for startup social enterprises to acquire the necessary funding to scale.

3.)    Hard time breaking into traditional portfolios. Impact investing makes sense to many with an interest in or basic knowledge of international development, but it is less intuitive to the average investor.

4.)    Measurement of social return is not easy. Although measurement of financial return is fairly straightforward, measurement of social impact is challenging.  In addition to the challenge of quantifying social outcomes, investors and entrepreneurs must be in agreement on the approach and method of measurement when it is applicable.

The bottom line is that while impact investing is nascent, its potential is legitimate. As Millennials continue to redefine the role of business in society to be more socially cognizant, impact investing has a natural foothold for years to come. Furthermore, by marrying traditional investing and philanthropic aid, impact investing can unlock waves of capital to the hands of eager social entrepreneurs who will use it to develop effective ways to improve the lives of millions of people across the globe.

An African Model for Agricultural Food Security

 Why the Failed Policies of Structural Adjustment Offer a Unique Opportunity for “Smart Subsidization”

Katie Martin
Project Associate, Management Sciences for Health,
USAID Leadership, Management, and Governance (LMG) for Health Project
(Twitter) @DevNthedistrict

IDDG member since 01/2014

This article also appears on the YPFP blog as of 4/16/2014

It would be reckless to assert that individual citizens of developing countries have benefited from issues associated with a lack of development. Pervasive poverty, lack of reliable infrastructure, and subpar education and health systems have certainly led to devastating outcomes for entire generations in the developing world. It is plausible to argue, however, that an unintended consequence of a hitherto ineffective development agenda is an opportunity to use lessons learned from the developed world to create more resilient public systems. This is especially the case in the agricultural sector.

Take for example, a policy that has garnered widespread criticism: the World Bank’s neoliberal structural adjustment programs in the 1980s. As a means to promote growth and development (and our own economic model of the time), the World Bank and IMF offered Structural Adjustment Loans (SALs) to developing nations. SALs came with an important caveat, however: recipient nations must focus their economies largely on privatization and deregulation. In the agricultural sector, this meant a near-elimination of subsidies.

Starved for capital, many developing countries accepted these terms – despite the fact that developed nations, including the United States, relied heavily on agricultural subsidies. Despite their good intentions, SAL terms proved devastating to sub-Saharan African farmers. Like the US farmers who faced daunting odds developing a comprehensive agricultural system, African farmers desperately needed the government subsidies akin to those that US farmers began receiving during the Great Depression. The effect of limiting this support, in Warren Buffett’s words, was “…to shove fragile economies into a ‘free market’ mode too early and without the ability to compete”.

Regardless, it is possible that this failed policy may have provided an opportunity to build a more sustainable agricultural sector. Through the use of “smart” subsidies that reward eco-friendly farming approaches, developing nations in Africa and elsewhere may be able to build a system focused not on yield maximization, but on conservation and long-term food security.

While crop subsidies have been a staple of the US agricultural industry since the Great Depression era, they have recently become a source of contention and debate. Some argue that the well-intentioned policies of the time have become outdated and encourage depressed commodity prices on the international market. Even further, the subsidies (based mainly on crop outputs) place an uneven focus on short-term yields instead of long-term investments in soil and water conservation.

Photo provided by Mother Nature Network

Photo provided by Mother Nature Network

It is necessary to mention here that the US Department of Agriculture does currently employ a variety of conservation programs. This includes the Conservation Stewardship Program, which awards $40,000 in funding to farmers employing certain conservation-friendly methods. These types of programs, however, receive little more than a third of the funding  (~$5.9 billion) of the more traditional short-term subsidization policies. This is where “smart” subsidization comes into play.

At a time when croplands are facing sobering challenges from a changing climate and exploding population, the world has an opportunity to incentivize a sustainable African agricultural system that rewards long-term thinking. Instead of trying to rollback decades of subsidization policies that promote short-term output and harm long-term production, African states can start fresh with smart subsidization of conservation-friendly farming approaches. In turn, they can provide a model for the developed world to modify their agricultural systems. It is possible that “smart subsidization” may affect US farmers’ ability to compete? Perhaps. The necessity for comprehensive food security, however, is one that far exceeds the geographic confines of our borders.

Now is the time that we need to develop agricultural systems that reward farmers worldwide for making long-term investments in soil and water conservation. This, in turn, will ensure that cropland will continue to be fruitful for generations to come. While the dividends of conservation-based agriculture may not result in astounding yearly crop surpluses, rewarding farmers for short-term yield maximization may inhibit our future ability to produce enough food for our exponentially growing population.

For all of the assumptions structural adjustment got wrong, it may have gotten one thing unintentionally right: Africa has an opportunity to build a new kind of agricultural system devoid of short-term thinking and full of possibility.

