This site offers data and research on multi-bi aid, earmarked funding to multilateral agencies. This new type of aid – somewhere in between the traditional forms of bilateral and multilateral aid – has massively grown since the end Cold War, but its underlying determinants and implications have only recently started to be studied systematically.
An interdisciplinary research team from the Universities of Zurich and Geneva, and Heidelberg University kicked off the research project The Proliferation of Multilateral Funds: Explaining the shift towards non-core multilateral aid and related institutions to address these gaps. The Swiss Network for International Studies (SNIS) provided generous funding for the initiation phase of the project (2012-2015).
The project produced a range of outputs, and also triggered a series of follow-up projects with additional and complementary results. They are ordered by the following thematic categories:
Thanks to a massive coding effort, we are able to trace the evolution of multi-bi aid for a range of donors over the last 25 years. Our dataset consists of three components.
Component 1 enlists all multilateral institutions that received multi-bi aid at any point in time over the last 25 years. It also includes variables on key characteristics of these multilateral institutions such as substantive mandates, institutional characteristics, and its legal independence from other multilateral organizations.
Component 2 contains all bilateral aid activities of 23 OECD/DAC donors from 1990 to 2012, some which are channeled through multilateral institutions (see Component 1) and thus qualify as multi-bi aid. For multi-bi aid activities, we identify the implementing institution and assess the specificity of delegation by the supporting donor through a number of additional hand-coded indicators.
Component 3 includes aggregate annual multi-bi aid along with the bilateral and multilateral aid flows adjusted for the purpose of avoiding any double-counting as described in the codebook. All types of aid add up to the total aid provided by OECD/DAC donors.
Eichenauer, Vera Z. and Bernhard Reinsberg (2017). What determines earmarked funding to international development organizations? Evidence from the new multi-bi aid dataset. Review of International Organizations, 12(2), 171-197, doi:10.1007/s11558-017-9267-2
In this research area, we illustrate the conceptual challenges to grasp a new development in the multilateral aid architecture being primarily addressed by development practitioners so far. Multi-bi aid includes all earmarked voluntary contributions to multilateral agencies, i.e., contributions outside the core funding, generally using special trust funds.
Based on this definition, our overview article on multi-bi aid first traces the evolution of multi-bi aid after the Cold War, discusses the main explanations for its rise, and explains some potential challenges of this type of aid in light of broader developments in the global aid architecture. The article also provides some tentative answers to widely discussed issues such as the financial additionality of multi-bi aid.
Read the full article: The rise of multi-bi aid and the proliferation of trust funds (PDF, 733 KB) (Bernhard Reinsberg, Katharina Michaelowa, and Vera Z. Eichenauer, book chapter in the Handbook on the Economics of Foreign Aid, Edward Elgar, 2015).
What are the determinants of providing multi-bi aid? A number of aid reports indicate a diversity of motivations of bilateral donors for using multi-bi aid. In particular, bilateral donors can expand their global presence without increasing their own administrative capacities; sometimes they can even reap the benefits of pooling bilateral resources, notably in high-risk contexts; donors also can enhance the visibility of their multilateral contribution, especially when giving beyond their burden-sharing commitment; finally, donors have traditionally sought to influence the type of activities pursued by multilateral agencies. The projects below address these issues in greater detail.
First, using the multi-bi aid data, we examine the general determinants of earmarked aid from the perspective of donor countries. We find that donors use earmarked aid in high-risk contexts, including post-war countries, weakly governed countries, and after natural disasters. In addition, donors use earmarked aid in the same recipient countries in which they have bilateral presence.
Eichenauer, V. Z., & Reinsberg, B. (2017). What determines earmarked funding to international development organizations? Evidence from the new multi-bi aid data (PDF, 3 MB), Review of International Organizations, 12(2), 171-197, doi: 10.1007/s11558-017-9267-2.
Second, we explore specifically the role of multi-bi aid in the foreign aid policies of Central and Eastern European (CEE) donors. The CEE donors provide a unique testing ground for theories on multi-bi aid as they tend to lack bilateral capacity while seeking for greater influence on their multilateral contributions (most of which they channel to the EU). The findings also reflect the diversity of motivations for multi-bi aid provision across different groups of donors and thereby complement the pooled analysis.
Szent-Iványi, B., Reinsberg, B., & Lightfoot, S. (2018). Small donors in world politics: The role of trust funds in the foreign aid policies of Central and Eastern European donors (PDF, 602 KB). European Journal of Development Research, doi: 10.1057/s41287-018-0175-y.
Third, we investigate under which conditions donor countries choose among select alternative funding mechanisms for their foreign aid programsaid channels. In particular, we study how the availability of trust funds alters the tradeoff between bilateral aid and voluntary funding of multilateral institutions. Our predictions from a formal model take into account the voting rules at different organizations as well as different preference constellations among donors.
Eichenauer, V. Z., & Hug, S. (2018). The politics of special purpose trust funds. Economics & Politics, 30(2), 211-255.
