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The President’s New Approach to Development

Nearly two months after the draft Presidential Study Directive (PSD) on development was leaked, the White House is showing a strong commitment to reforming the U.S. foreign assistance system. At the G8 summit in Muskoka, Cananda, President Obama issued a statement outlining his objectives in reforming the U.S. global development strategy entitled “a New Approach to Advancing Development.” Like the draft PSD, President Obama’s new approach would place a greater emphasis on research and innovation, tailor development strategies to specific conditions in the field, and hold all aid recipients accountable for results.

Unlike the leaked PSD draft, this new development approach explicitly exemplifies all four of Global Washington’s Principles of Aid Effectiveness; consolidation and coordination, transparency and accountability, targeting to those most in need, and local ownership. By strengthening multilateral capabilities, the U.S. can consolidate resources and increase donor coordination. Using data and analysis from strong monitoring and evaluation mechanisms to guide policy will help to make the process more transparent and will increase both donors’ and recipients’ accountability to results. President Obama’s new development strategy will also target aid to select countries, regions, and sectors and emphasize local ownership of development projects.

Missing from this strategy, however, is any mention of institutional reform of the U.S. foreign assistance structure. Without addressing the tangled and unwieldy web of U.S. departments and agencies charged with carrying out U.S. development programs, the goals of President Obama’s new development strategy may not be met. Such reforms will most likely be taken up by the highly anticipated development policy directive to be released in the near future. Until the official policy directive is released, “a New Approach to Advancing Development” acts as a strong framework of objectives to be met by a new U.S. foreign assistance strategy.

President Obama’s New Global Health Initiative

by Eugenia Ho, Global Washington Volunteer

It has been an exciting month for the global health community.  On June 2, the Gates Foundation announced a new investment of $1.5 billion over the next five years in maternal and child health, family planning and nutrition in developing countries.   Also, the G8 nations are gearing up for their summit later this week,  where they will discuss a new initiative on maternal, newborn and child health in an effort to work toward achieving the health-related Millennium Development Goals.  In the lead-up to the G8 Summit, Canada has announced its willingness to inject about $1 billion in maternal and child health in poor countries if other countries ante up.

Of course, we cannot overlook the latest development on the Global Health Initiative (GHI) – a U.S. program with the largest amount of money that has ever been committed to any global health initiative.   On June 18, 2010, the U.S. Department of State, USAID and the U.S. Department of Health and Human Services announced the GHI program’s governance structure and the first eight countries selected to receive additional technical and management resources under this initiative.   The eight countries are: Bangladesh, Ethiopia, Guatemala, Kenya, Malawi, Mali, Nepal, and Rwanda. 

The Global Health Initiative is a $63 billion investment over six years to help over 80 partner countries, where U.S. government global health dollars are already at work. The initiative aims to improve measurable health outcomes by strengthening health systems and building upon proven results.  With a comprehensive approach, it places a particular focus on improving the health of women, newborns and children.

According to the GHI’s Fact Sheet on the USAID website, the GHI established goals for improving health outcomes in HIV/AIDS, malaria, tuberculosis, child health, nutrition, family planning and reproductive health, and neglected tropical diseases, with these principles:

– implementing a woman- and girl-centered approach

– increasing impact through strategic coordination and integration

– strengthen and leveraging key multilateral organizations, global health partnerships and private sector engagement

– encouraging country ownership and investing in country-led plans

– building sustainability through health systems strengthening

– improving metrics, monitoring and evaluation; and

– promoting research and innovation

The GHI announcement was welcomed by organizations such as UNAIDS and Oxfam America; while some organizations have different views.  Dr. Peter Mugyenyi, who runs the Joint Clinical Research Center in Kampala, Uganda, which is almost entirely PEPFAR funded, spoke about his concerns on NPR’s Morning Edition radio show.  He worries that the funding for HIV/AIDS will be diluted as more diseases become the focus under GHI.

 As you know, Washington State is a world leader in the field of global health, so this initiative could have a direct impact on local organizations.  According to the Washington State Department of Commerce, about $143 million of Washington’s annual tax revenue is generated by global health activities.  Washington State is home to some of the most renowned organizations and institutions with expertise in global health.  They include PATH, Seattle Biomedical Research Institute, the Gates Foundation, the University of Washington, Washington State University, and Washington Global Health Alliance (WGHA).  A Washington-based organization, Health Alliance International, is part of a coalition of global health advocacy organizations who use the same name – the Global Health Initiative, and they came up with recommendations on how US development assistance for health should be structured in the future. 