This article also appears in Development in the District

*This article is based on Story 28 “Can Smarter Carrots Save Soil?” of “40 Chances: Finding Hope in a Hungry World” by Howard G. Buffett*


The Unintended Consequences of Foreign Aid

Ahmed Aliyu Ahmad
Master of Environmental Engineering; concentration in Management-Systems, Public Policy, and Economics from Johns Hopkins University
IDDG Member since 08/2013

This article also appears on the YPFP Blog as of 3/14/2014

Bob Lupton, President of FCS Urban Ministries is known for saying that when he gave something the first time, there was gratitude; and when he gave something a second time to the same community, there was anticipation; the third time, there was expectation; the fourth time, there was entitlement; and the fifth time, there was dependency. This statement in a nutshell presents the kind of situation found in many cases as a result of foreign aid. Dependency can be categorized into “positive dependency” and “negative dependency,” where positive dependency is not necessarily an undesirable outcome given that this trait is exhibited when an individual, household or community is unable to meet its immediate basic needs without help from outside. Thus by assisting these individuals, households, and communities, in the form of aid, there is already the intention of creating positive dependency. Conversely, the emergence of negative dependency occurs when dependents are prone to amending their behavior in response to the availability of aid, which thereby creates disincentives to adopt desirable behavior. Arguments on dependency frequently confuse short-term and longer term negative effects without taking into consideration the unintended consequences. The objective of this post is to highlight some of the unintended consequences of foreign aid in a general context and more specifically, as it relates to the democratic process. We will examine the case study of Tanzania, a country considered to be a donor darling since the late 1980s as a result of its adoption of the structural adjustment policies.


In today’s world, nearly half of the population survive on $2/day or less, while more than 800 million people go to sleep hungry any given night, and a child dies every five seconds due to hunger-related issues. These are just a sample of the many problems that foreign aid tries to solve. However, there remains significant disagreement on how to effectively mitigate such issues. From the disparate attempts resulting from these disagreements, unintended consequences are likely to arise The difference between intentions and impacts is a frequent subject of discussion when it comes to aid, wherein those who question programs’ impacts are challenged by those who emphasize the programs’ good intentions, forgetting that the unintended consequences cannot be waved aside.

The subject of unintended consequences is a complex and multi-layered one that can be approached from various angles. Focusing on the national level, as this paper will, has associated drawbacks. This perspective might be too broad, and may require further details as to how aid implementation contributed to given outcomes. The issue, however, may also be inspected from a functional angle. Functional perspectives can include different types of aid interventions at the thematic level, including military, food, and education. The timeline during which the effect of the aid was measured also plays a role in the attempt to understand the consequences of interventions, as they can arise immediately and disappear in the long-term, or be nonexistent in the short-term and only begin in the long-term.


Above: Global Human Development Index; Source: ODI

The study of the impact of foreign aid has always been a staple of economic studies due to the fact that the actions of different stakeholders, including governments, corporate bodies, individuals, multi-lateral agencies, and nongovernmental organizations alter the incentives and constraints faced by other decision-makers, leading to feedback through induced behavioral responses. These feedback cycles are often hard to envisage but very real nonetheless. Unintended consequences on one hand can be favorable, as in Adam Smith’s “invisible hand”-effect of individually self-interested behavior leading to socially desirable outcomes, or the “crowding-in” effects of certain public investments that induce complementary private investment. Generally however, negative effects often come to mind when the issue of unintended consequences is brought up. Tanzania presents an instructive case for examining such consequences. The chart below further examines the relationship between aid and democracy.


The Case in Tanzania

Tanzania is the second-largest aid recipient in sub-Saharan Africa, having received about $26.85 billion in aid between 1990 and 2010. It has enjoyed stable politics relative to other African political systems starting with the shift from a one-party to a multi-party system, which opened doors to greater freedom of speech, and then the first multiparty elections in 33 years. Foreign aid to Tanzania has strengthened basic democratic institutions such as civil society and media freedoms, thereby aiding Tanzania’s transition to resilient democracy. At the same time, the associated inflow of foreign aid resulted in corollary effects that deteriorated the quality of the country’s political system. Without dwelling entirely on the unintended consequences, we will first inspect the positive intended results listed below:

–          Foreign aid has succeeded in enabling civil society in Tanzania, starting from the early 1980s, as donors have been placing emphasis on the role of NGOs during this period. As a result, civil society has begun to play a vital role in the area of advocacy and service delivery through constant involvement with the Government in a consultative capacity.

–          Foreign donors have expanded media independence via a wide range of programs, which ultimately led to an increase in the number of new media organizations in Tanzania. The Media Council of Tanzania and NGOs involved in media advocacy work have benefited from the funding provided by foreign donors.

–          The judiciary in Tanzania has also benefited largely from funds coming from Scandinavian countries, with the aim of enhancing human rights-related legal reforms and legal aid projects. This has allowed the judiciary to cut executive branch dependency since the 1990s. However, considerable corruption still exists in the lower courts, and judicial independence continues to be undermined by the executive branch.

Unintended consequences of foreign aid in Tanzania

The positive role of foreign aid in cannot be overstated, especially when it positively affects key institutions within a democratic setting such as civil society and the judiciary as mentioned above. However, Tanzania is still held back from further democratic consolidation due to unforeseen foreign aid outcomes.