Fourth, we consider the choice by sovereign donors among various types of multilaterally channeled funds. We suspect that donors trade off burden sharing in larger funds versus preference matching in smaller funds. We derive a number of observable implications that we assess using funding decisions for all trust funds at the World Bank.
Reinsberg, B., Michaelowa, K., & Knack, S. (2017). Which Donors, Which Funds? Bilateral Donors’ Choice of Multilateral Funds at the World Bank (PDF, 1021 KB). International Organization, 71(4), 767-802.
Finally, we are interested in the motivations of multilateral agency staff to pursue trust funds. In general, staff members have incentives to pursue these funds to expand their remit and increase their internal autonomy, which may counteract overall organizational objectives. In the case of the World Bank, organizational reform (unrelated to trust funds but affecting the budget autonomy of some departments) triggered increased fundraising for multi-bi aid from these departments.
Reinsberg, B. (2017). Organizational reform and the rise of trust funds: lessons from the World Bank (PDF, 1 MB). Review of International Organizations, 12(2), 199-226, doi: 10.1007/s11558-017-9268-1.
The increasing popularity of multi-bi aid makes the aid architecture ever more complex. A primary example of the fragmentation provides the European Union, funded by contributions from its member states, but itself also a source of earmarked funding through other implementing multilaterals. Why do actors engage in such a complicated double-delegation process? When does the European Union delegate its aid program through other multilaterals, and what are the strings attached under these circumstances? We analyze this interesting case in two articles to gain a deeper understanding of multi-bi aid.
Michaelowa, K., Reinsberg, B., & Schneider, C. (2016). Multi-bi Aid in European Development Assistance: The Role of Capacity Constraints and Member State Politics (PDF, 1 MB). Development Policy Review, 35(4), 513-530, doi: 10.1111/dpr.12193.
Michaelowa, K., Reinsberg, B., & Schneider, C. (2018). The politics of double-delegation in the European Union. International Studies Quarterly 62(4), 821-833. (doi:10.1093/isq/sqy034).
Another paper revisits the aid allocation patterns of trust funds based on collective donor preferences at the World Bank. Donors may use country-specific trust funds at the World Bank to target aid according to their priorities. We investigate the determinants of trust fund support across developing countries, using a sample of World Bank trust fund disbursements over the last decade. Country size, level of development, and institutional quality turn out to be significant predictors of trust fund aid, while fragile countries and IDA-eligible countries are not.
Neither Use It nor Lose It? The Impact of National Budget Cycles on Sub-Annual Donor Support to Trust Funds at the World Bank (Vera Eichenauer)
We also analyze whether trust funds allocate aid in specific areas (here climate-related aid) more efficiently than bilateral donors:
Michaelowa, K., Michaelowa, A., Reinsberg, B. & Shishlov, I. (2020). Do MDB trust funds allocate climate finance efficiently?, in: Sustainability 12(14), online article 5529, https://doi.org/10.3390/su12145529.
Donors are widely seen as the key driver of trust funds. This paper discusses how multi-bi financing channeled through trust funds shapes the organizational practices of multilateral agencies. The analysis covers seven types of implications, notably, differences in the portfolio allocation of trust funds and core resources, potential for misalignment with development needs, donor influence upon agency operations, recovery of maintenance costs, long-term budget implications, transaction costs and administrative burdens, and institutional fragmentation. Using evidence from a large number of interviews conducted at the World Bank, the paper comes at rather nuanced conclusions that offer a lot of potential for institutional improvement on multi-bi aid.
As trust funds have become an established feature of the multilateral system, they also have systemic implications, for instance by affecting norms of ‘good donorship’ and best practices around aid provision. An ongoing collaboration based on this project examines which kinds of donors pioneered the use of trust funds at the World Bank (‘market-driven donors’) and how these donors set in motion a dynamic process by which other donors (‘state-centric donors’)—even if initially skeptical of trust funds—initiated their own trust funds, specifically with the purpose to build capacity in recipient countries.
Network governance in international organizations: Lessons from World Bank trust funds (with Simone Dietrich and Martin Steinwand).
They also lead us to reflect about resourcing international organizations more generally:
Michaelowa, K. (2017). Resourcing international organizations: so what?, in: Global Policy 8(S5), 113-123.
(See also the full special issue edited by Ronny Patz and Klaus Goetz this paper is part of.)
Throughout our project, we have also produced studies appearing in non-academic outlets, given the practical relevance of multi-bi aid among development practitioners.
Analysis of climate change-related trust funds at the Multilateral Development Banks (study on behalf of the German Federal Ministry for Economic Cooperation and Development Bernhard Reinsberg, Igor Shishlov, Katharina Michaelowa and Axel Michaelowa, published by the German International Cooperation (GIZ), Eschborn, 2020.
We are aware of related work on earmarked funding through multilateral agencies (If you are an author, please let us know if you wish to be linked from this platform).