The U.S. House of Representative’s new subcommittee focusing on International Development, International Organisations and Global Corporate Social Impact held a hearing today and invited me, along with Ann Mei Chang and Ben Leo to offer testimony on the benefits of innovation in development policy and provide recommendations on how to advance the use of it in U.S. foreign aid.
I told the committee that innovation in development allows scarce resources to go further and compresses timelines to meet development goals. While this was true before the pandemic, it is particularly important now.
Innovation offers significant social returns, often greater than traditional aid models. As an example, as we outlined in GIF’s recent Impact Report, just five of GIF’s early innovations have generated over $53 million in discounted social benefits directly attributable to GIF’s investment. The social value being generated by GIF’s current portfolio, even after adjusting for risk, is some 180 times greater than the social value that would be created by deploying the same amount of money as cash transfers to people who live on less than five dollars a day.
The benefits of innovations can best be captured by the application of two related policy principles. Measuring impact – and using that information for investment decision-making – and strategically structuring investment vehicles to create the right balance between flexibility and accountability in deploying capital.
Taking smart risk, protecting taxpayer dollars through increased transparency and accountability, and generating evidence can drive a virtuous cycle.
But, as I noted to the subcommittee, using impact data to guide decision making is necessary but not sufficient to catalyse impact. Governments should also create investment vehicles strategically, to more easily unlock the value and social impact of innovation.
I would like to thank the subcommittee, especially the Chairman, Joaquin Castro, for inviting me and his strong interest in this. He has authored legislation in the past on how to bake support for innovation into USAID.