  • Tanzania has been receiving aid in the form of General Budget Support (GBS) in response to the Paris Declaration created to pursue continual discussion on aid efficiency. According to the Organization for Economic Co-operation and Development (OECD), “the Paris Declaration of 2005 puts in place a series of specific implementation measures and establishes a monitoring system to assess progress and ensure that donors and recipients hold each other accountable for their commitments.” This method has instead created a situation whereby the ownership of development lies in the hands of the government, and the funds are often used to rent political support. This has shifted power to the president and finance minister, who end up making most of the decisions regarding the use of GBS. Since GBS involves huge amounts of funds in unaudited accounts, it has paved the way for corruption and political finance to flourish. Therefore, institutions like civil society have been squeezed out of funding opportunities.
  • Prior to 2003, Tanzania operated a complex form of taxation known as the “development tax”. The removal of this tax has been perceived as welcome progress by donors, given that the amount of money collected has not yielded the services it was expected to. The consequences of the removal of this tax have led to the reduction in revenue received by district councils, thus creating dependence on the central government for needed funds. The distribution of these monies has become largely politicized, and at one time, used by the ruling political party as a means of fostering political witch-hunts of regions not in support. This situation is significant, as around 95% of local government revenue in Tanzania is derived from the either the central government or from foreign donors therefore: 1) denying citizens the fundamental right to active participation in local government affairs; and 2) further cementing the strength of the central government and the consolidation of power within the central government, making local governments less accountable to their citizens.
  • Foreign donors held on to the belief that privatizing projects would divest the state of money-losing enterprises and so continued to underwrite huge losses accumulated by the government. In fact, the subsidization of these inefficient industries by foreign donors has become a highly profitable venture for the ruling elites, wherein there exists a much greater incentive to continue to run inefficient and failing infrastructure than to build quality-focused industries in the long run. This has been the case for the country’s electricity infrastructure where the norm is to ration electricity in order to influence voters: Voters are more likely to enjoy uninterrupted power supply during an election year, and then revert back to frequent power cuts once elections conclude.


More often than not, foreign donors fail to consider the potential for unintended consequences, thereby creating new problems while attempting to solve old ones. In the case of Tanzania, stakeholders in a democratic setting, including the judiciary, civil society, political parties, and the media, are all direct beneficiaries of foreign aid. This aid has a double-edged component, which makes it difficult for these groups to keep the executive arm of their government in check. This highlights the need for donors to account for contingent and unintended consequences in addition to the direct and intended impacts of their activities.

The question now before development implementers and practitioners is how to measure these consequences and tailor approaches to aid so as to eliminate associated negative outcomes. This critical issue should be considered when aid agencies carry out monitoring and evaluation exercises. This is important in order to ensure that aid efforts do not create negative impacts as in the case of Tanzania, where the executive branch has gained leverage over the civil society, the media, the judiciary and other stakeholders in the democratic process. Such control ultimately hinders the growth of democracy and fosters aid dependency—especially on the part of central governments.


Cultural Barriers to Economic Success for Women: The importance of research and data

Madeleine Macks
IDDG Member since 01/2014

This article also appears on the YPFP Blog as of 2/18/2014

As Ban Ki Moon, Secretary General of the United Nations, said in his address to the United Nations General Assembly in September, 2013:  “The equation is simple: When girls are healthy and in school; when legal frameworks and financial access support women; when women’s lives are free of violence and discrimination, nations thrive.” The Secretary General went on to declare the 21st Century as the century of women, and call for a greater focus on women in future development agendas. His message is certainly on point. In practice, however, creating the parameters within which women in the developing world can succeed, and thus help their nations thrive, is a pervasive and multi-layered challenge. As a result of particular expectations and attitudes in many parts of the world, women may be unable to take advantage of opportunities that are as beneficial to men within their very same communities.  Research and data on these cultural and regional factors can inform future interventions to better ensure effectiveness in creating economic success and growth for women.  A recent study that looks at financial access, one of the areas Ban Ki Moon addressed in his speech, helps demonstrate the benefits of collecting data to better understand complex barriers to success for women.

The study, titled Stimulating Microenterprise Growth: Results from a Loans, Grants and Training Experiment in Uganda was conducted from February 2012 to July 2013 by Nathan Fiala. Recognizing that access to capital, ability, and lack of skills can be obstacles to growth for many microenterprises, Fiala designed an experiment that sought to test for these business constraints to identify what types of interventions might result in growth. 1550 microenterprises in central and northern Uganda whose owners (61% of whom were women) had expressed interest in growing their business were given an infusion of capital. This came in the form of a grant, a loan, a grant with business training, or a loan with business training. The remaining microenterprise owners were part of a control group.

Madeleine's Pic

Photo Courtesy of OCHA |

Though not all of the experimental groups showed increased profits, men who were given a loan combined with training reported an average increase in profits of 54%. The same improvement, however, did not hold true for the women’s experimental group participating in the loan with training. In fact, women saw no improvement in any of the experimental categories.

