SCALING UP IN AGRICULTURE, RURAL DEVELOPMENT, AND NUTRITION


Learning from the Experience of Vertical Funds KEITH BEZANSON, PAUL ISENMAN, AND ALEX SHAKOW


Focus 19 • brIeF 18 • June 2012 V


ertical funds are multistakeholder global programs that provide earmarked funding for specified purposes. This


brief presents a series of lessons learned from vertical fund experiences that are applicable to scaling up in agriculture and rural development. It draws on the experience of the Global Fund to Fight AIDS, Tuberculosis and Malaria as well as other funds with substantial operational programs at the country level. It also draws on the experience of the Scaling up Nutrition (SUN) movement, a multistakeholder global program without a vertical fund that is directly relevant to agriculture and rural development. While the emphasis here is on learning from mistakes and


challenges of vertical funds, it is important to note at the start the areas where they provide positive lessons. These include (i) a focus on results, in most cases outputs and in some cases outcomes; (ii) the inclusion of civil society and the private sector, in addition to governments, in governance; (iii) transparency in what they finance; (iv) innovation and adaptation; and (v) proven effectiveness in assisting developing countries to scale up. These positive lessons have already had a broad influence on international agreements for aid effectiveness. At the same time, vertical funds raise problems in aid-


dependent countries of inconsistency with the key principle of the Paris Declaration on Aid Effectiveness—support to government priorities, institutions, and the systems underlying the aid agreements. Eleven lessons for the design and reform of vertical funds in agriculture and rural development can be drawn


1. Think twice: Global action does not necessarily mean a new vertical fund. An initial, crucial, but often ignored lesson is the need to think twice—even in the face of public pressure— before launching a new vertical fund. In the past decade the great majority of additional funding for health has been through vertical funds, driven by public and political support in donor countries for narrow agendas. There has been little prior consideration, with consequent donor neglect, of broader health objectives and systems. This is now being repeated in the case of climate change. Yet the same donors who initially championed and have been the main sources of funding of vertical funds now loudly decry their proliferation and the distortions and fragmentation that they can produce. Thus, the Busan Outcome Document of the 2011 Fourth High Level Forum on Aid Effectiveness states, “We will work to reduce the proliferation of these channels [vertical funds] and will, by the end of 2012, agree on principles and guidelines to guide our joint efforts.”


What is required before setting up another vertical fund is a rigorous analysis of the “aid architecture” that already exists—including comparative advantages and weaknesses of existing relevant organizations. And that analysis should, to the maximum extent feasible, be done jointly by potentially interested funders, since multilateral funds


require, by definition, collective action. Then the analysis needs to be accorded widespread consultation and serious political and policy consideration.


2. Use existing institutional capacity. If a new vertical fund is needed, then it is important to follow the commitment in the 2008 Accra Agenda for Action that “existing channels for aid delivery are used and, if necessary, strengthened before creating separate new channels that risk further fragmentation and complicate co-ordination at country level.”


In the case of agriculture and rural development, there are existing global funding sources, primarily the International Fund for Agricultural Development (IFAD) but also others, including the Global Agriculture and Food Security Program (GAFSP). Similarly, the Committee on Global Food Security and the High Level Task Force on Food Security and Nutrition provide existing mechanisms for advocacy and dialogue.


3. Don’t forget the importance of adequate funding. Even without a new vertical fund, perhaps especially so, adequate finance is important, be it external or domestic. SUN, although not a vertical fund, gives high priority to mobilizing resources from existing relevant sources.


4. Set up an appropriate governance and organizational structure. If after in-depth analysis a new vertical fund is indicated, it should have governance that is strategic and robust enough to achieve its intended objectives. When the fund is established within an existing organization, there may be no need for an additional governance structure. Conversely, as the SUN movement shows, in highly selective cases it may be desirable to establish a governance structure even when there is no vertical fund. In the rare cases where a new governance structure is indicated, appointments to boards should wherever possible be based on a person’s experience and qualifications rather than constituency representation (although taking some account of stakeholder and other balance). Experience shows that this is important in minimizing parochialism, gridlock, and conflict of interest. Experience has also shown that it is far easier to get governance right at the start, rather than trying to retrofit it to a board with established constituency “rights.” The same points apply to secretariats. A new secretariat may not be needed or, as in the case of the International Health Partnership, it can be virtual and shared between two existing organizations. In the event a dedicated secretariat is needed, however, it should be adequately and predictably financed, so that it can contribute to getting the initiative off to a good, and credible, start.


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