Investing in Our Shared Future

Cabinet Exit Memo | 2017

Investing in Our Shared Future

Cabinet Exit Memo | 2017

Strengthening USAID’s Capabilities

Previous: USAID’s Role and Impact | Next: Building on a Legacy of U.S. Development Leadership

Given the complexities of the challenges and opportunities the world faces, significant effort has gone into strengthening our capabilities, the things that make progress possible:

Policy and Evaluation: Recognizing development as a discipline and not just an aspiration, USAID has dramatically improved its analytic capabilities.  These include analyses of the drivers of fragility and violent extremism, as well as analyses for policy deliberations ranging from protecting health care workers from Ebola to supporting stabilization efforts in Iraq. In 2010, USAID established the Bureau for Policy, Planning, and Learning to make sure what we know is built into what we do. A challenge going forward is to more fully integrate these capabilities into decision-making, both within USAID and throughout the U.S. Government.

Since adopting a new evaluation policy in 2011, USAID has built a strong culture of evaluation, conducting on average 230 external evaluations each year. And our data show that more than 90 percent of these evaluations are being used to shape our policies, modify or course-correct existing projects, and inform future project design. The focus on evaluation has also instilled the Agency with confidence to frankly assess rather than defend programs, and to seek solutions where and when shortfalls are identified. USAID’s progress on this front has been highlighted by Results for America’s “Invest in What Works Federal Index” for the last three years, and the Foreign Aid Transparency and Accountability Act, signed into law in 2016, reinforces this culture and practice.

The Agency has also developed new tools to assess the capabilities of partner governments and other recipients to properly administer funds, including the Public Financial Management Risk Assessment Framework, which has led the Agency to opt against providing direct assistance to partners based on the absence of sufficient financial controls.  Our bureaus and missions also rely increasingly on the Office of the Inspector General, both to request investigations where irregularities are suspected and for advice on the implementation of additional measures that can ensure effective financial and program management.

Leveraging Private and Domestic Capital Flows: Mobilizing the private and domestic capital upon which successful economies depend is now a regular feature of USAID’s work.  In 2015, USAID managed over 360 active public-private partnerships that yield or are expected to yield over $3 for every $1 provided by USAID. Initiatives led by USAID – including Feed the Future and Power Africa among others – have mobilized over $100 billion in private sector commitments. USAID’s capacity to mobilize private capital is sustained by a number of offices, including the Development Credit Authority (DCA) and Office of Private Capital and Microenterprise (PCM). DCA marked its fifth consecutive year of portfolio growth in 2016, contributing substantially to the $4.8 billion in private sector funds it has mobilized since 1999. In addition to its strong growth, the DCA continues to experience a low default rate of 2.4 percent, and a high leverage ratio of 1:23. PCM was established in early 2015 to increase USAID’s capacity to mobilize private capital and expertise in support of development priorities, helping the agency address development needs sustainably and at much greater scale. Most recently, PCM launched a partnership with U.S. institutional investors who manage trillions of dollars in assets – with the aim to bring new pools of capital towards investment in key sectors such as infrastructure in Africa. USAID also plays a key role, along with the Treasury and State Departments, in providing U.S. sovereign bond guarantees, helping countries raise money from international capital markets to implement specific economic reforms that promote economic stability, growth, and prosperity in these countries.  The use of sovereign bond guarantees has expanded over the past four years, with nine being issued.

Demand for the technical assistance that can enable developing country governments to manage effective tax administrations and national budgets is also on the rise and is expected to increase. Through the Sustainable Finance Initiative (SFI), USAID is working with the Office of the Global AIDS Coordinator and the Treasury Department on a pilot to develop and implement strategies for domestic resource mobilization and sustainable financing for health, particularly HIV/AIDS. SFI has already helped unlock $30 to $40 million annually in new domestic spending for HIV response in Kenya, and USAID anticipates similar outcomes in other countries. In addition, USAID is piloting a five-year trial whereby domestic resources will be mobilized in up to six additional countries by using up to 2.5 percent of assistance resources made available for these countries under most initiatives and directives.