What caused the difference in profit growth separated along the lines of gender? Just like the men in the study, women had the ability and knowledge to own their microenterprises, had expressed an interest in growing their businesses, and were given more access to capital. This is the critical juncture at which Fiala’s data lends important insight. His study shows that family proximity likely explains the different success rates for men and women in the sample.

Though women did not see profit increases in any of the groups, those women who had family living nearby were more likely to fare worse. The effects of the loan, loan with training, and grant with training programs for women with family nearby were all “large, negative, and significant.” Further analysis demonstrated that these negative effects associated with nearby family members were present for married female microenterprise owners. The data implied that increased demands on cash from the husband or husband’s family in the presence of a loan or grant diminished business returns for married women as they diverted resources away from the enterprise. These demands caused the women in the study to lose their capital stock over time

Based on the results, Fiala concludes that “highly motivated and skilled male-owned microenterprises can grow through finance, but the current finance model does not work for female-owned enterprises.” Many women in the study seemed to face pressures that detracted from their ability to take advantage of access to financial tools. Fiala’s research helped to highlight this problem and demonstrates the complex challenges faced by women microenterprise owners in the developing world.

Conventional economic wisdom teaches that with a viable business model, the combination of funds and skills is a successful formula for growth. The results of Fiala’s study suggest, however, that access to capital and business training may not be effective if the regional economic ecosystem is not optimal for business growth. In Uganda, where traditional pressures faced by women seem to override the value placed on their entrepreneurial goals, these interventions, as demonstrated by Fiala’s work, have little effect. Transplanting solutions for economic growth from communities where “conventional” business strategies are widely supported and viable into communities that have conflicting attitudes and expectations will not necessarily result in success.

The challenge unearthed by Fiala’s study raises the question of how to go about transforming values so that women can take advantage of opportunities for entrepreneurial growth. This is valid not only in Uganda, but in the rest of Africa where variations of these same barriers often exist. This is a question that is not easily solved, however. As Fiala’s work suggests, research and data are crucial first steps to making a change.

Fortunately, organizations are investing in understanding the challenges faced by women hoping to grow their businesses in developing communities. For example, Making Finance Work for Africa released a policy brief that identified significant barriers to women’s financial inclusion in Africa and put forth recommendations on best practices for success. Other institutions have also completed more focused regional studies with recommendations for future program implementation. Understanding the particular cultural environment in which women are trying to succeed in growing their business is the key to ultimately designing programs and interventions to provide opportunities within those communities. More informed future practices will help make Ban Ki Moon’s vision of the century of women a reality.

100 Ways to Do It Wrong: Reflections on the use of randomized control trials in international development

Katie Martin
Former White House Intern & Defense Consultant
IDDG member since 01/2014
Twitter: @katiesusette90

This article also appears on the YPFP Blog as of 2/09/2014

Proponents like The Abdul Latif Jameel Poverty Action Lab at MIT and Yale Economics Professor Dean Karlan of Innovations for Poverty Action are working to bring Randomized Control Trials (RCTs) to the forefront of the international development discourse.

The concept behind the use of RCTs is fairly straightforward: evaluate the efficacy of development interventions prior to scale-up, using similar methods to those employed by scientists and pharmaceutical companies. RCTs enable development practitioners to reliably assess a program’s performance through the use of static control groups, which function as a reliable basis of comparison to a group that receives treatment. In turn, these results can help inform the development of future projects.  As a result, an “unsuccessful” intervention can be just as illuminating as a project that achieves marked success on the first try. RCTs, while perhaps time and resource consuming, are therefore both worthwhile and relatively simple to explain.

For example, consider a hypothetical agricultural intervention aimed at increasing the yield of a certain crop in South Asia by employing the use of fertilizers. Development Company X implements a yearlong testing phase for the project, providing subsidized fertilizer to a select group of farmers. At the end of the year, the monitoring & evaluation team conducts post-phase assessments and finds that crop yield doubled during the test phase and farmer income experienced a similar boost.

This led to a variety of knock-off effects, including improved school attendance for dependents of farming families, and increased investments in healthcare. Development Company X lauds the project, and advises their implementation team to begin scale-up efforts across the region. A year later, however, they find that the project’s measurable impact has essentially disappeared altogether. What happened? To answer the question, let’s take a look at Development Company Y’s experience with a comparable project.

Development Company Y observes a similar void in the use of fertilizers in their region of operation. After conducting some initial research, they decide to conduct a yearlong experiment involving the provision of subsidized fertilizer to a select group of farmers.  At a weekly town hall meeting, they take down the names of 100 farmers interested in the program.

A member of their monitoring & evaluation team conducts a few pre-program surveys to ensure that the participants are relatively similar in education, income, and a few other critical factors. The team then randomly selects 50 farmers who will receive the subsidized fertilizers, with the remaining farmers receiving a placebo bag of a compound that will neither harm nor promote the growth of their crops. (Note that it is important that the farmers in the control group are unaware that they are receiving a placebo fertilizer. This helps protect against work effort bias, such as a farmer not tending to his crops as carefully due to frustration over being in the control group.)

