Co-Financing Community-Driven Development Through Informal Taxation: Experimental Evidence from South-Central Somalia

Community contributions are often required as part of community-driven development (CDD) programmes, with payment encouraged through matching grants. However, little remains known about the impact of matching grants, or the implications of requiring community contributions in order for communities to receive development funding. This paper describes research where we partner with two non-governmental organisations (NGOs) – one international and one Somali – and undertake a randomised control trial of a CDD matching grant programme designed to incentivise informal contributions for local public goods in Gedo region in south-central Somalia. We rely on household survey data collected from 1,297 respondents in 31 treatment and 31 control communities, as well as surveys of village leaders and data on informal contributions from the mobile money platform used by community leaders to collect revenue. Two key findings emerge. First, our research shows that working with communities and incentivising informal revenue generation can be an effective way to deliver public goods and to support citizens and communities. Second, building on research exploring the potential for development interventions to spur virtuous or adverse cycles of governance, we show that development partners may work directly with community leaders and informal taxing institutions without necessarily undermining – and indeed perhaps strengthening – state legitimacy and related ongoing processes of statebuilding in the country. Indeed, despite playing no direct role in the matching grant programme, taxpayer perceptions of the legitimacy of the local government improved as a result of the programme. These findings deepen our understanding of how community contributions may be incentivised through matching grant programmes, and how they may contribute to CDD and public goods provision in a context of weak institutional capacity.

High-Capacity Donors’ Preferences for Charitable Giving

How can charities solicit high-capacity donors to provide the funds for matching grants and leadership gifts? In conjunction with Texas A&M University’s fundraising organizations, we conducted a field experiment to study whether high-income donors respond to nonpersonal solicitations. We also designed the experiment to test the impact of allowing for directed giving on the giving behavior of high-income donors and their willingness to direct their donations toward overhead costs. High-income donors are not responsive to letters or emails, regardless of whether they have the option to direct giving; we cannot conclude, therefore, that giving behavior is different for those who could direct giving compared with those who could not. Our results highlight the difficulties of motivating some high-income donors, especially when only impersonal communication is used.

The Ford Foundation, Matching Grants, and Endowment Building

This chapter examines the Ford Foundation’s predominantly economics- and finance-based expertise, and the way it sustained the country’s largest and most expensive performing arts institutions: orchestras, operas, and conservatories. Ford accomplished its goals primarily through matching grants and endowments, hoping with matching requirements to diversify organizations’ funding sources and expand the public’s commitment to local arts. Based on the expert advice of economists and administrators, Ford intended endowments to be a permanent source of income for orchestras and conservatories, if they managed the invested principal properly. In practice, however, wealthy individuals on boards of trustees for institutions such as the Boston Symphony Orchestra and the Juilliard School solidified their personal, social connections to elicit five-, six-, and sometimes seven-figure gifts. In general, ordinary citizens and the local community did not participate, and as a result, broad-based support never materialized. Orchestras and conservatories came back knocking on the foundation’s door again and again.