The MM Model – Transforming Aid
“We are living in a perverse democracy where laws are passed that which permits and even prolongs the dismal existence of almost half the world’s population; ravaged by hunger, disease and environmental insecurity. A bold corrective measure is necessary”
Fortune Forum Founder
“To overcome desperate poverty in the midst of unprecedented prosperity, Aid will need to become more intelligent as well as generous. People want to contribute more; but voluntary donations will increase dramatically only if aid becomes more visibly effective.”
Sir James Mirrlees,
Nobel Laureate Economist
|Chapter One: The MM Aid Model|
| The REAL AID Fund (RAF)
|Private Sector Office|
| Building Public Confidence
|Chapter Two: The Case for MM Model International Roll out|
|UK Adaption; ‘UK Aid Match’ matching charity appeals|
|Praise & Endorsements|
Chapter One: The MM Aid Model
One billion people will go to sleep hungry tonight. More than 30,000 people die of malnutrition, avoidable diseases and hunger every day. Every minute of the day a mother dies in childbirth. With continued use of fossil-fuel technology, the world will become hotter, and the oceans will rise. Unless we act, there will be famines, widespread drought, an extreme climate, loss of valuable species, a grave risk of social turmoil and violent conflicts. Poverty and poor living conditions generate ethnic and political conflict, migration and pandemic disease. Rising world population exacerbates the problems. Global action is necessary and urgent.
In 2000, the nations of the world adopted the UN Millennium Development Goals (MDGs); which include the reduction of extreme poverty, disease, child mortality, climate change and gender inequalities, and the improvement of primary education and maternal health. At the United Nations Sustainable Development Summit on 25 September 2015, world leaders adopted the 2030 Agenda for Sustainable Development, which includes a set of 17 Sustainable Development Goals (SDGs) to end poverty, fight inequality and injustice, and tackle climate change by 2030.They seek to build on the Millennium Development Goals and complete what these did not achieve. The SDG programme needs funds. The 193 UN member governments backed these new goals. To meet the need, the developed nations reaffirmed their aid target of 0.7 per cent. of their national incomes to the developing nations. Only five of them currently meet the target. Most contribute less than half the pledged level. In 2013, the shortfall was $165B, roughly 55%. That shortfall represents widespread human misery and a great risk of global insecurity. The MM Model provides a way for Nations to move faster toward meeting the funding shortfall.
The model is a way of arranging for Nations, Individuals and Corporations to contribute their ‘Fair Share’ towards these urgent needs. We propose to encourage increased private sector contributions by matching these donations from governments’ development-aid budgets, and by establishing better monitoring control, coordination and transparency of delivery systems. We further propose that additional funds are generated by mandatory donations from business profits. Improving the performance of development aid, by vigorous oversight and by the creation of special management funds, are essential parts of the model. The quality of aid is as important as its quantity, in achieving the development goals. And better performance justifies increased giving. As part of the model, we propose arrangements to engage trusts and foundations in the model.
There are numerous ways in which a country’s government can encourage its residents’ and citizens’ giving by matching and enforcing good and effective use of these funds. Following the publication of the MM Proposal in 2008, and its detailed blue print and global government dissemination in 2009, its core concepts have since been applied by the UK DFID in a scheme to match donations to projects proposed by NGOs. The expanded MM Aid Model set out here provides a broader set of adoption possibilities that countries can tailor in accordance with their administrative capabilities and funding priorities. The paper also contains additional recommendations in pursuit of aid effectiveness.
In addition to the richer OECD Nations, our recommendations have now been expanded to include middle-income nations, where donations would be mainly for development aid within the nation and offshore territories, which normally do not have provision for aid donations, so as to invite them to collectively participate in the mission to provide enough Real Aid.
How can donations be increased? By making aid expenditures more effective and people more aware of the good their donations achieve; and by increasing the aid that a donation accomplishes. These measures strengthen the incentive to make donations. We propose that incentives be increased by Governments using part of their overseas development assistance (ODA) budgets to match private voluntary donations one-for-one. With this matching, a donor knows that the donation would achieve twice as much as if it was not matched. The incentive to donate is thereby considerably increased. Matching and giving could be optimized for most people by allowing them to make voluntary donations along with their tax payments.
These contributions, along with the matching public funds, should be channelled through a special fund, to be set up by the government or the government aid agency. We call this fund the Real Aid Fund (RAF). Its spending remit would be determined in accordance with the country’s aid agenda. Every donation made to the RAF by a private individual, should be matched by an equal contribution from the government’s aid budget earmarked for matching; a part that, in the absence of the scheme, would have gone to governments and government aid agencies directly and unconditionally. Donations to the RAF can be made along with income-tax payments, as direct payments, or as legacies. Alternatively, donations could be matched via NGO appeals. Donations may come from people who are not domiciled or resident, and from accumulated wealth, including funds held offshore.
