WINCHESTER, United Kingdom — The United States significantly contributes to fighting global poverty each year. According to a 2023 report by the Congressional Research Service, the USAID budget was around $41 billion in 2022. However, the distribution of these funds is far from perfect, since many of the projects it supports lack effectiveness. According to a 2019 report, from 2014 to 2016, 43% of the agency’s 2,321 awards achieved only an average of 53% of their expected results. However, a recent bill seeks to change this, improving USAID’s effectiveness in the process.
The Root of the Problem
The major contributor to this worrying statistic is the understaffing of the USAID department. Despite an increase in USAID’s budget to $63.1 billion and therefore workload over the past decade, staffing has not increased accordingly. According to Jodi B. Herman of the Bureau for Legislative and Public Affairs: “There is no question that Bureau of Humanitarian Assistance (BHA) staffing has not kept pace with the growth in humanitarian budgets.” This lack of staffing forces USAID to rely on contractors to distribute program money, as seen in the fact that just 25 organizations received 60% of USAID’s funding in 2017.
Between 2019 and 2022 the number of malnourished people worldwide increased by 150 million and 14 million children across the globe still suffer from severe acute malnutrition.
Enter: FIGDA
Reps. Joaquin Castro (Democrat, Texas) and Young Kim (Republican-California) first introduced the Fostering Innovation and Global Development Act (FIGDA) in December 2022. However, it was officially introduced into Congress on April 25, 2023.
In short, FIGDA aims to ensure the cost-effectiveness of USAID, by updating global aid and implementing the use of innovative technologies. It will ensure that strategies and programs have rigorous evidence backing them before they are endorsed by USAID, ensuring that funds are going to programs that help the highest number of people in poverty.
The Act will achieve this goal through a number of strategies including:
- Global Innovation Strategy – This will ensure that USAID incorporates innovation throughout its programs and that the U.S.’s fight against global poverty adapts to the 21st century.
- The establishment of a “Proven Solutions Program” – This will require USAID to examine their previous projects and determine which have produced or have the potential to produce the most effective results. These strategies will then be implemented in other countries so that more people living in poverty can benefit from their positive results.
- Authorise U.S. participation in the Global Innovation Fund (GIF) – USA and U.K. founded this organization in 2014 and it now operates in 36 countries. It uses evidence-backed interventions to fight poverty and expects to benefit 143 million people living in poverty by 2032. While the U.S. remains on the board of the GIF they have not made a contribution in recent years. FIGDA, if it becomes law, will change that and require the U.S. to contribute to this incredible organization once more.
Development Innovation Ventures (DIV)
FIGDA will work toward improving USAID’s effectiveness by requiring the existence and seeking to increase the impact of Development Innovation Ventures (DIV). DIV is a program within USAID that focuses on sending out project grants quickly and effectively and only to programs that demonstrate rigorous evidence of success.
In 2021, the cofounder of DIV and Nobel-winning economist Micheal Kremer co-published a paper on the program’s influence. The paper estimated that $281 million in social benefits was generated by the $19.2 million investments made by DIV in its first three years. This is a rate of return of over 143%.
In January 2023, Open Philanthropy donated $45 million to DIV, while its total budget in 2022 was $40 million. But FIGDA seeks to increase its impact on USAID as a whole and therefore increase the number of small and more impactful grants; the kind that DIV specializes in. These are the grants that do the most for people in poverty.
– Lily Cooper
Photo: Flickr