Einar H. Dyvik
Research expert covering Nordics and global data for society, economy, and politics
Get in touch with us nowDevelopment aid can come both from governments and government agencies, termed official development assistance (ODA), and from individuals, private agencies, and non-governmental organizations. It can come both in terms of grants, meaning that the sum does not have to be repaid by the recipient, and loans, which have to be repaid. It is extremely difficult to assess the exact effect of development aid as hunger and poverty reduction are linked to several interrelated factors. However, there has been a reduction of poverty in the world since 1990, a development that especially must be seen in relation with China's economic growth in recent decades. However, even though the poverty rate has fallen in almost every world region since 1990, millions of people continue to live in poverty, especially in Sub-Saharan Africa.
Bilateral vs. multilateral development aid
Development aid can be distributed either directly from the donor country to the recipient country, called bilateral aid, or via international organizations and development banks such as the World Bank or different United Nations (UN) agencies, called multilateral aid. Both have advantages and disadvantages; bilateral aid can be used by donors to form strong relations with potential partners and to put pressure on recipients to implement policies that the donor support, while multilateral agencies have a strong credit and experience in how to foster social and economic development. This so-called politicization of bilateral aid may be an advantage for the donor and can also be an effective instrument to reduce corruption and improve human rights, but the actual development may be hampered by it. On the other hand, when aid is distributed multilaterally, it can be challenging for the donor government to see where and how the money is actually spent.Humanitarian and other types of aid
Moreover, development aid can be allocated to specific sectors or projects in which the objectives are substantially different. For instance, humanitarian aid has the purpose to reduce the effects of a human crisis or to stop one unfolding. Hence, the target is to have an immediate, short-term impact. Sectoral aid directed towards social and economic infrastructure, on the other hand, is aimed at having more long-term effects, and the true effects of investments in for instance the education system may not be seen before years later. A substantial amount of the ODA is unallocated, meaning that the recipient has more autonomy over how to use the means.Even though the way to most effectively invest development aid remains contested, it continues to play an important part in poverty alleviation and to stop humanitarian crisis. It will likely remain important in the most vulnerable countries as rising inflation has made food unaffordable for the world's poorest, and as climate change is expected to put more pressure on arable land.