The optimal method would be to invite Tax payers to donate at least 0.7 per cent. of their taxable income. They could choose a different rate or opt out entirely. That amount would be collected with their tax payments, unless they chose to opt out, or chose a different level of donation. This proportion echoes the commitment to increase government development assistance to 0.7 per cent. of GDP. Alternatively, donations in response to appeals could be matched, as in the Aid Match system established by the UK government aid agency DFID. Territories lacking an income tax or an overseas aid budget, such as many of those known as offshore territories could organize a general appeal to their citizens through an annual invitation letter.
Higher-income tax-payers would be invited to donate at least 1.0 per cent. of their taxable income. In order to generate more revenue, we also propose that businesses be required to pay a minimum of 1.0 per cent. of their net profits (when positive) to the RAF, and allowed to contribute more. To encourage additional contributions, government matching should be applied to business contributions beyond the required 1% levy as well as to personal donations. These contributions would not impose a serious or unusual burden. Businesses in some countries are already required to contribute a proportion of their profits or revenues to good causes. Many higher-income earners and businesses would of course donate more than 1.0 per cent.
Other ways of increasing the quantity of Real Aid
As of 1st April 2014, the Indian government mandated a minimum spend of at least 2% of their average net profits on development initiatives within India. It is suggested that the other BRICs Nations and emerging economies should follow India’s lead by imposing a similar requirement on their nation’s companies thereby sharing their country’s growth with the investment in their poorest populations.
Aid is often misdirected due to tying to political and commercial interests. For instance, if ODA is tied to the purchase of goods from the provider’s country, it can create a bias towards projects with a large import content in areas of particular export interest to the originator and towards commercially advantageous developing countries; this, in turn, tarnishes the credibility of providers of development co-operation.
If implemented by all OECD nations the model could, in combination with untying aid and trade from the donor’s national priorities, make available more than US$100 billion per year. To achieve such a high level of additional donations, savings and contributions, all OECD member states and offshore regions would have to implement various aspects of the MM Model such as clear display of on the invitation form and, on a website, reports of aid results, from additional monitoring, and the availability of specialist donor support through the creations of a Private Sector Office. An exceptional matching incentive alone will not work – recipient NGOs, UN Agencies andGovernment ministries have to accept an independent evaluation process, such as the one we now sketch.
The REAL AID Fund (RAF)
The RAF would have three tasks of the first importance, to select the best programmes and projects, to assess their performance, and to inform public perceptions.
The Fund will receive donations and matching funds, as described, and will have to decide where that aid will go. It is for the Country RAF to decide, but we have some suggestions. It is generally thought that NGOs are effective at applying money to poverty alleviation projects. Many of them have a good record of creating, implementing and supporting the kinds of programmes that the Fund could support. The scale of these programmes is often too small. Scaling up good projects, and providing independent monitoring, evaluation and reporting of these programmes can only enhance them.
The Real Aid Fund is essentially designed to aggregate thematic concerns within the scope of international development. The RAF will allocate its resources to development programmes, proposed to it by the organisations and agencies that will implement them. RAF has to build public confidence in the results of these programmes, both to attract donations, and to serve the Sustainable Development Goals.
Sizable contributions from individuals, trusts/foundations and businesses could be directed in ways selected by the donor, with the guidance of the Private Sector office (see p. 7).
RAF needs to be attractively presented on the tax return or invitation form. An associated website should display the brand logos of the delivery organizations to make the destination of the funds immediately clear. Effective presentation would engage and encourage the donor.
The success of pooled funding is clear. Public private mobilization around the GAVI, The Vaccine Alliance which is forged around a single issue of global health has proven to be attractive to private funders and has seen impressive tangible results. Gavi which has an annual income in excess of U$4billion, its Private funding commitments accounted for 21% of Gavi’s funding between 2000 and 2020, and continues to expand with the launch of public-private partnership initiatives, such as the Gavi Matching Fund (see UK Adaption at page 10).
It is worth noting that grouping NGOs in appeals for aid has also proved successful in the UK, where the Disasters Emergency Committee (DEC) initiative brings 13 leading UK based international aid charities together in times of crisis. These member brand logos are used in DEC’s humanitarian appeals which adds considerable strength to their fundraising. These appeals have raised more than £1.1 billion since the DEC’s inception.