Below are some additional news and resources on the Global Health Initiative:

 The Global Health Initiative Fact Sheet on USAID

Huffington Post

Wall Street Journal

Dr. Ignacio Mas on Mobile Banking for the Poor

from the Bill & Melinda Gates Foundation website

by Evan Forward, guest blogger

On June 8, Dr. Ignacio Mas—deputy director of the Bill & Melinda Gates Foundation Financial Services for the Poor Program—delivered a special evening presentation at the Frye Art Museum on the topic of mobile banking for the poor.  The focus of Dr. Mas’ talk was M-PESA, a new SMS powered savings deposit and withdrawal platform that the Gates Foundation has been funding through its pilot stages in Africa over the past several years.

The event was hosted by SeaMo, a Seattle based non-profit organization that serves to connect the microfinance community through events, online services and opportunities for collaboration.

The Gates Case for Mobile Savings Accounts

The Bill & Melinda Gates Foundation financed M-PESA in Africa to address a side of the financial services equation in the developing world that has been thus far severely neglected: savings accounts for the poor.   M-PESA was designed to target the segment of the world’s population that is earning less than $2/day and is eligible to work.  For a typology of this 1.8 billion people adapted from Dr. Mas’ presentation, please refer to the table below.

Table 1 Gates Foundation typology for the 1.8 billion eligible workers in the world living on <$2/day[1]

M-PESA

M-PESA operates through a text message based application that allows an intermediary to accept cash deposits and input the amount for the depositor via mobile phone into a secure electronic savings account.

For the majority of the world’s poorest, few options exist for secure, accessible, and low transaction cost savings deposit accounts.  Currently formal avenues for savings account services are, by and large, prohibitively expensive due to the sheer cost of transporting hard currency that they entail.  The bulk of the world’s poorest are concentrated in rural areas where transportation infrastructure is often limited, circuitous or unreliable.   When a client is only able to deposit in small or sporadic increments, the transaction costs can easily negate the value of the transaction to any provider.  

Apart from the few formal savings services that may be available to the world’s poorest, deposit arrangements arising through informal channels come with a host of other problems.  Informal savings agreements can be unreliable; they are often not private; and they render clients susceptible to exploitive agreements.

Leverage Points

Dr. Ignacio explained that the Gates Foundation sees three primary groups of existing resources that lend can be maximally leveraged in the roll out of M-PESA’s services.  

1)      The “Bricks and Mortar” of existing retail shops and central community buildings.  Rather than constructing new buildings to serve as deposit locations, Gates Foundation looks to market M-PESA as a secondary activity within already active enterprises or community spaces.

2)      An already widely deployed communications network.  Mobile phone networks are quickly approaching omnipresence, delivering 3g capability and cellular phone service today to even some of the most remote areas of the world. With M-PESA, these networks will allow poor and geographically marginalized communities to receive the same real-time, low-cost transaction capability that is enjoyed in the richest countries in the world.  

3)      The rapid spread of mobile phones.   Inexpensive and often the only telecommunication option available for those living in rural areas, mobile phones have spread to the hands and communities of even the poorest in the world.  By charging phones with the rudimentary capabilities of an ATM machine, using M-PESA’s services involves very little new investment, change in normal behavior, or training.

Regulation

The primary public burden of M-PESA, by Dr Ignacio’s characterization, is found in the costs of regulation.  Ensuring that retailers providing M-PESA’s mobile phone based cash deposit services are not exerting monopolistic pricing and exclusive practices on poor communities is a real, and potentially very costly, regulatory challenge to effectively address.  A challenge which requires a regulating entity more credible and responsive than typically exists at the status quo in the national governments of most developing countries. 

Conspicuously absent from the existing resource bases that the Gates Foundation seeks to leverage for the roll-out of M-PESA’s services are the government institutions of recipient countries.  Instead, the Gates Foundation funds the Alliance for Financial Inclusion(AFI), managed by German Technical Cooperation (GTZ).  AFI is a platform for:

• Facilitating online and face-to-face dialog amongst policymakers in the developing world on critical regulatory challenges and emerging best practices;
• Giving visibility to the network of public and private sector actors working to improve access to basic financial services for the world’s poorest and;
• Connecting grant funding to develop and implement the most promising solutions for problems of financial inclusion

Dr. Mas stated that the largest grants currently available from the Gates Foundation are offered through AFI to fund projects and programs that promote financial inclusion.     

[1] Adapted from Dr. Ignacio Mas presentation Thursday, June 3, 2010. Frye Art Museum, Seattle.