Is Foreign Aid an Effective Cure for Global Poverty?

Abstract

This paper argues that the top-down foreign aid system is ineffecient and possibly damaging for poverty reduction and long-term sustainable economic growth due to the lack of accountability and local knowledge. The paper assesses efficiency of alternative models of development assistance programs with the emphasis on community-based participatory development projects.

   The evaluation of the Brazilian Bolsa Familia and Indonesian Kecamatan Development programs showed promising results. The evidence of the research leads to the conclusion that the hybrid form of foreign aid whereby the international community provides technical assistance, resources, expertise and knowledge in designing and carrying out projects with a great degree of the local communities participation  seems to be more effective alternative to the existing top-down aid paradigm. Project designs of participatory programs, however, must guarantee a viable monitoring system to avoid corruption and elite capture.