At the end of the year, Development Company Y’s Monitoring & Evaluation team conducts post-test assessments. They find that the farmers who received the real fertilizer experienced a doubling of their crop yield and a similar income boost. However, farmers in the control group experienced a slightly lower, yet still impressive, crop yield boost as well. The monitoring & evaluation team concludes that the crop yield increase cannot confidently be attributed to the fertilizer, and recommends that scale-up be delayed until further testing can confirm positive results. Figure 1 below shows the basic design of an RCT from a back to work program used in the UK (all copyrights belong to the original owner of the image below).

RCT Design

So what happened?

Did farmers in the control group accidentally receive a bag of real fertilizer here and there? Was record rainfall in the region responsible for increasing crop yields across the board? Did a competing development organization implement an overlapping fertilizer program? Did the local government invest in public infrastructure that provided easier access to reliable irrigation? Here’s the kicker: we don’t know. We have no idea why the intervention didn’t achieve markedly successful results. But we don’t have to. At this phase, what is important is recognizing that this project is unlikely to experience transformative effects after a massive scale-up. The next step will either involve more testing, investigation of the crop yield boost causes, or both. This will enable Development Company Y to utilize this information to design a more successful intervention in the future.

Critics of RCTs will cry that experimenting on human beings is unethical. Denying a critical intervention to someone in need simply does not sit well with most people. While the intentions of this argument are good, it is perhaps equally unethical to waste dwindling resources on a program that may have zero net effect. Such funds could alternatively be used to scale up a program that has been proven to work through the use of RCTs or another rigorous evaluation method.

On the subject of constrained resources, the argument that RCTs sound like a lot of work should also be addressed. Such trials involve more time, thought, and most likely, money during a period of stretched budgets. Investing in a program that is ineffective, however, is not only fiscally irresponsible; it is reckless. People’s livelihoods depend upon these types of programs. While it may benefit donors to share positive results with stakeholders and the greater development community, negative results can be equally illuminating. They help practitioners to refine their approach and inform future projects so they can be more successful.

When asked about his numerous failed experiments in relation to electricity, Benjamin Franklin remarked, “I didn’t fail the test, I just found 100 ways to do it wrong.” It would behoove the development industry to take this attitude to heart. While it may take more upfront effort to “do” development the right way, the opportunity cost of not doing it is simply too high for the billions of poor people who these programs seek to serve. Eventually, the development community will find the right way, and that has the capacity to truly transform the world and dramatically reduce the number of people living in extreme poverty.

*This article was based on a presentation made by Eric Foster-Moore on 1/29/2014, entitled “The Future of Monitoring and Evaluation: Lessons from a decade of impact evaluations.

*Additional RCT-related readings include:
More Than Good Intentions – Dean Karlan and Jacob Appel
Poor Economics – Abhijit V. Banerjee and Esther Duflo


Three Lessons from Bangladesh

Minhaj Chowdhury
Minhaj Chowdhury is the CEO of Drinkwell, a clean water start-up based in Boston, MA.
IDDG Guest Speaker on 10/29/2013

Excited couldn’t even begin to describe my enthusiasm. I had returned! Two years after implementing a university-funded clean water project aptly titled “Clean Water for Peace“, I was now a Fulbright Fellow, ready to evaluate the scalability of a clean water intervention. And then it happened. I arrived at the project site and was greeted by Fatima, a short but powerful mother who said:

Why wasn’t I involved when you planned this?

You said the free water, food, and education I would receive would help us move beyond poverty and into prosperity. But all you’ve done is create dependency. Your free water filters were made of raw materials that could be sold in the bazaar for more than what my family makes in two months. The free food that eventually came from another NGO ran my uncle’s food stall out of business. The NGO-run school shut down because we didn’t have enough teachers. You didn’t help us. I actually think you made things worse.

All I want now is the dignity of work. Can you at least give me that?

As soon as Fatima had finished, Habib – a longtime friend and Manager with a partner NGO – immediately took me aside to his offices. I didn’t see Fatima the rest of the day. So, what happened?! I asked Habib. Why did Fatima greet me with such an impassioned monologue?

For starters, let’s talk about three: the number of filters being used two years after distributing 100 household filters in Golaidanga in the summer of 2009. John, a Chemical Engineer of German descent and college friend/partner-in-crime for the project, and I thought we had everything right. Buy-in from local stakeholders? Check. Employ a local caretaker to ensure uptake? Check. Upon further inquiry however, I learned Shikha, the employed female caretaker, no longer lived in the village. When visiting her home, I saw a picture of John and Shikha from the previous summer. John was the first bideshi, or foreigner, villagers had seen. Shikha’s picture with him had cemented her social status as one who mingles with bideshis. Five months later, this led her parents to wed their only daughter to a wealthy family. We failed to account for the cultural implications of a new face entering an established community. Consequently, there was no caretaker to ensure uptake.

Bangla1Local schoolchildren pose for a picture with John and Shikha [R] upon performing a play dispelling myths regarding arsenic.

We came to call this the “John Effect.” As a strong believer in the adage of “mistakes are okay as long as they are new ones,” I couldn’t help but think of just how many times the “John Effect” impacts an intervention.