Government aid agencies already provide some funding to NGOs. In 2013, USD 19.6 billion of official development assistance (ODA) was allocated to and through CSOs by OECD DAC members compared to USD 18.2 billion in 2009. While the share of bilateral aid allocated to and through NGOs/CSOs differs widely among DAC members, the equivalent of 11.6% of DAC Members’ total gross ODA was channelled to and through CSOs in 2013. That proportion should be increased. We propose that NGOs’ total income should be at least doubled and this could be achieved by putting aside as little as 10% of total aid budgets for matching NGOs directly, as is likely that good enough projects are available to fund. That additional income would much more than compensate for any possible diversion of private donations direct to NGOs as a result of the MM Model.
We would emphasize the importance of voluntary donations, People generally choose to give their money to NGOs because NGOs are able to appeal to their motives. As this is a voluntary donations scheme it therefore makes sense that much of the funds should be delivered through NGOs alongside the Government’s existing channels to address the necessary challenges associated with development. The RAF’s choices should reflects the donor country’s aid priorities and earmark funding to trustworthy NGOs with a good track record and a clear capacity to deliver the promised aid. This portfolio would of course include relevant and effective UN agencies. CIVICUS, an international alliance dedicated to strengthening citizen action and civil society around the world, would be the ideal partner to advance the NGOs’ stake in development.
A major part of development is achieved by strengthening government systems to ensure that poor people have access to essential services. The State could best provide improved infrastructure: roads, hospitals and clinics, agricultural support services, schools and colleges, water supply and sanitation. It is for the donor Government to determine its bilateral support of transparent recipient Nations. Much of the funding by the RAF should therefore provide for bilateral support of recipient governments in developing economies. However, there are valid concerns with the corruption associated with Bi-lateral aid, this can be minimized by channeling aid directly through the government ministries themselves.
RAF would reflect issues that make up the 17 SDGs such as health, education, gender equality, infrastructure etc and which could also reflect broad geographical and wider delivery interventions. Each implementing government can set out guidelines on how its expenditure, implementation and monitoring should be handled.
With regard to the relationship of RAF with its existing national aid agency expenditures, a notable characteristic of RAF would be that the entire selection of Funds and its projects that are chosen for funding are those that represent the most visible impact, providing clear and compelling reporting to donors. Such projects are often referred to as ‘tangible’ or ‘identifiable’ and relate to most interventions where there are measurable outcomes; providing a set number of immunizations or utilities that provide a certain amount of clean water are two clear examples for the sake of illustration here. Other important aspects of development such as, security and the rule of law, protection of property rights, and a social safety net which are longer term or not so predictable can continue to be funded by the National Aid agency, the UK example being DFID. In effect, the existing national aid portfolio would be split in this way to attract substantial and continuous private donations to RAF.
The RAF would have the task of measuring what the spending achieves. Planning and evaluating the programmes necessarily requires many consultants and experts, but it is important that most of the funds are spent on the programmes rather than the advisors. At the same time, we have to recognize that reducing or eliminating corruption in the aid process has a cost attached. Contributing donors can be confident that their giving will be channelled successfully, because the whole distribution process through to assessment of the effectiveness of proposed recipients, and subsequent evaluation of results obtained.
Private Sector Office
RAF would be set up as a legal entity owned by the Government and this new government aid collection programme would act as the gateway to the private sector. We propose the creation of a Private Sector Office to cultivate private sector relationships and to communicate efficiency of the RAF portfolio. This office would provide specialist support to its major donors with the aim of optimizing their giving. This support will include; reinforcing the donor’s connection to the causes through the dissemination of reports, events and thanking and recognising major donors, and engaging their funding expertise. Small and Medium Enterprises (SMEs) can account for as much as half of GDP in high income countries such as the UK. SMEs has good reason to engage with funds, notably it is convenient because the grant making process is undertaken by RAF. A company’s CSR efforts would ordinarily consist of establishing a dedicated department to assess development needs, to undertake and allocate programmes directly or through NGOs and to conduct regular impact evaluation studies. RAF should therefore appeal to this valuable contributing sector.
Private philanthropy fosters innovation because philanthropists often take risks, but if things work with great success on a small scale, proven philanthropic results should be scaled up by governments to speed up progress and coordination. To attract foundations and trusts to contribute to the RAF, and also to enhance the impact of their resources, the RAF should invite them to submit their best funding practices for funding consideration. RAF would not be able to relate its expenditures exactly to individual intentions, but it should be guided by performance outcomes. The recommendations would not take place on the tax return rather through the ‘Private Sector Office’ who would get in touch to process the donation, but more importantly this will instigate the donor cultivation process. We further suggest that an innovation department be set up to consider a variety of these recommendations as well as other emerging innovative models.