Science, Technology, Innovation, and Partnership: USAID has made notable progress in leveraging science, technology, innovation, and partnership to test and pilot new tools and approaches, engage new actors and develop breakthrough solutions to promote inclusive growth. Bureaus and offices across the Agency have prioritized innovation, and in 2014 we established the Global Development Lab (the Lab) to serve as a hub to help USAID take smart risks and engage new partners in the development process. We have invested in 900 innovations in more than 60 countries, which are helping our partners reach the massive scale needed to promote growth and reduce global poverty. For example, the Lab’s investment of $6.1 million in a pay-as-you-go home solar system business in Tanzania allowed the company to raise $95 million in private equity and debt. The company now provides off-grid electricity to more than 100,000 homes, with a goal to reach 1 million households by 2020.

By prioritizing partnerships and policy changes that promote the use of digital and data-driven approaches, the Lab has increased the speed, accuracy and efficiency of development work.  For example, USAID co-founded the Better Than Cash Alliance (BTCA) to digitize institutional payments. BTCA now has 50 members, including governments, multilateral organizations, and private companies like Visa, Mastercard and Chase, and its efforts have helped drive adoption of digital financial services while reducing poverty and corruption.  

The Lab is also testing new ways to catalyze investment in entrepreneurs in developing countries by working with 40 incubators, accelerators, and seed-stage impact investors on a program that is expected to leverage more than $100 million in private resources. One research program has built on over $400 million in federal science grants to fund hundreds of local scientists across the world, pairing them with American scientists in research partnerships, and the Higher Education Solutions Network partnered USAID with seven world-class universities, including MIT and the University of California at Berkeley, to create eight Development Labs that focus on critical issues related to extreme poverty.

Additionally, in 2012 USAID led two projects with Presidential Innovation Fellows, who served as short-term entrepreneurs-in-residence, to build innovative solutions for food security and agriculture. The Lab has also worked with countries, development banks, civil society and nonprofits to catalyze digital infrastructure, development, and inclusion projects, including recently hiring a Senior Advisor for Connectivity and working with the State Department on the Global Connect Initiative to the connect an additional 1.5 billion people by 2020. Also, Agency demand for Lab services continues to rise, with 50 missions and bureaus using Lab-supported tools, approaches, and advisory services during the first half of 2016 – more than all of 2014.

Congressional support for the Lab was demonstrated by introduction of bicameral, bipartisan legislation and the House’s passage in September 2016 of the Global Development Lab Act, bipartisan legislation to provide the Lab with key authorities to make it even more effective. 

Internal Management: A priority for USAID under the Obama Administration has been to make systemic, long-term improvements to USAID’s operating and management systems to make it more capable of serving future administrations. As part of this effort, USAID has launched a Human Resource (HR) Transformation process, which aims to ensure that the Agency is supporting and empowering its staff around the world and thus retaining quality personnel, and also rationalizing hiring systems and authorities so that the Agency has the staff it needs.  This much-needed reform will require a commitment beyond the tenure of any one administration. Ultimately, strengthening USAID’s internal management must be a long-term goal, and we are grateful that Congress and President Obama’s Administration have recognized this as a bipartisan necessity and opportunity.

Budget: Over the past eight years, USAID has improved its capacity to be more responsive and accountable in the use of its budgetary resources, and to live up to our role as the lead U.S. development agency.  By being more rigorous, deliberate and transparent in measuring results, the Agency hopes to gain the flexibility across its budget to ultimately create a more agile USAID that is more effective, efficient and accountable in carrying out its mandate.  

Finally, in national security contexts, USAID is often confronted with the trade-off between investing in long-term development transformations that yield sustainable security, and providing assistance where national security imperatives require.  USAID’s mission should and will continue to include both long and short term goals. Ideally, the Agency’s capacity to provide rigorous analysis of the trade-offs will be increasingly drawn upon in order to strike the right balance between meeting urgent requirements and delivering long-term solutions.

Previous: USAID’s Role and Impact | Next: Building on a Legacy of U.S. Development Leadership