Quantifying Aid Allocation: A Critical Review of the DFID Needs‐Effectiveness Index
| Published date | 01 February 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12362 |
| Date | 01 February 2017 |
| Author | Michael Tribe |
Quantifying Aid Allocation: A Critical Review of
the DFID Needs-Effectiveness Index
Michael Tribe
University of Strathclyde
Abstract
This article has three main sections. An introduction describes the main features of the Department for International Develop-
ment’s (DFID’s) Needs-Effectiveness Index (N-EI) which was the basis for aid re-allocation between countries in the review of
UK Aid undertaken in 2010–11. The second main section is a critical review of the ‘poverty’element of the Index, particularly
questioning the selection of the higher of the two World Bank poverty lines, and the adjustment used to allow for differing
impact of country population sizes. The third main section focuses on the ‘fragility’element of the N-EI, suggesting that the
incorporation of this very important element of international ‘need’into the Index was less than transparent, that it did not
reflect important parts of the literature available at the time, and that it understated earlier research sponsored by the DFID.
The N-EI has been subjected to little critical evaluation in the literature even though it had a central position in the major
review of UK aid allocation. The article concludes that further consideration of the attributes of the N-EI would be necessary if
it were to be used as the basis for policy decision-making in the future.
1 Introduction
This article aims to explore the methodology adopted by
the UK Department for International Development (DFID) for
its major review of both bilateral and multilateral aid (Offi-
cial Development Assistance –ODA) allocation undertaken
in 2010–11 (DFID, 2011a; 2011b; 2011c; 2011d). It focuses in
particular on the ‘Needs-Effectiveness Index’(N-EI) which
was a central feature of the Bilateral Aid Review: the main
aim of both reviews was to make the allocation of UK Aid
more systematic. Part of the N-EI was contributed by the
World Bank’s Country Policy and Institutional Assessment
together with the DFID N-EI –is indicative of increasing ele-
ments of ‘measurement’, and of ‘metrics’, in the evaluation
and design of public policy globally.
1
2 DFID’s Needs-Effectiveness Index: the basics
The 2011 review of its aid allocation, and of its aid allocation
system, by DFID included a welcome increased degree of
transparency for the processes involved and for the associ-
ated policy outcomes. There was a laudable attempt to
avoid obfuscation of aid allocations and of the criteria
adopted in arriving at these allocations (DFID, 2011a; 2011b;
2011c; and 2011d). Central to the systematic approach to
the narrowing and focusing of aid allocations was the use
of a ‘Needs-Effectiveness Index’(N-EI) to identify, on a quan-
titative basis, the prioritisation of countries for the receipt of
UK Aid. The DFID’s review of both bilateral and multilateral
aid in 2010–11 was a major exercise involving many com-
plex issues, but this discussion will focus only on the N-EI,
which was employed in both reviews, although the main
explanation of the methodology involved is included in the
multilateral review (DFID, 2011c). An excellent and incisive
review of the issues raised by the bilateral aid review can be
found in a January 2012 report by the Africa All Party Parlia-
mentary Group (AAPPG, 2012).
The N-EI comprises two elements: ‘need is based on the
number of people living under $2 a day, the country’s score
on the UN’s Human Development Index, and a measure of
the country’s fragility. The effectiveness part of the index is
based on the World Bank’s Country Policy and Institutional
The first part of the need element –the number of peo-
ple living under the $2 a day poverty line in a country –is
clearly intended to accommodate the issue of ‘poverty’. The
$2 a day measure is the less stringent of those used interna-
tionally to identify the extent of absolute poverty, the $1.25
a day being the poverty line below which more severe, or
‘chronic’, poverty is deemed to exist (UNDP, 2013, p. 161;
World Bank, 2013a, pp. 79–80, 375).
2
The use of the poverty
line to determine the extent of absolute poverty allows
comparison of the relative impact of inequality between
countries when the number of people below the poverty
line is expressed as a proportion of the total population.
However, when the proportionate measure is not used, as is
the case with the N-EI, comparisons between countries with
significantly different population sizes are more difficult.
The second part of the need element –the inverse of
each country’s Human Development Index (HDI) score –is
intended to indicate where a country lies within the interna-
tional measurement of ‘development’, the inversion of the
HDI meaning that the higher the score the lower the ‘level
of development’(reversing the order of the HDI itself). The
HDI is now a well-established measure of the standard of
living (three dimensional, including life expectancy at birth,
years of schooling and per capita income (UNDP, 2010,
©2016 University of Durham and John Wiley & Sons, Ltd. Global Policy (2017) 8:1 doi: 10.1111/1758-5899.12362
Global Policy Volume 8 . Issue 1 . February 2017
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