Publication: Grants or Loans? Development Finance and Incentive Effects
Date
2005-03
ISSN
Published
2005-03
Author(s)
Harford, Tim
Klein, Michael
Abstract
Some people think the best way to give
aid is through grants. Others advocate aid embedded in
subsidized loans. Mostly, incentive effects on donors and
recipients are ignored in this debate. But grants and loans
carry different incentives and in some settings can be
complementary. Donors should offer a wider menu of options,
including ongoing forgiveness of loans, unbundled subsidies,
and loans combined with output-based grants. Donor agency
staff should be rewarded for outcomes, not volume of funds
out the door.
Citation
“Harford, Tim; Klein, Michael. 2005. Grants or Loans? Development Finance and Incentive Effects. Viewpoint. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/57faae06-7cc8-5dc4-9950-7822c8aa6c5d License: CC BY 3.0 IGO.”
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