Governments may decide to match innovative large scale Social Business projects whereby businesses may opt to further utilize their unique assets, expertise and networks in formatting their uniquely designed Social Business, a term commonly used to describe business models that are characterized by their goal to maximize the social impact instead of the return on investments. Often production facilities are being set up in poor countries to produce inexpensive, affordable products that are highly beneficial for the people in that country (e.g. shoes, healthy food enriched with vitamins etc.). The profits are either being reinvested in the production facility or given back to those who have created it – the employees e.g. through shares or direct payments. By investing in scalable models that can produce sustainable business solutions to boost local employment and incomes is becoming one such development trend to achieve this goal. Germany has an excellent example of a 10 year, eight figure private public partnership with the Cotton Made in Africa initiative pioneered by Dr. Michael Otto. Through its training programs, Cotton made in Africa improves the living conditions of smallholder farmers and allows continuous knowledge transfer to smallholder farmers to improve their living conditions and to promote environmentally friendly cotton production.
A common aspiration that social investors share is for local communities to work ‘their own way out’ of the reliance on the international donor community. Social Business as popularized by Prof. Mohammad Yunus enables local entrepreneurs to solve social problems in a financially self-sustainable way. Yunus Social Business would be a good advisory body for knowledge transfer.
A decent provision for grassroots organisations should be made so as to fund innovative sustainable practices that have the potential of being scaled up. Smaller organisations tend to have the vision, concept, and determination to start new ground breaking initiatives, but often lack the resources to finance them. We therefore propose that a selection of Randomized Controlled Trials (RTCs) projects are on offer to major donors. RTCs conduct randomized evaluations around the world. The Abdul Latif Jameel Poverty Action Lab (J-PAL) designs, evaluates, and improves programs and policies aimed at reducing poverty and would be the ideal partner to guide policy with scientific evidence.
It is generally thought that Agencies and NGOs are good at applying money to addressing the root causes of poverty. Many of them have a good record of creating, implementing and supporting the kinds of programmes that the funds will support. The scale of these programmes is often too small. Scaling up good projects, and providing independent monitoring, evaluation and reporting of these programmes can only enhance them.
Building Public Confidence
We suggest that a RAF commission of independent-audited projects and initiatives that rate its aid expenditures by their impact and results. That would provide a competitive environment amongst grantees. It would reward good performance, improve or eliminate inefficient programmes, and facilitate better coordination of aid efforts. The result would be a higher yielding portfolio of development programmes. An independent panel of experts who represent the development, charity, NGO and aid agency sectors should oversee the process.
The programmes have to be well chosen, serving development priorities, not defence or donor-trade priorities. RAF will be responsible for evaluating their performance, and reporting to donors. It also has a responsibility to counter, through programme selection and direct monitoring, the inefficient use of development assistance through corruption and wasteful administration. Waste and corruption are among the reasons why donations to these causes are so much less than their importance requires.
Complete independent monitoring of aid programmes is not always practicable. RAF should obtain full reports from their delivery partners of their activity and the use and effectiveness of their funds, and audit them critically. RAF should also undertake some field auditing of randomly selected programmes. It is not sufficient to rely on reporting by the NGOs and governments of recipient countries. Auditing has to be undertaken the way school and bank inspections are done unannounced. Honest reporting is the right basis for positive publicity. In this way, Governments could make a valuable contribution to the great task, increasingly a focus of national and international aid agencies, of ensuring Aid effectiveness, and help to show what can be achieved in a believable way. Evaluating the programmes necessarily requires consultants and experts, but it is important that most of the funds are spent on the programmes rather than the advisors.
Donors are to be given good information about development programmes they have financed through the RAF, information that should be publicly and transparently available on line. Donors contributing through the RAF can be confident that their giving will be channeled successfully, because of the RAF’s independent audit of the whole distribution process, from the criteria driving allocation of funds through to assessment of the effectiveness of proposed recipients, and subsequent evaluation of results obtained.
RAF would publicize the Funds’ achievements to potential donors, and show that the donors’ performance expectations are met by reports that would also be available on-line. By doubling donations, channelling the money more effectively, and by publicly demonstrating successful outcomes we create a multiplier effect to attract donations from the private sector.
