Special Report: The $25 billion question - Aid to Africa

July 2, 2005

Years of mistakes have taught donors a bit about how to spend aid money better. The dilemmas of distributing bednets illustrate some general problems of aid. Donors muster resources, but they fail to align the incentives of the people providing them or benefiting from them. The grand macro-solutions often neglect the nagging micro-foundations. The staff of rural schools and clinics, for example, have scant reason to do their job well. A study in Uganda led by Barbara McPake, of the London School of Hygiene & Tropical Medicine, found that in the typical public clinic, 76% of drugs "leaked" on to the private market, more than a quarter of them prescribed to "ghost" patients who did not exist. Donors, Ms McPake points out, would rather subsidise drugs than pay salaries. Hence health workers make their own money by selling the drugs for themselves. If they did not, the clinics might not have survived at all. Clinics also levied "informal" charges on their patients, sometimes five to ten times the formal rate. Expectant mothers had to pay for the polythene sheet on which they gave birth; afterwards, they had to wash and return it. Patients who could not pay were routinely abused and occasionally assaulted. The authors heard of a newly delivered baby being "confiscated" until payment was made. Not surprisingly, the poor avoid public clinics if they can--which is just as well, because doctors staff them, on average, for fewer than 13 hours a week. Such problems mostly surprise and appal donors. But they are predictable and systematic. A cadre of economists, such as Michael Kremer at Harvard, Abhijit Banerjee at the Massachusetts Institute of Technology (MIT) and the Bank economists who wrote last year's World Development Report, are busy working out how to solve them. Some have tried to fix these problems by giving nurses, doctors and teachers incentives to do better. Others hope to solve them by giving patients and parents the power to demand more.