With new and more ambitious development goals being negotiated in 2015, understanding how financial resources and mechanisms can help achieve them becomes more crucial than ever. However, evidence on the contribution and effectiveness of development financing to large-scale interventions is scant in some sectors and, where available, ambiguous.
This synthesis paper attempts to partially fill this gap by drawing on evidence and lessons from the country case studies of the Development Progress project. This project aims to explain how progress has been achieved in 50 developing countries in the past two decades across eight dimensions of well-being. Finance features as one of the main factors contributing to development progress across these countries, and is addressed in detail in 20 of the project's case studies. This paper therefore predominantly draws on evidence from these case studies. Lessons include:
- Assessing a direct causal link between financial resources and development outcomes and outputs is challenging, especially across the very diverse sectors reviewed in the Development Progress project. Nonetheless, we identified some common patterns across several case studies.
- Progress is often associated with sustained economic growth performance and with shifting financial burdens for accessing services from households to governments and/or to bilateral and multilateral donors.
- Improvements in well-being indicators were correlated both with policy advice and a rise in external assistance from bilateral and multilateral donors in the low-income and lower-middle-income countries reviewed in the project.
- In those middle-income countries whose aid volumes were small in proportion to the size of their economy, technical assistance was usually targeted to areas where the government had low capacity and effectiveness, making a substantial contribution to improvements in well-being.