The MM Model would help give the world’s poor access to food, water, shelter, education, health-care, a cleaner environment, making available a more dignified existence, and the power to work themselves out of poverty once and for all. Let’s honour their dignity by granting opportunities to fulfill their human potential. Let’s help these people win their struggle. Chapter Two: The Case for MM Model International Roll out
UK Adaption; ‘UK Aid Match’, matching charity appeals
The UK Government has demonstrated that a Model along these lines can generate substantial contributions to the UN SDGs. We are encouraged by their decisive leadership.
The co-authors of the MM Aid Model Sir James Mirrlees and Renu Mehta, had explored the ideas, and recommendations of the MM Model and held consultations with UK Government officials at the Department for International Development (DFID) and the UK Treasury from 2008 up to briefing of the incoming International Development Secretary Andrew Mitchell in late 2009. DFID independently adapted, developed and established MM’s central concepts and guidelines with its formation of UK Aid Match scheme and various other programmes. UK Aid Match was set up by DFID to boost public support for charities focused on poverty reduction in developing countries. It doubles public donations appeals run by British international development charities.
The MM Aid Model core ideas that have been taken up by DFID include; a) For Government to utilise its aid budget to match and therefore galvanise private sector donations from individuals, businesses and foundations b) It had set up a ‘Private Sector’ office to optimise and service sizable donations in line with defined major initiatives. Our other recommendations taken up include the setting up in 2010 of an Independent Audit of Aid.
UK Aid Match resulted from DFID tailoring our submissions to suit its infrastructure, administrative and other objectives, thereby involving charities and NGOs to match donations and to advertise DFID’s role in the matching endeavour.
The UK Aid Match commitment totals £265m over a 6 year period from 2011-2016. The UK Aid Match commenced with an initial £37.5M pilot matching fund in 2011 and, due to the public popularity of this matching scheme, the UK has since increased its matching budget several times (derived from ODA). This initial pilot fund benefited NGOs include Retrak, Action Against Hunger, Islamic Relief, READ Foundation, WaterAid, Riders for Health, World Vision West Africa Appeal, UNICEF, Christian Aid, Trócaire, CAFOD, Sport Relief 2012, Sightsavers and Save the Children. Total UK Aid Match funding supported over 66 appeals.
Within this total £265m figure we include the five rounds of funding subsequent to the initial pilot and interim funding phases and DFID’s Private Sector Department £50m commitment. This dedicated office was set up to cultivate public-private partnerships, namely by establishing a £50m GAVI matching fund alongside $50 m from Bill & Melinda Gates Foundation, used to match contributions to GAVI Vaccine Alliance from corporations, foundations and other organisations, as well as from their customers, members, employees and business partners.
Whilst it is laudable that UK has taken the lead in adopting these core ideas, this £265m total matching commitment over a six year period is a striking contrast to the UK’s overall ODA budget of £12.1 billion in a single comparative year (2015). Evidently only a small fraction, on yearly average, only 0.46% of its ODA, is actually being utilised for matching private sector funds. The UK could obviously do much to scale up the funds made available to UK Aid Match.
Meanwhile, DFID enjoys substantial public recognition for UK Aid Match as orchestrated by its eligibility criteria which stipulates, in their own words, “organisations must, through their own and their partner channels, ensure that the public are aware that their donations will be matched pound for pound by the UK government. All Appeal publicity must carry UK Aid Match messaging and the UK Aid Match logo.” Their criteria goes so far as setting out a minimum publicity threshold of 400,000 opportunities to view. In the UK Aid Match endeavour DFID’s communication partners do much of its well-deserved publicity.
The influence of these ideas embodied in the UK Aid Match has spawned more than £265m of funding for trusted charities and organization impacting well over 100 million lives across the globe. If 5% of the UK Foreign Aid budget is used for UK Aid Match, this could positively impact over a billion people. If the major G8 countries used 5% of their aid budget, this could bring in enough money to touch the lives of the majority all the world’s poorest people.
The MM Model –“Giving a chance to everyone”
If offshore funds have to be paid via national bank accounts, will those funds be subject to tax prior to making a contribution?
If your scheme becomes oversubscribed, would the government run out of money for matching private donations?
What about all the other charitable sectors that will not receive any of the additional money that will be generated by the scheme?
Would donations to the fund from non-taxpayers overseas enable people with offshore bank accounts to evade taxes?
Will there be immunity for off-shore funds? i.e. will those people’s wealth be scrutinized by the collecting authorities?
Isn’t there already enough bureaucracy in aid, if donor governments have to report to the RAF, individual aid agencies and multilateral institutions won’t this waste a lot of our aid money?
Glossary of Terms