As my focus for the next nine months was to understand villager perceptions of us, the well-intentioned development practitioners who just couldn’t seem to get things right, I found myself joining a movement alongside local NGOs wishing to add more of the beneficiaries voice to the bland monthly scorecards and dashboards. While well-intentioned at first, many of these qualitative discovery trips took form in the following manner: a Bideshi student or aid worker would select a village to conduct interviews regarding the progress of a specific intervention. Armed with a voice recorder, translator, and perhaps worse, a camcorder to “put a face” to the beneficiaries, the interviewer arrives in a remote village accompanied by local field staff. A focus group discussion is organized where the interviewer asks beneficiaries how a program is progressing. The beneficiary then responds to such questions surrounded by flashing lights (especially if it’s the time of year to publish annual reports) as well as community members. In my case, as the interviewer asked how many households used a clean water filter the beneficiary, a quiet and reserved mother, kept looking across the group, waiting for cues from an elder female before responding to each question. This leads to my first lesson from working in Rural Bangladesh:

Lesson 1 – The Bideshi Mirage

I was accompanying a pair of Swedish interns who were conducting a one-week assessment of microfinance programs in northern Bangladesh with a local NGO. Accompanied by a translator, the students immediately drew a crowd with their Swedish looks and Macbook Pros. As a Bengali-American, I looked a lot more like a local than they did, so I introduced myself as a local college student whose parents’ village was nearby. As the students began their interview with the mother and daughter of the family, I took notice of the father, Farooq, and took him aside to ask “Is your family going to tell the truth about the NGO’s work?” Farooq chuckled:

If we say how things continue to fail, the bideshis won’t return. They would be disheartened. If, however, we lie and paint a rosier picture, the bideshi visits that serve as a highlight of our otherwise monotonous day will continue for us! Better yet, they will invest more money into trying to help us. Why stop such a thing?

Bangla2 Local high schoolers crowd around a tubewell with camera phones ready as they await the arrival of bideshis.

Farooq’s point of view made perfect sense – why stop an innocent effort to help, especially when it meant mingling with people he can only see on television? He quipped, if we are to truly effect change, we must involve Bangladeshis, not bideshis. Such is the reality for a country that is more reliant on donor-funded NGOs than on its own government.

Lesson 2 – How can you ensure disruptive innovation with non-disruptive adoption?

There are many alleged innovative “low cost, high quality, game changing” products out there. In late 2012, I found myself mouthing these words at a now commonplace venue for social innovation, a hackathon. Boston Startup Weekend was the scene, and I, frustrated with the inefficiencies of gaining honest insights using a pen and paper monitoring and evaluation system, thought I had a solution all figured out. The name of the start-up was Ashalytics, an “early warning system for the developing world.” The idea was simple. Field agents across Bangladesh were going door-to-door and amassing 8 million single-page surveys of data for Bangladesh alone. By the time they are tabulated by hand, the data is outdated.

Since a majority of people in Bangladesh have cell phones, however, collecting and analyzing data in real time via mobile phones was low-hanging fruit, and something that could drive out the inefficient pen and paper reporting process. This mobile platform was Ashalytics. Organizations could subscribe to Ashalytics’ Software-as-a-Service. Villagers and Field agents use mobile phones to upload data directly to the cloud. This means managers can access information in seconds, instead of waiting for a month with the current paper-based system. Data collection costs are drastically reduced. Accuracy is improved. Armed with timely and actionable data, engineers and public health practitioners are better equipped to fix broken water systems, educate the populace, and deliver cleaner water faster. Furthermore, this data could be shared with donors, thereby eliminating the need for bideshis to visit the field and encounter mirage dynamic altogether.


[L] A typical NGO’s monthly dashboard. Time from survey collection to publishing results on the dashboard: 30-45 days. [R] Ashalytics’ real-time dashboard. Time from survey collection to publishing results on Ashalytics’ mobile platform: 1-2 minutes.

But, this came at an expense. It turned out that organizations embracing Ashalytics would let go of community employees whose sole job was to collect, sort, and tabulate the heaps of paper. While eliminating such inefficiency is a no-brainer in the private sector, such a move muddles the reputation of NGOs and social sector organizations whose cost-cutting moves can be at odds with its social mission of creating opportunity in impoverished communities. Furthermore, certain organizations would have to restructure their performance evaluation systems, as instant reporting meant instant knowledge of broken water points and flawed programs. Beforehand, field agents would have over a month to determine a mitigation plan and patch issues before management became involved. Real-time notifications meant managers would be inundated with problems that have no immediate mitigation plans, thereby changing their perception of their employees ability to solve problems. These adoption pains proved too much for our initial organizations, and outweighed the gains of cost-savings, streamlined donor reporting, and real-time monitoring. Put simply, our product was too painful to adopt.

