CREDIT 14/01: Why Pay NGOs to Involve the Community?

Summary

Community participation is often celebrated in the popular as well as academic discourse, and is widely viewed as a requirement for successful poverty-relief projects. Indeed, community-based development has arguably become a “central tenant of development policy” (Mansuri and Rao, 2012: ix). Botchway notes that participation is often assumed to be “good by definition” (2001: 135) and the term has gained “unprecedented visibility and respectability” (2001:148), often represented as the “magical missing ingredient” (2001:149) for development projects. The concept proceeds from the premise that permanent improvements in living standards are seldom attainable without the involvement and cooperation of beneficiaries. Accordingly, the beneficiary is to be given more information, responsibility and decision-making power in diverse project areas, including its focus, the targeting of beneficiaries, the implementation strategy, and assessment. While the approach is widely considered best practice, it is not clear that it deserves these accolades. Evidence on its performance is scant, and there exists a lack of thorough and systematic evaluations with counterfactuals. The empirical literature on community participation acknowledges that there may be a large gap between the idealized textbook representation of the concept and non-profit organizations’ experiences with it. Case studies show that, for a variety of reasons, textbook benefits do not always materialize.

In this Nottingham School of Economics working paper Burger, Dasgupta and Owens examine this relationship between the donor emphasis on community participation and beneficiary welfare, at both theoretical and empirical levels. They set up a simple theoretical framework which considers a population of NGOs, which differ in the weight put on own profit, relative to beneficiary welfare. The magnitude of this is private knowledge: known only to the NGO itself. Beneficiary welfare depends positively on both community participation and actual project expenditure. NGOs can increase participation by incurring some constant (non-negative) marginal cost. Donors may incentivize costly community participation by providing a payment per unit of participation implemented, i.e. a participation subsidy at a constant rate. They may alternatively offer a lump-sum grant identically to all NGOs, which entails the same aggregate expenditure by donors. Examining data collected from a sample of Ugandan NGOs, they find the NGO revenue structure is better characterized as a lump-sum transfer, rather than as involving a participation subsidy. The authors estimate the relationship between the level of community participation implemented and the extent of NGO selfishness as perceived by their client communities, and find that the level of participation does not appear to be significantly related to NGO selfishness. The empirical analysis appears to reject the policy case for any participation subsidy whatsoever, in favour of the status quo regime of lump-sum grants. They conclude eliminating community participation from the set of conditions for funding an NGO may in fact benefit target communities.

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CREDIT Discussion Paper 2014-01, Why Pay NGOs to Involve the Community? by Ronelle Burger, Indraneel Dasgupta and Trudy Owens, October 2014

Authors

Ronelle Burger, Indraneel Dasgupta and Trudy Owens

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