Multi-bi aid platform

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 after the 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 provided generous funding for the initiation phase of the project.

Thus far, the project has produced a range of outputs, 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.

Our database can be obtained here. Please cite as follows:

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, 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) (to be published 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. Seeking to assess some of these narratives empirically, we focus on three related issues.

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 and Reinsberg 2017).

Second, we investigate under which conditions donor countries choose among alternative funding mechanisms for their foreign aid programs. 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 and Hug 2015).

Third, 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, Michaelowa, and Knack 2015).

Direct access to these working papers (please contact the respective authors for the most recent versions):

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 the hope of gaining a deeper understanding of multi-bi aid.

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.

Direct access to these working papers (please contact the respective authors for the most recent versions):

Poverty and policy selectivity of World Bank trust funds (Vera Eichenauer and Stephen Knack)

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)

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.

Policy outputs

Throughout our project, we have also produced studies appearing in non-academic outlets, given the practical relevance of multi-bi aid among development practitioners.

  • Various blog posts on multi-bi aid on the website of Bernhard Reinsberg
  • Blog post on multi-bi aid from non-DAC donors from Vera Eichenauer
  • Interview on multi-bi aid with University of Zurich "Hilfsgelder auf Umwegen"
  • Interview on multi-bi aid at E+Z
  • Analysis of German trust fund portfolio and policy suggestions (study commissioned by BMZ/GIZ, co-authored by Bernhard Reinsberg)
  • Analysis of French trust fund portfolio and underlying donor motivations (study commissioned by AFD, Vera Eichenauer and Bernhard Reinsberg)
  • Reform proposals for 'smart multi-bi aid' (study commissioned by Overseas Development Institute, Bernhard Reinsberg)

Related projects

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).

  • Erin R. Graham, Drexel University – design, development, and performance of international institutions, including the United Nations, World Health Organization, and Global Environment Facility

We hope you may find our platform useful.

Your project team,

Prof. Dr. Simon Hug, University of Geneva
Prof. Dr. Katharina Michaelowa, University of Zurich
Prof. Dr. Axel Dreher, Heidelberg University
Vera Eichenauer, Heidelberg University
Bernhard Reinsberg, University of Zurich