During one of our weekly team meetings, we had to ask ourselves if we wanted to be in the business of displacing local enumerators. The alternative? Shift our strategy and align our platform with organizations who wouldn’t face such difficult tradeoffs. This meant venturing into the nascent world of social enterprise to see if Ashalytics would have a less painful adoption for smaller, more private-sector focused enterprises. And so away we went. Away from the donor-funded organizations whose large budgets wooed us into thinking we could secure sky-high valuations, and towards the volatile but exciting world of social entrepreneurship.

Lesson 3 – It’s job creation, stupid.

Today, Ashalytics is being designed for use with Drinkwell, a clean water enterprise that establishes franchise-owned water filtration systems primarily in arsenic and fluoride-affected areas across South Asia. Drinkwell provides clean water through a “Select, Build, Sell, Collect” model. In the Select stage, a Drinkwell Committee comprised of local government officials, NGOs, business partners, and school and religious officials is formed. The Committee selects an entrepreneur who owns a contaminated tubewell. In the Build stage, an $8,000 system is installed over one month using local materials and workers. The franchisee also hires 2 drivers and 1 caretaker to run the plant. Franchisees then Sell clean drinking water for $3 a month and keep a portion of monthly gross profits. Households can purchase a “Drinkwell Card” in local shops that have 30 punch holes for redeeming 20L jugs of water daily. Each system can, at a minimum, serve 600 households on a daily basis (capacity can be easily increased). Finally, Drinkwell “collects” customer data using Ashalytics (liters dispensed, household demographics, and other output data) to fuel customer growth.

As Drinkwell creates 3 jobs for each system opened, caretakers and franchisees use Ashalytics to monitor system usage. Instead of displacing community enumerators, Ashalytics can now be used as a tool to create jobs as the seamless reporting enables faster growth driving human capital needs of franchisees. As the endgame goal of most development interventions is to stamp a sustainable seal of permanence, it’s taken me five years to arrive at a simple concept to ensure true success: it’s job creation, stupid.

Does Aid Work? Is That the Right Question?

Jonathan Cali
Global Health Corps Fellow at Inter-American Development Bank
IDDG Member Since 09/2013
This article also appears on the YPFP Blog as of 2/09/2014

With traditional donor countries in North America and Western Europe facing budget constraints, the debate over the effectiveness of aid is likely to continue. Before this issue is debated, practitioners and academics must first establish what the purpose of aid is, how the impact of aid and international development organizations should be evaluated, and what types and amounts of assistance are most beneficial in each circumstance.

Firstly, aid and other development assistance can serve two general purposes. One of these purposes is not to turn poor countries into rich countries. The process of development is incredibly complex, and often involves the complete political, economic, and social (and sometimes cultural) transformation of a nation and its people.  There is still much debate on the causes of development, but domestic governments, businesses, and social groups, not foreign donors, are the driving forces of development.

What aid can do is to a) contribute to the process of development through small, yet important contributions at key moments to feed a virtuous circle, or b) help to relieve the suffering caused by extreme poverty. Contributions that spark a virtuous circle may include the transfer of technology or training that improves agricultural productivity, lays the foundation for start-up businesses, or drastically improves the ability of government ministries to do their jobs. The additional income from agriculture or a new industry, or better public management could lead to better policy, increased economic growth, and eventually development and poverty reduction. Interventions that relieve the suffering of the poor include the elimination of infectious diseases, programs to improve and expand education, and micro-lending to help poor people start small businesses. In one example of this type of aid, this author is working on a project with the Inter-American Development Bank to reduce the burden of Elephantiasis and other tropical diseases in Latin America.

Now that we have defined the purpose of foreign aid, we need to change the way aid is evaluated. That being said, the effectiveness of assistance programs should be measured on an individual basis through randomized trials and other evaluation techniques. Policy-makers should ask if each program has achieved its objective: Has it created a virtuous circle of development? Has it relieved the suffering of the extreme poor? Foreign aid should not be evaluated based on how many countries “graduate” from poor to developed. Aid alone cannot achieve such an ambitious goal, and that is not its purpose.

Finally, understanding the purpose of aid should make it easier to determine what type of foreign assistance should be deployed in which context. Regions that are poor yet relatively stable are more likely to benefit from aid to spur a virtuous circle. The virtuous circle of development requires a peaceful and somewhat orderly environment that would allow local businesses and the government to take advantage of foreign assistance. Very poor, conflict-ridden countries and middle-income regions would benefit most from aid meant to relieve the suffering of the extreme poor. Conflict-prone, wildly unorganized regions are unlikely to be able to take advantage of a transfer of technology or capacity building, as combatants and dictators are free to disrupt aid projects or siphon off the funds for their own benefit.  Middle-income countries already have strong and growing economies and capable civil servants, and are less in need of transfers of technology and capacity building. Aid can still be used, however, to improve the lives of poor and marginalized populations that are not benefiting from economic growth.

In a future article, I will expand on this idea that different types of aid should be targeted to different contexts, and discuss some case studies of countries in which aid was squandered or contributed to a virtuous circle of development.

Mobile Money in Afghanistan: An uphill battle

Adam Brown
IDDG Member since 11/2013
This article also appears on the YPFP blog as of 1/29/2014.

