Impacting investing: trends, issues and capabilities
For some time I have been funding a project in Uganda. As part of a community development project my foundation has been funding the building of a number of boreholes providing fresh water to villages who previously had no access to water other than from rivers and water holes which were often several miles away. Each borehole costs $10,000 and serves 1,000 villagers. Assuming that the boreholes operate for five years before requiring replacement or major repair, that works out at a cost of $2 per person per year for fresh water. Not only does this have immediate health impacts in terms of preventing waterborne disease, it enables children to attend school and prevents the incidents of rape of young children who have to stray outside their own village to collect water.
That all sounds like great value for money for the donor with the added bonus of a feel good story which is easy to tell. However, if it is such good value for money for the donor why hasn’t the Ugandan government paid for this already?
In the last budget, the Ugandan Government had about $109 per person to spend. It is not much, but it is enough to provide some basic necessities. The budget figure for water and the environment is $1.87 per person.
Does the government deliberately slow down the provision of clean water because it knows that charities will step in, and are charities happy to step in because they know that boreholes are an attractive project for donors? If that is true then the real impact my donation is not the borehole, even though I can see it and I know it was built and it is being used. The real impact of my donation is whatever the government spent the money which was freed up as a result of my donation. In the same year the government spent £17.19 per person on fighter jets. Perhaps there is a ground to air missile with my name on it.
I have quizzed the charity in question about the question of financial displacement and there doesn’t seem to be much thinking beyond the simple provision of then borehole and the immediate impact on the community.
I will get to the bottom of it. It may be that these boreholes were on the list to be done but would only have happened in several years’ time. If that is the case I have speeded up the provision of water by three years and maybe I should just look at the three years of benefit for the village and be happy with that.
In future I will be asking far more questions about the bigger picture of how these projects should be funded to make sure that I am not merely letting the government off the hook and freeing up resources to be spent elsewhere. The only clear way to do this is to pick project which have impact but which are just beyond the government budget at the present time.
As a donor I rarely see an argument present that includes an analysis of how the donation fits into the bigger picture of funding.
I can see how it suits some donors not to ask too many questions. Donors like to be able to say how much impact their donation has had and there may be a willingness to accept a simplified picture of what is happening. In truth both charity and donor would be better served by thinking a bit deeper.
I don’t think this problem is limited to developing countries. I often see project raising money for equipment which really should be on the NHS budget. As long as people are willing to step in and pay for them the NHS is happy to stand back and let them get paid for. Again the real impact of this type of donation is whatever the freed up funds were spent on not the shiny new scanner itself.