Francis Watanabe is project portfolio manager for the government. He acquires development interventions on the secondary market, to add to his portfolio on early child development. Innovators, like the Gates Foundation or Oxfam, or even local governments, start up their interventions, and after the first rated evaluation sell them off to the highest bidder on the secondary market. Interventions from a reliable provider, with a good results projection and long life span are in high demand. Buyers normally will pay for all the investments and overhead, and are prepared to pay the innovator for the further project management. The management fee for high yielding projects can be set quite high. Private sector innovators with a good success rate can earn a good living, and in some sectors, like micro-finance, most innovators are from the private sector. In early child development however, most innovators are former NGOs or foundations.
Watanabe is expected to reach a very good results/cost ratio for his portfolio, better than the average from the donor group, so he cannot just rely on market data. He also has to research on the latest scientific findings and try to identify upcoming new techniques or new innovators. He can also improve his ratings by identifying local champions in difficult environments. Real bargains can be concluded when other countries decide to switch to other priorities, and they offload their old portfolio.
Thanks to the secondary market approach, most donors have managed to improve the development results of their work with a factor two or even three, all on a stable budget.
It seems like this market approach just had to happen when the different building blocks for the system were available:
- In order to have a functional market, knowledge asymmetry should be solved as much as possible. The transparency drive in development funding provided the information needed. The International Aid Transparency Initiative lead to the availability of data on every intervention by every actor in a comparable way. IATI started just did this.
- The results based approach lead to a system where interventions should deliver on the promised results.
- Standards in results reporting and impact evaluations led to the rating of projects for a specific development outcome. Independent rating agencies emerged from evaluation and audit consultancies.
The acceptance of the Sphere standard as the absolute poverty line set a baseline and brought it all together.
The real breakthrough came with the sphere standards, setting concrete lines for absolute poverty. Donors wanted to spend the bulk of their money on palpable morality & evidence based interventions for the poor, instead of for vague institutional goals or long term elusive economical growth.
Inevitably once the results based approach was accepted, coördination and partnership moved from the agenda. Indeed, as ownership and the “do no harm principle”were part of the basic set of principles, debating coördination and partnership was not necessary any more. Any intervention bypassing ownership issues would get a bad rating for sustainability. Partnerships and coördination became more organic: it had to serve the development goals. Pragmatically the operators moved from partnership to competition and back again, according to the needs of the beneficiaries.
However, still a hefty 30 % of the interventions happen outside of the system. This is normal, as most of the interventions that don’t cover basic services are more difficult to assess on their results potential and their value would be too difficult to estimate. Indeed: important work still happens in the rule of law, security, democracy, governance and economic development. However, a secondary market for this type of projects still seems a few decades away.