Since 2008, the Afghan mobile phone provider, Roshan, has worked to bring mobile money services to Afghanistan.  With the support of USAID, all four of Afghanistan’s major mobile phone providers are currently developing mobile money capabilities.  The highly successful rollout of Kenya’s mobile money and banking service, M-Pesa, has spurred a flurry of similar startup efforts – over 72 in  42 countries. Many countries, however, have failed to experience the kind success that M-Pesa achieved, and Afghanistan is no exception.

AFGHANISTANWhile the mobile money program in Afghanistan is in its nascent stages, the factors that helped M-Pesa to succeed are generally lacking. The most important of these are, 1) a dominant mobile carrier; 2) an economy that depends on long distance money transfers; and 3) customer trust in the system. The Afghan mobile phone market is too divided to create the kind of widespread network required to attain the critical mass necessary for a sustainable customer base. Further complicating the issue is the fact that Afghans generally do not rely on remittances, limiting the utility that could draw future users.  To fix that, mobile money providers should include banking mechanisms early in their programs instead of tacked on only once a money transfer system is in place.  However, trust in banks, especially since the Kabul Bank scandal, may be too low for Afghans to put their money into another bank-like mechanism. While mobile money is not destined to fail in Afghanistan, proponents of mobile banking and USAID should adjust their expectations for success, or at least be ready to address the above issues.

The gold standard for mobile money is Kenya and its M-Pesa system.  Four factors facilitated success of mobile money in Kenya. First, Safricom, Kenya’s largest mobile phone provider, already owned over 70% of the mobile phone market in Kenya when it began rolling out M-Pesa.  Secondly, once a user adopted M-Pesa, they could be reasonably certain that those around them would also be using M-Pesa and not a mobile money system from a competing provider.  This meant Safricom had already overcome the critical mass issue that plagues so many other mobile money startups.  Third, Kenya’s population relied heavily on remittances, with many urban dwelling breadwinners sending money back to their families in rural areas.  M-Pesa’s ability to send Kenyans’ remittances more quickly and reliably than traditional money transfer systems rapidly built up a widespread customer base.  Finally, the brand name of Safricom, along with reliable and consistent positive user experiences worked to build the trust of users, while word of mouth has helped M-Pesa add almost 12 million users since its launch.

Afghanistan offers a drastically different example.  Beset by a market divided among four major providers, familial structures that are geographically localized, and a deep-seeded distrust of banking systems, mobile money systems are hard pressed to set up effective networks.  Unlike the near monopoly held by Safricom in Kenya, Afghanistan’s mobile market is shared by four major mobile providers.  If a user chooses to open a mobile money account with any one of the providers, it is likely that only a quarter of the people in Afghanistan would be on the same mobile network and thus able to send and receive money with them.  With only a fourth of the market share, it is difficult for mobile money programs run by any of the mobile providers to offer the kind of widespread utility needed to attract new users.  To fix this, mobile phone companies and their foreign investors should work on developing a common mobile financial infrastructure that allows users to send and receive money across providers.  Giving users the ability to send money unrestricted by inter-company compatibility will remove the biggest hurdle to integrating mobile money.


While money mobile money has successfully been integrated into payment systems for government workers, mobile money offers limited utility to the average Afghan. While some Afghan families have some segment of the family living in a distant city sending back money, the practice is not an economic game-changer as of yet.  Additionally, infrastructure is so poor in Afghanistan that many markets, especially in rural communities where almost three quarters of Afghans live, tend to be almost entirely localized.  As such, the area within which the economic and social lives of the majority of Afghans are conducted is extremely limited.  Given this unique level of localization, mobile money will have a difficult time in finding relevance in the economic lives of Afghans.  To correct this, mobile phone providers should work on implementing widespread financial services that can benefit large numbers of Afghans.  Elements of mobile banking – mobile savings accounts, micro loans, and insurance – can appeal to a much broader section of Afghans.  Not only does this help draw in new customers, it also provides greater benefits to Afghans than simple money transfers.  95% of Afghans don not have bank accounts while 80% of them do have mobile phone access.  Mobile banking can help Afghans save money and insulate themselves against economic shocks like poor crop harvest, family illness, and uneven employment.  Granted, Afghans will be deeply skeptical about putting their money into a banking system since the Kabul Bank scandal.  To mitigate this, mobile money programs should look at starting their own mobile banking operation, or utilize a reliable foreign bank.  What is important is that the mobile banking system be seen as separate and insulated the historic turmoil of the Afghan banking system.  If this can be done, then Afghans will have the kind of incentive they need to begin taking their hard earned cash out from under their mattresses and depositing it into mobile money systems.

Implementing mobile money in Afghanistan is going to be an uphill battle for the foreseeable future.  It can be done, but mobile phone providers in Afghanistan, and their backers, must adjust their strategy to overcome specific hurdles.  Deep differences in the mobile phone markets and societies of Kenya and Afghanistan indicate that attaining a Kenya-like success story is unlikely.  But like all things in Afghanistan, given the thoughtful application of resources and of time, progress is possible.